California Insurance Broker Bond
All licensed insurance brokers in California must hold a California insurance broker bond, also called a bond of insurance broker. This surety bond is a prerequisite to obtaining a Personal Lines Broker-Agent License from the California Department of Insurance (CDI). All personal lines brokers (insurance brokers) operating in California must have this license.
What is a California Insurance Broker Bond?
A California insurance broker bond is a financial guarantee that a broker will conduct business ethically and lawfully. If they fail to do so, this surety bond is in place to reimburse any affected parties, such as clients, for any damage or losses caused by the broker’s misconduct.
Every CA insurance broker bond is a contractual agreement between three parties:
Principal - The insurance broker that needs the bond.
Obligee - The party requiring the principal to get bonded (California Department of Insurance).
Surety - The bond company or insurance company that issues and financially backs the bond.
Suppose a broker mishandles funds, conducts business unethically, or operates against the California Insurance Code (INS). In these cases, a claim can be made against the bond up to the full bond amount ($10,000). The surety will initially pay for any valid claims, but the principal is then responsible for paying them back in full.
Remember: A California insurance broker bond does not protect the broker or their business—it acts like a form of credit, not insurance. In short, this surety bond financially protects clients and the general public. You need to obtain this bond to get an insurance broker license but hope to never use it (have a claim made against it).
How Much Does a California Insurance Broker Bond Cost?
A California insurance broker bonds costs as little as $150.
While the full bond amount (penal sum) of a California insurance broker bond is $10,000, you only have to pay a small percentage (bond premium) to get bonded. To calculate your surety bond cost, the bond company underwriting the bond will consider factors like your:
- Personal credit score
- Industry experience
- Past bonding history
For this type of licensing bond, in particular, your personal credit score often holds the most weight. Therefore, those with good credit can often secure this bond at a rate of 1% -5% ($100 - $500 to secure the $10,000 bond for a two-year term).
Get a free quote today to see your qualifying rate.
Important: Depending on which brokering activities you plan on doing, you may need additional bonds, such as a surplus lines broker bond.
Can I Get Bonded with Bad Credit?
Yes, you can often get an insurance broker bond in California with bad credit.
However, applicants with credit issues should plan for a slightly higher bond premium (5% - 10%). Why did the price increase? Applicants with lower credit are viewed as higher risk—sureties want to know that if a bond claim is ever made against a bond that the applicant can reimburse them. These higher-rate bonds are commonly called “bad credit surety bonds”, but the only difference between them and any other surety bond is their increased premium.
Insurance Broker Bond Requirements
To get a CA insurance broker bond, you must be at least 18 years of age with credit. Both residents and non-residents can apply. However, beyond meeting these minimum requirements, you should also ensure that you qualify to become a licensed insurance broker. After all, the only reason to get an insurance broker bond is to get this license.
The California Department of Insurance offers many license classes for brokers and insurance agents. These include but aren’t limited to, personal lines broker-agent, surplus lines broker-agent, casualty broker, life settlement broker, and insurance adjuster. The Producer Licensing Bureau dives into each of these specific licensing requirements here. For the personal lines broker license, you will need the following before completing the license application.
There are no post-secondary education requirements to become an insurance broker in CA. However, all applicants must take a certified pre-licensing course that dives into ethics, insurance codes and procedures, the California Insurance Code, and more.
Note: You may be exempt from some coursework if you are an Accredited Advisor in Insurance (AAI), Associate in Risk Management (ARM), Certified Insurance Counselor (CIC), or Chartered Property Casualty Underwriter (CPCU).
Before accreditation, all insurance brokers must pass the California Insurance licensing exam. This PSI exam is available online or in person.
Criminal Background Check
Insurance broker applicants must not have any disqualifying criminal offenses. A background check and fingerprints must be sent with every application.
You must be able to pay all fees, including course fees, examination, fingerprinting, and application. Check with the corresponding institutions to see the current fees charged.
How Do I Get a California Insurance Broker Bond?
Step 1: Pick a Qualifying Surety Company
Before diving into the bonding process, ensure that you pick a surety that:
- Is reputable with good reviews.
- Is a corporate surety permitted to do business in the State of California.
- Offer a California insurance broker bond (bond of insurance broker).
Read How to Choose the Right Surety for more information.
Step 2: Apply for the Surety Bond
To get bonded in as little as a day, use an online bond application—it instantly provides a free bond quote, and you can apply 24/7. In addition, this application requires only basic information such as your contact information, your bond type, and the bond amount. Prefer to apply over the phone or through mail? Many sureties also offer these options.
Step 3: Sign the Bond Agreement
Your surety will send you a bond agreement once you are approved. You need to sign it and then email or fax it back to them, along with the payment for your invoice. Once everything is processed, you will receive your surety bond (complete with the required notary signature).
Step 4: Submit Your Bond
Keep a copy of your bond from your records. Send your bond form (bond of insurance broker) to:
Producer Licensing Bureau
P.O. Box 1139
Sacramento, CA 95814-1139