When is it permitted to collect premiums for surplus lines insurance?

Collecting premiums for surplus lines insurance is permitted only after policy binding because this ensures that the insurance coverage is guaranteed and that the policy terms have been finalized. Binding a policy signifies the acceptance of the risk by the insurer and the commitment to provide coverage, which means the premium collection is justified at this stage.

Prior to binding the policy, collecting premiums can pose unnecessary risks—such as the possibility that the policy might not be issued, leading to confusion regarding the payment and coverage status. Additionally, ensuring that premiums are collected after the terms are agreed upon protects both the insurer and the insured, as it confirms that coverage is in place before any financial transactions take place.

In contrast, collecting premiums before binding or at the time of application could lead to situations where the applicant might not actually receive coverage, which can lead to disputes and misunderstandings. Therefore, the correct timing for collecting premiums aligns with binding the policy to ensure that risk acceptance and financial transactions occur simultaneously.