North Carolina Premium Finance Company Bond: A Comprehensive Guide

July 25, 2022

North Carolina Premium Finance Company Bond

This guide provides information for insurance agents to help their customers obtain a North Carolina Premium Finance Company bond

At a Glance:

  • Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit history
  • Bond Amount: Based on the company’s license type:
    • Class A: $1,000 for every $5,000 in premium finance receivables (minimum of $5,000 and maximum of $25,000)
    • Class B: $25,000
  • Who Needs it: All premium finance companies operating in North Carolina
  • Purpose: To ensure the public will receive compensation for financial harm if the company fails to comply with licensing law
  • Who Regulates Premium Finance Companies in North Carolina: The North Carolina Department of Insurance

Background

North Carolina Statute 58-35-5 requires all premium finance companies operating in the state to obtain a license from the Department of Insurance. The North Carolina legislature enacted the licensing requirement to ensure that premium finance companies engage in ethical business practices. To provide financial security for the enforcement of the licensing law, premium finance companies must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the North Carolina Premium Finance Company Bond?

North Carolina requires premium finance companies to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the business fails to comply with the regulations outlined in North Carolina Statute 58-35-15. Specifically, the bond protects the public if the company engages in any acts of fraud or breaches any consumer contracts. In short, the bond is a type of insurance that protects the public if the premium finance company violates the terms of its license.

North Carolina Premium Finance Company Bond Form

North Carolina Premium Finance Company Bond Form

How Can an Insurance Agent Obtain a North Carolina Premium Finance Company Surety Bond?

BondExchange makes obtaining a North Carolina Premium Finance Company Bond easy. Simply login to your account and use our keyword search to find the “Finance” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Not an agent? Then let us pair you with one!

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Is a Credit Check Required for the North Carolina Premium Finance Company Bond?

Surety companies will run a credit check on the owners of the company to determine eligibility and pricing for the North Carolina Premium Finance Company bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit,” meaning that the credit check will not affect the owner’s credit.

How Much Does the North Carolina Premium Finance Company Bond Cost?

The North Carolina Premium Finance Company Bond can cost anywhere between 1% to 12.5% of the bond amount per year. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience. The chart below offers a quick reference for the cost of a $25,000 bond requirement.

$25,000 Premium Finance Company Bond Cost

Credit Score Bond Cost (1 year)
720+ $250
680 – 719 $375
625 – 679 $500
600 – 624 $1,000
550 – 599 $1,875
500 – 549 $3,125

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Who is Required to Purchase the Louisiana Auctioneer Bond?

North Carolina requires premium finance companies to purchase a surety bond as a prerequisite to obtaining a business license. To paraphrase North Carolina Statute 58-35-1, a premium finance company is an organization that pays the premium payments for an insured in exchange for being repaid at later date with interest.

Exemptions to this definition include:

  • Banks
  • Trust companies
  • Installment paper dealers
  • Auto finance companies
  • Savings and loans associations
  • Cooperative credit unions
  • Agricultural credit associations
  • Companies subject to the provisions of the NC Consumer Finance Act or the Auto Dealer/Manufacturer Licensing Law
  • Insurance companies making installment payment charges
  • Fire and casualty agents/brokers extending credit to their policyholders

How Do Premium Finance Companies Apply for a License in North Carolina?

Businesses in North Carolina must navigate several steps to obtain a Premium Finance Company License. Below are the general guidelines, but applicants should refer to the application checklist for details on the process.

License Period – All North Carolina Premium Finance Company Licenses expire on June 31 of each year and must be renewed before the expiration date

Step 1 – Determine the License Type

North Carolina requires premium finance companies to obtain specific licenses corresponding to the way their business operates. Below are the different types of the North Carolina Premium Finance Company License:

    • Class A: Required for businesses that offer only premium financing services to one specific insurance agent or agency
    • Class B: Required for businesses that are not limited to providing premium financing services to one specific insurance agent or agency

Step 2 – Meet the Net Worth Requirements

Premium finance companies must maintain a company net worth (assets – liabilities) of at least $5,000 and submit audited company financial statements verifying their net worth with their application.

Step 3 – Complete the Application

All North Carolina Premium Finance Company License applications should be submitted online here. Businesses must complete the application in its entirety, and submit the following items:

    • Owner authorization to apply for licensure
    • Personal Questionnaire Form
    • Company formation documents
    • Certificate of Authority (out of state businesses only)
    • Detailed methods of operation
    • Sample premium financing documents
    • Audited financial statements verifying the company’s net worth
    • $648 application fee for Type A license applicants
    • $2,448 application fee for Type B license applicants

Businesses must obtain a separate license, and pay a $100 fee, for each branch location.

Step 4 – Purchase a Surety Bond

The Department of Insurance will inform the applicant of their required bond amount after reviewing their application. Premium finance companies must purchase and maintain a surety bond with a maximum limit of $25,000.

How Do North Carolina Premium Finance Companies Renew Their Licenses?

Premium finance companies should submit their completed applications, including all required fees, online here. All North Carolina Premium Finance Company Licenses expire on June 31 of each year and must be renewed before the expiration date.

What are the Insurance Requirements for the North Carolina Premium Finance Company License?

North Carolina does not require premium finance companies to purchase any form of liability insurance before receiving a business license. Premium finance companies must purchase and maintain a surety bond with the following limit:

  • Class A License Type: $1,000 for every $5,000 in premium finance receivables (minimum of $5,000 and maximum of $25,000)
  • Class B License Type: $25,000

How Do North Carolina Premium Finance Companies File Their Bonds?

Premium finance companies should mail their completed bond forms, including the power of attorney, to the following address:

NC Dept. of Insurance/ASD
ATTN: NIBE Team
1204 Mail Service Center
Raleigh, NC 27699-1204

The surety bond requires signatures from the surety company that issues the bond, the applicant, and a notary verifying the applicant’s signature. The surety company should include the following information on the bond form:

  • Legal name of the entity/individual(s) buying the bond
  • Surety company’s name and state of incorporation
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can North Carolina Premium Finance Companies do to Avoid Claims Made Against Their Bonds?

To avoid claims against their bonds, premium finance companies in North Carolina must follow all licensing regulations in the state, including some of the most important issues below that tend to cause claims:

  • Do not engage in any acts of fraud
  • Do not breach any contracts made with consumers.

What Other Insurance Products Can Agents Offer North Carolina Premium Finance Companies?

Most reputable premium finance companies will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for North Carolina Premium Finance Company Customers?

North Carolina unfortunately does not provide a public database of active premium finance companies in the state. We suggest contacting the Department of Insurance to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-07-25T16:25:51-04:00