What is an insurance broker bond?
Insurance broker bonds are contracts that hold brokers accountable, ensuring they abide by state laws and industry regulations. The bond offers protection for individuals and businesses that work with the broker. If the insurance broker breaks the contract and financially harms another party, that party may file a claim against the bond for compensation.
Due to the risky nature of buying insurance (by handing over personal and financial information), insurance broker surety bonds are required in several states. Many insurance brokers must obtain a bond before they can conduct business legally.
Agents vs. Brokers: What’s the difference?
Brokers and agents are similar in several ways. They’re both licensed insurance professionals. They both connect consumers with insurance coverage and earn money from commissions. But there are also some distinct differences.
- Agents represent insurance companies and sell directly to consumers.
- A broker’s first loyalty is to the consumer. Brokers can compare several insurance options and choose the best fit for their client’s needs.
- Agents may conduct transactions on behalf of their insurance company.
- Brokers connect the consumer with the insurer, and then the insurer handles the transaction part of the process.
Get Your Insurance Broker Bond:
- Insurance broker bonds are contracts that hold brokers accountable and ensure they abide by state laws and industry regulations.
- If you cost a client money by acting illegally or unethically, they may file a claim against your bond.
- Depending on where you live, you may need a bond that covers your entire company or an individual bond for yourself (that only covers you).
- Required bond amounts can vary but often fall between $10,000 and $20,000.
Why do insurance brokers need this bond?
Insurance broker bonds ensure you treat your clients fairly and honestly while following the laws and regulations set by your state and industry. If you commit some type of illegal or unethical activity that costs a client money, they may file a claim against your bond.
For example, you could face hefty fines if you manipulate pricing for a client’s insurance premium or persuade a client to purchase an unnecessary insurance product. Your surety may cover the cost of the claim upfront, but you must repay them in full in the end.
If someone files a false claim, however, contact your surety to resolve the issue for you. The company will investigate if necessary to determine whether the claim is valid. If it’s not, you won’t need to take any further action.
How do insurance broker bonds work?
Depending on where you live, you may need a bond that covers your entire company or an individual bond for yourself (that only covers you). You must maintain your bond for the duration of your career to maintain your license. A bond is a contract between three parties:
- Obligee: The party that requires the bond (your state)
- Principal: The insurance broker
- Surety: The company that issues and underwrites the bond
How much do insurance broker bonds cost?
The cost of your bond will depend on your specific state requirements. Required bond amounts can vary but often fall between $10,000 and $20,000. You will pay a small percentage of that amount to obtain your bond.
If you have a good credit score, you might pay as low as 1% of the bond as your premium. With poor credit, you might pay upwards of 10-15%.
How to Get an Insurance Broker Bond in Your State
We can help you find the right license and permit bond for your business. ZipBonds offers the fastest and most secure option for getting bonded. Our all-digital platform is intuitive and straightforward. Apply online or call us at 888.435.4191 to speak with an agent directly.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.