An insurance adjuster bond — also referred to as a public adjuster bond — is a type of surety bond that in many states is required in order to become an insurance adjuster. Essentially what an insurance adjuster bond does is require the party that takes out the insurance adjuster bond to follow ethical business practices and to adhere to any regulations that govern public adjusters.
Let’s take a closer look at what insurance adjuster bonds are, how they work, and who needs them.
Do I need a public adjuster bond?An insurance adjuster is a type of claims adjuster that an insurance policyholder pays to appraise and negotiate claims for them. When a licensed insurance adjuster negotiates a claim on behalf of a policyholder, they take on a lot of responsibility and it’s important they practice their work ethically while following all regulations. It is illegal to act as an insurance adjuster in a state that doesn’t license or regulate public adjusters in any way (except in select emergency cases).
There are 44 states that require insurance adjusters to have a license and in order to be granted a license initially or to renew it, they have to secure an insurance adjuster bond. If someone has more than one office, either within or across state lines, they will need to secure an insurance adjuster bond for each office. If you employ anyone, you may also have to get a bond for each individual employee or may need to pursue blanket bonding for your entire company.
How do insurance adjuster bonds work?There are three parties involved in insurance adjuster bonds and understanding what each party’s role is makes it easier to understand how insurance adjuster bonds work:
Principal. The principal is the party who needs to take out the insurance adjuster bond in order to be properly licensed. In the case of an insurance adjuster bond, this is the insurance adjuster or an insurance adjustment company who needs bonds for all of their employees.
Surety. This is the party that issues the insurance adjuster bond. The surety is responsible for handling the claims process and for initially paying out any claims against the surety bond.
Obligee. Most often, the obligee is a state government, but this can be any party that requires an insurance adjuster bond.
A public insurance adjuster bond helps protect consumers by guaranteeing to the state licensing agency that the insurance adjuster or their company will abide by the conditions of the bond such as practicing their work ethically and adhering to both local and state regulations.
If the party who secures the bond or one of their employees violates the bond agreement terms, then a claim can be filed against the insurance adjuster bond. The surety will then host an investigation to see if the claim is valid. If the surety finds the claim to be valid, they will initially pay out the claim against the bond. Then the principal will need to repay the surety and they may be expected to not just pay the claim amount, but to pay interest and fees.
It’s best to always stick to the rules so you can avoid having a claim filed against your insurance adjuster bond as claims can be very expensive, as can what follows next. In the future, it’s likely that your insurance adjuster bond will cost more when you go to renew your license or buy a new one. Which is why, whenever possible, you will want to resolve customer issues on your own and quickly to avoid having them file a claim.
If you can’t afford a higher bond price after a claim, you won’t be able to secure an insurance adjuster bond, and won’t be able to become properly licensed.
How much do insurance adjuster bonds cost?Speaking of price, how much insurance adjuster bonds cost can vary, but they usually cost between 1% and 7.5% of the bond amount. So let’s say your bond amount is $10,000 and you receive a rate of 1%, you’ll pay $100 to get bonded. The percentage you’re offered depends on a few different factors, such as years in business and your financial situation, but the primary factor taken into consideration is your personal credit score.
The higher your personal credit score is, the lower a percentage you’re likely to qualify for and the less your insurance adjuster bond will cost. You can benefit greatly from improving your personal credit score by making on-time payments to debt, paying down revolving credit balances, and by having a healthy credit mix. Over time as you improve your score, you’ll likely find that when you go to renew your insurance adjuster bond, that you can qualify for a better rate and save money.