Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your insurance agent license bond needs. View the insurance agent license requirements, below.
What Are the Different Types of Insurance Agent Licenses?
Insurance agents represent specific insurance carriers and are paid by them on a commission basis. There are some variations on the standard insurance agent license:
- A Managing General Agent (MGA) is given underwriting authority from an insurance carrier and can do certain things that normally only an insurer can do, such as bind coverage, underwrite a policy, set a premium rate, and/or settle claims.
- A Surplus Lines Agent sells policies designed to protect against a financial risk greater than what a regular insurance company will provide, such as flood insurance. The companies that surplus lines agents work for typically are domiciled in another state or even another country.
- A Nonresident Agent lives in one state and is licensed to sell insurance in another.
Each state’s Insurance Department (or Insurance Division) regulates the state’s insurance industry and what licenses are available.
What Are the Licensing Requirements for Insurance Agents?
Insurance agent licensing requirements vary by state and by license type. You’ll need to find out from your state’s Insurance Department what you’ll need to do to qualify for an insurance agent license.
In general, insurance agent licensing involves:
- Pre-licensing education
- A state insurance exam
- Fingerprinting
- An online or paper application
- Application and license fees
In some cases, especially for MGA, Surplus Lines, and Nonresident agent licenses, a surety bond is also required.
Why is an Insurance Agent License Bond Required?
In states that require bonding of insurance agents, an insurance agent license bond serves these important purposes:
- It guarantees that the licensed agent will comply with the state’s insurance regulations.
- It indemnifies the state’ insurance department (the “obligee” requiring the bond) against liability for damages caused by the unlawful or unethical actions of a state-licensed insurance agent.
- It ensures that funds will be available to compensate consumers for such damages.
Any violation of the surety bond agreement that results in financial harm to a consumer gives the injured party the right to file a claim for damages against the insurance agent’s license bond.
How Are Insurance Agent License Bond Claims Paid?
The terms of the surety bond agreement, a legally binding contract, make the insurance agent (the bond’s “principal”) wholly responsible for paying valid claims against the bond.
However, rather than wait for the principal to gather enough money to pay a claim, the surety (the company that authorized the bond) typically pays the claim on the principal’s behalf. This extension of credit creates a debt that the surety is legally obligated to repay to the surety. In other words, it’s a loan to the principal, not a gift.
How Much Does an Insurance Agent License Bond Cost?
The required amount of the bond (the bond’s penal sum) is established for each license type by the state in its capacity as the bond’s obligee. The annual bond premium is a small percentage of that penal sum, which is the maximum amount that will be paid out on a single claim. That percentage is the premium rate, which is established by the surety on a case-by-case basis.
The surety’s main concern is being repaid by the principal for claims paid on the principal’s behalf, so the principal’s creditworthiness is the main underwriting consideration. With good credit, the premium rate will most likely be in the range of one to three percent.
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