There are many times when I'm workin on finding the proper insurance policy to write a particular business, house, or building as a trusted advisor I communicate that I’d prefer to use an admitted company whenever possible. Most of the time people don’t understand the difference between Admitted and Non-Admitted (surplus lines) companies. For most its just a company name . . . whether it’s admitted like Chubb, Liberty Mutual, Travelers, Arbella, etc., or Non-Admitted like Lloyd’s of London, Westchester, or many others.
When it comes to insurance, there are two main types of companies that you can choose from: admitted insurers and surplus lines insurers. In this blog post, we'll discuss the key differences between these two types of insurers, and why it's generally considered more beneficial to use an admitted insurance company.
An admitted insurance company is one that has been licensed and approved by the state in which it operates. These companies must comply with all state regulations, and are subject to oversight by the state's insurance department. They are also required to file financial reports with the state, which helps ensure that they have the resources to pay out claims. Additionally, if an admitted insurer becomes insolvent or unable to pay claims, the state's guarantee fund will step in to provide coverage.
On the other hand, surplus lines insurers are not licensed or regulated by the state in which they operate. They are generally considered to be "non-admitted" or "excess" insurers. These companies may not have the same level of financial stability as admitted insurers, and they may not be required to file financial reports. Additionally, if a surplus lines insurer becomes insolvent, there is no guarantee fund to step in and provide coverage.
Another key difference between admitted and surplus lines insurers is the type of coverage they offer. Admitted insurers are required to offer a wide range of coverage options, and are generally more likely to provide standard policies that meet the needs of most businesses and individuals. Surplus lines insurers, on the other hand, may specialize in specific types of coverage, such as excess liability or specialty risks. This may make it more difficult to find a surplus lines insurer that can provide the coverage you need.
So why is it generally considered more beneficial to use an admitted insurance company? For one, the financial stability and oversight provided by the state can help ensure that you're getting a quality policy from a company that has the resources to pay out claims. Additionally, admitted insurers are typically more willing to provide standard coverage options, which can make it easier to find the coverage you need. Finally, the presence of a guarantee fund can provide added peace of mind in case of the insurer's insolvency.
Of course, it's always important to do your own research when choosing an insurance provider. It's a good idea to check the financial ratings of any company you're considering, and to compare coverage options and pricing. But as a general rule, using an admitted insurance company will provide you with more protection and peace of mind.
