Are you a personal lines-broker agent in California? If so, the California Assembly Bill 1696 requires you to obtain a $10,000 surety bond.
The bond should be issued by a California-admitted surety and should be made payable to the State of California.
Why do personal lines-broker agents need a surety bond?
Prior to the enactment of the California Assembly Bill 1696, no other type of financial responsibility was required of personal lines broker-agents. Only property broker-agents and casualty broker-agents were required to submit a surety bond to the Insurance Commissioner of the State of California before acting in the capacity of an insurance broker.
While acting as an insurance broker, the personal lines-broker agent can “transact insurance other than life, disability, or health insurance with, but not on behalf of, an admitted insurer.”
The new bond legislation, which was passed in October of 2017 and has taken effect on January 1, 2018, will serve as an important protection against contractual failure as well as guarantee the lawful performance of the principal or the personal lines broker agent.
The surety bond is part of the documents in determining the authority to act as an insurance broker. Other documents that must be submitted by the personal lines-broker agent are as follows:
- An Action Notice of Appointment completed by the sponsoring insurance company.
- A Business Entity Endorsement which will be completed by a California-licensed sponsoring business entity. This should be submitted via the California Department of Insurance’s Business Entity Endorsement and Termination.
- An Action Notice of Solicitor – for those who will act as an insurance solicitor.
The aforementioned documents will be submitted along with the rest of the application requirements for a personal lines broker agent.
How can a personal lines-broker agent acquire a bond?
Acquiring a surety bond is a pretty straightforward process. Here’s a simplified guide to obtaining one:
Step 1: Look for the right Surety
Make sure that the Surety (individual or corporate surety who will issue the bond) should be permitted in the State of California. Check the reputation of the Surety as well to avoid any problems in the future. If the Surety is not allowed to conduct business in the state, your bond will be rejected by the Obligee (the person who requires the bond).
Step 2: Ask for a free quote
Before settling in on a specific surety, ask for a free quote first. Know your bond premium or what you need to pay.
Step 3: Apply for the bond
The bonding process will include the submission of standard documents and other important information such as your financial capability, credit score, and performance history.
Step 4: Bond issuance
Once you have signed the indemnity agreement, the Surety will execute the bond and send it to you immediately.
Do you need further assistance? Call us now at 800-333-7800!