What is a Michigan Insurance Premium Finance Company Bond?
The Michigan Department of Insurance and Financial Services (DIFS) require insurance premium finance companies to furnish a surety bond before conducting business in the state.
The Insurance Premium Finance Company is part of the license requirement for both new and renewing license applicants (except for insurance companies and banks).
The bond guarantees ethical and lawful business practices and compliance with all state laws in covering and paying the cost of an insurance premium.
Any person who shall engage in the business of financing insurance premiums in this state without obtaining a license and surety bond will be subjected to a penalty of not more than $200.
Under The Insurance Code of 1956 Sec. 500.1502(b), an insurance premium finance company refers to any person(s) engaged in the business of entering into insurance premium finance agreements.
An insurance premium finance agreement means “an agreement by which an insured or prospective insured promises to pay to a premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent in payment of premiums on an insurance contract together with a service charge as authorized and limited” by The Insurance Code of 1956.
What are the bond conditions?
- The bond must be issued by a Surety authorized to conduct business in the State of Michigan.
- The Michigan Department of Insurance and Financial Services is named as the Obligee.
- The Principal (or Licensee) is the insurance premium finance company holding a license issued by the State Commissioner.
- The Principal must comply with all state provisions and statutes in agreeing not to, directly or indirectly violate the provisions of The Insurance Code of 1956, Act 218, Chapter 15 as amended.
- If the Principal performs as agreed, the obligation will be null and void; otherwise, the agreement will be in full force.
- The liability of the Surety for aggregate claims that arise in any license year will not exceed the specified bond amount.
- The Surety must provide the Director of the Department of Insurance and Financial Services with a written notice of cancellation at least 60 days before the cancellation date.
What is the bond amount?
Under The Insurance Code of 1956, Sec. 1504(2), a $10,000 surety bond shall be deposited with the State Treasurer for the benefit of any or all borrowers, who may become creditors of the premium finance company.
The cost of the bond is a percentage (bond premium) of the bond amount, typically ranging from 1%-5%. The cost varies and may be subject to a surety underwriter’s evaluation of your credit score.
How do I obtain an Insurance Premium Finance Company Bond?
SEND US A BOND APPLICATION – We begin the bonding process with an application. To get an accurate rate of your bond, get your FREE quote HERE!
UNDERWRITING – Once we have received your application, an underwriter will ask you to submit the following important requirements:
- Proof of your financial capability
- Your business’ history
- Your credit score
To avoid any delay, make sure that your requirements are complete before submitting them.
ISSUANCE – As soon as the underwriter has completed the necessary in-depth check, we will immediately issue the surety bond and send it to you!