Corporate Insurance Agency ($25,000) Bond - Statewide in Texas

Brief Summary

A Texas corporation, LLC or partnership applying for an agency license proves financial responsibility one of two ways under Insurance Code 4001.106: a $25,000 surety bond or a $250,000 errors and omissions policy. The bond is written on TDI's own form, FIN505, and a binding commitment to issue it is enough when the license application goes in.

Texas issues an agency license to a corporation or partnership only if it can pay up to $25,000 on a customer claim caused by a negligent act, error or omission. Under Insurance Code 4001.106(c), the entity shows that ability with either an errors and omissions policy of at least $250,000 or a $25,000 surety bond payable to the Texas Department of Insurance for the benefit of its customers. Section 4001.003 brings limited liability companies and limited liability partnerships within this rule.

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How to Apply for a Corporate Insurance Agency ($25,000) Bond:

• Confirm the entity's full legal name exactly as registered with the Texas Secretary of State.
• Choose between the $25,000 bond and an errors and omissions policy of at least $250,000.
• Complete the bond application with entity and owner information for underwriting.
• Receive the executed bond on TDI form FIN505, or a binding commitment to issue it.
• Submit the bond as proof of financial responsibility with the Texas resident agency license application.
• Make sure at least one officer or active partner and every person acting as an agent for the entity holds an individual TDI license.

Detailed Information About the Texas Corporate Insurance Agency ($25,000) Bond:

The bond is one of two options

Insurance Code 4001.106(c) lets a corporation or partnership choose how it maintains the ability to pay customer claims. It can carry an errors and omissions policy of at least $250,000 with a deductible of not more than 10 percent of the policy amount, issued by an insurer authorized in Texas or, if a policy cannot be obtained from one, a surplus lines insurer. Or it can file a $25,000 surety bond. TDI's proof of financial responsibility page lists the same two options for a Texas resident agency.

Who this applies to

Section 4001.106 covers corporations and partnerships licensed as agents. Section 4001.003 defines a corporation to include an entity organized under limited liability company laws, and a partnership to include limited liability partnerships. At least one officer or active partner, and everyone performing acts of an agent for the entity in Texas, must be individually licensed by TDI separately from the entity.

What the bond guarantees

The bond must be executed by the agency as principal and by a surety company authorized to do business in Texas. It is payable to TDI for the use and benefit of the agency's customers and is conditioned on the agency paying any final judgment a customer recovers against it. A customer is anyone the agency sells or tries to sell a policy to, or from whom it accepts an application for insurance.

Form, name and term

TDI's Insurance Agency Bond is form FIN505, with a penal sum of $25,000 and TDI as obligee. The form stays in force indefinitely without renewal certificates. The surety may terminate it on 30 days written notice to TDI and remains liable for defaults before that date. TDI asks that the entity's full legal name on the bond match its registration with the Texas Secretary of State. Under Section 4001.106(d), a binding commitment to issue the bond is sufficient when the license application is filed.

Eligibility and Requirements for a Texas Corporate Insurance Agency ($25,000) Bond:

• Surety company authorized to do business in Texas.
• Penal sum of $25,000, payable to TDI for the use and benefit of the agency's customers.
• Conditioned on paying any final judgment a customer recovers against the agency.
• Continuous form, with 30 days written notice to TDI before the surety's termination takes effect.
• Legal name on the bond matching the Texas Secretary of State registration.

Texas Corporate Insurance Agency ($25,000) Bond FAQs:

Official and Additional Resources for the Texas Corporate Insurance Agency ($25,000) Bond: