What Is Non-Admitted Insurance?

Surplus Lines Insurance Explained in Less Than 4 Minutes

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Non-admitted insurance covers risks that admitted insurers won't cover. Admitted carriers are licensed to offer insurance in your state. A non-admitted insurer is not licensed by your state. It is not subject to the same rules.

This type of insurance has advantages. These include coverage that wouldn't be possible using an admitted insurer. But there are disadvantages, too. Learn more about how these policies work.

Definitions and Examples of Non-Admitted Insurance

Non-admitted insurance refers to an insurer that is not licensed with the state to offer a type or amount of coverage. But, that does not mean that the insurer is not allowed to work in the state. A non-admitted insurer may sell coverage through a state-licensed broker.

A non-admitted insurer does not have to follow the same rules in underwriting. They also do not have to set the same rates as admitted carriers.

One example of a non-admitted insurance provider is Lloyd's of London. Lloyd's is a non-admitted insurer in most of the U.S. In fact, Lloyd's is not even an insurance company. It is an insurance market. But, they are one of the largest insurance providers in the world. Lloyd's also has top ratings as being financially stable.

  • Alternate names: excess and surplus insurance, E&S, surplus lines

How Non-Admitted Insurance Works

Non-admitted insurance answers the need for higher risk coverage. Without non-admitted insurance, many people would be unable to get insurance. They might not be able to buy homes or be insured after a string of bad luck.

When you buy any type of insurance, it must be sold to you by a licensed person or agency. Non-admitted insurance still is subject to certain laws. It is just not subject to filing rates and other rules.

In the U.S., many non-admitted insurance carriers are licensed as "admitted" in one or more states. This allows them to carry on business in other states. Also, many admitted insurers have non-admitted insurers within their family of companies.

The state provides protection to consumers who are covered by admitted insurance. But the state's guaranty fund typically does not offer protections to those covered by non-admitted insurers.

If you run into trouble and need help with a non-admitted insurance policy, you should always start by asking your broker or agent. If that fails, you contact the state insurance commissioner's office. If they are able to assist you, they may refer you to the state surplus lines office.

Types of Non-Admitted Insurance

Non-admitted insurance can apply to many types of insurance products. Some examples are:

  • Home insurance where an area is considered a high-risk zone (for instance, where the risks of tornado, hurricanes, and wildfires are high)
  • Professional liability insurance
  • High-value home insurance
  • Insurance for people who do not meet standard underwriting criteria (for instance, those with too many claims)
  • Insurance for non-U.S. citizens
  • Long-term care policies

Benefits of Non-Admitted Insurance

Since rates are not regulated by the state, insurers do not have to submit their rates. Further, the policy forms and products are not regulated by the state.

These insurers can offer options that help states extend coverage in high-risk markets. This can help people who need to use FAIR plan insurance. This is state-mandated insurance making coverage available to those living in high-risk areas. Some of this coverage may be with non-admitted insurers.

Depending on the situation, the rates for non-admitted insurance may cost more. But they may offer coverage that a standard insurer would not.

Are These Insurers Higher Risk?

Non-admitted insurers are not necessarily risky or unstable. They may be better equipped to handle large losses. Also, they may have more experience in high-risk environments than standard insurers.

You should always check the financial stability of an insurer, whether admitted or not.

Non-admitted insurers are not subject to the local rules on rate issues. It may allow the insurer to collect rates appropriate to the risk. This in turn may help them to turn a profit. That may make some of these firms more stable.

In some cases, a non-admitted insurer has a stronger rating than an admitted one. This can show they are more able to handle claims and losses.

Key Takeaways

  • Non-admitted insurance refers to an insurer that is not licensed with the state to provide a type or amount of coverage.
  • A non-admitted insurer does not have to follow the same rules in underwriting.
  • Types of non-admitted insurance include high-value home insurance, coverage for non-U.S. citizens, and long-term care policies.
  • Non-admitted insurers are not necessarily unstable, but you should always research an insurer before buying a policy.