Definition
Non-admitted insurance covers risks that are not covered by admitted insurers. Admitted insurance companies are licensed to offer insurance in your state. Non-admitted insurers are not licensed by your state.
Types of Non-Admitted Insurance
Non-admitted insurance can apply to many types of insurance products. Some examples include:
- Home insurance where the area is considered a high-risk zone (for example, where the risks of hurricanes, tornadoes, and massive fires are high)
- Professional liability insurance
- High-value home insurance
- Insurance for individuals who do not meet standard underwriting criteria (for example, those with many claims)
- Insurance for non-U.S. citizens
- Long-term care insurance
Benefits of Non-Admitted Insurance
Since prices are not regulated by the state, insurance companies are not required to submit their rates. In addition, policy forms and products are not regulated by the state.
These companies can offer options that help states expand coverage in high-risk markets. This can assist individuals who need to utilize FAIR plan insurance. This is state-mandated insurance that provides coverage for those living in high-risk areas. Some of this coverage may be with non-admitted insurance companies.
Depending on the situation, non-admitted insurance costs may be higher. But they may offer coverage not provided by a standard insurer.
Are These Companies Considered Higher Risk?
Non-admitted insurers are not necessarily higher risk or unstable. They may be better equipped to handle large losses. They also have more experience in high-risk environments than standard insurers.
You should always check the financial stability of any insurance company, whether admitted or not.
Non-admitted insurers are not subject to local regulations regarding pricing. This may allow the insurer to set appropriate rates for the risk. This can help them achieve profitability. This may make some of these companies more stable.
In some cases, a non-admitted insurance company may have a stronger rating than an admitted one. This can indicate that they are more capable of handling claims and losses.
Sources:
The Balance only uses high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we verify facts and maintain the accuracy, reliability, and quality of our content.
National Association of Insurance Commissioners. “Non-Admitted Insurance Model Act,” page 5. Accessed July 21, 2021.
National Association of Insurance Commissioners. “Surplus Lines.” Accessed July 21, 2021.
Texas Department of Insurance. “Insurance Companies for Surplus Lines.” Accessed July 21, 2021.
Source: https://www.thebalancemoney.com/what-is-non-admitted-insurance-4571008
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