When it’s time to purchase a business insurance policy, it’s time to research some unfamiliar terms. Selecting a comprehensive liability package might be easier than you think—but adhering to your state’s laws and regulations may be a bit tougher.
Often, prospective business insurance policyholders have a question: What are admitted insurers? What are Non-admitted insurers? Do their differences impact the type of coverage protecting your business? Let’s find out.
Admitted Insurance Carriers
An admitted insurance carrier has a license to sell insurance in their state. These insurance carriers contribute to the state’s Guaranty Fund. This fund, which exists in every state, protects insurance buyers from licensed insurance companies, financially. If the selling company goes bankrupt, and if they can’t compensate policyholders, a fund will pay the policyholder instead. More or less, the state Guaranty Fund is a type of policyholder backup insurance.
Non-Admitted Insurance Carriers
Non-Admitted insurance carriers don’t interact with their state’s Guaranty Fund. While it might seem normal for a company to become Admitted and have backup insurance, some companies simply can’t afford the costs. Some states, of course, require Admitted carrying status regardless for all their operators. If a state believes carriers should have more options, however, they’ll let Non-Admitted carriers have an excess line or surplus coverage.
Determining Financial Risk
It’s natural to assume that Non-Admitted carriers are riskier than Admitted carriers, but this isn’t necessarily the case. Non-Admitted carriers, for instance, have more flexibility in offering premium prices. They can set rates high to fund additional risks.
A company’s financial risk, experts report, doesn’t match its Admitted or Non-Admitted status. Instead, a company’s financial rating is a better gauge. It’s a good idea to check out an insurance company assessment with your insurance agent. These assessments give insurers letter grades for easy comparison. The most reliable companies have grades of A+ or A++.
Benefiting Your Business: Admitted or Non-Admitted?
There are situations where either Admitted or Non-Admitted insurance companies are better for business owners.
If you’re purchasing coverage from an Admitted carrier, you often won’t need to pay any taxes or fees when purchasing a policy—as the Admitted status usually removes the need for the insurer to charge these expenses. You can also appeal a company’s claim decision to your state insurance department if you feel the claim decision was unnecessary.
If you buy from a Non-Admitted carrier, you’ll probably find coverage options many Admitted carriers don’t offer. Non-Admitted carriers, for example, may cover weather-related damages in high-risk areas—whereas Admitted carriers won’t.
Browse the best policies available with your insurance agent, and take care in determining which type of policyholder you’d like to buy from. Both Admitted and Non-Admitted carriers can benefit your business—and both can offer incredible coverage options.