Is your business insurance company admitted or non-admitted in your state? When deciding between two companies with similar coverage and pricing, this is an important consideration that many business owners overlook. Let’s explore the differences so that you can make an educated decision.
In order to qualify as an admitted carrier, the insurance company must file an application with the state’s insurance commissioner. This process ensures that the company’s rates are filed and approved by the state and that the company is operating in compliance with the state’s insurance regulations. Most of the larger insurance companies that you see advertising are admitted.
Non-admitted insurance companies are prevalent in the Excess and Surplus Lines insurance marketplace. These types of insurance companies tend to be smaller in size than admitted companies (although not always) and may focus on specific niches of insurance. For example, most of the companies that write business liability insurance for assisted living facilities, personal care homes, skilled nursing facilities, home health agencies and senior placement agencies are non-admitted companies. When you think of insurance that can not be easily found in the open marketplace, chances are there is a non-admitted carrier that specializes in it.
One of the benefits to working with admitted companies is that the client avoids the surplus lines taxes and fees that are found on non-admitted policies. With admitted carriers, these costs are filed with the state and built into the premium, whereas non-admitted carriers charge the taxes and fees separately. These taxes and fees a non-admitted company charges are essentially the costs they pay to the state in order to conduct business there. When comparing premium expenditures, you may find that admitted companies have a lower overall cost for this reason.
Another benefit to working with admitted companies is that the carrier’s liabilities are backed by the State Guarantee Fund. If the company becomes insolvent, the state will use money from this fund to pay off policyholders in the event of a claim. Insolvency is rare, but may come into play during catastrophic natural disasters if a company does not have enough reserves to pay the total claim expenditures.