Surplus Lines Insurance
Candlefocus EditorSurplus lines policies offer a number of advantages to consumers, even though they are often more expensive than regular insurance. A wide variety of targeted risk coverage is available, including some that may be difficult to find in the regulated market. Additionally, surplus lines insurers often have more flexible underwriting criteria than their regulated counterparts, and may be willing to write policies for risk-prone customers like businesses operating in developing countries. This increased flexibility can provide an important safety net when traditional options are unavailable.
Surplus lines insurers are subject to different requirements than those that operate in the regulated market. In general, surplus lines insurers are individually assessed for capability to insure risks and must meet state requirements for capital and surplus. Additionally, each state imposes a separate set of tax and licensing requirements upon insurers operating within its borders. To protect consumers from potential financial losses that could result from dealing with a surplus lines insurer, most states require brokers to make sure customers are informed about the status of their insurance prior to purchasing the policy.
Overall, surplus lines insurance can provide a useful source of risk coverage for individuals and businesses where traditional risk coverage is not available. Those considering buying surplus lines insurance must recognize that policies are more expensive and they must comply with additional guidelines. By taking the time to understand the extra steps and costs associated with surplus lines policies, consumers can reduce potential financial losses and ensure they are well-protected.