How is the surplus lines tax collected from the insured?

The surplus lines tax is typically added to the policy price by the broker. This means that when a broker places a surplus lines insurance policy, the tax is not something the broker absorbs or pays out of pocket. Instead, the broker calculates the total premium for the insurance policy, which includes the applicable surplus lines tax, and then presents this total to the insured. This process ensures that the tax is accounted for in the total cost of the coverage being provided.

Additionally, the collection of surplus lines tax usually occurs at the time the policy is issued, and it is the broker's responsibility to arrange the payment of this tax on behalf of their clients to the appropriate state authority, further emphasizing the role of the broker in the transaction rather than waiving or absorbing the cost. The other options do not accurately reflect how the tax is integrated into the process, focusing instead on misinterpretations of the broker's role in relation to the insured's obligations.