What’s the difference between admitted and non-admitted commercial coverage?
If you are looking for business insurance in Whitestone, New York, then you’ve likely seen insurance providers characterized as “admitted” or “non-admitted.” But what exactly do these terms mean? Here’s what you need to know about the difference between admitted and non-admitted business insurance.
Admitted insurance carriers are those that have been officially licensed by your state’s insurance department. These carriers are subject to state insurance regulations concerning things like capitalization, organization, rate approval, claims handling, policy forms, and so on. While admitted insurance carriers seem like a better coverage option because they are approved by the state, the admitted designation is not necessarily a mark of superiority. It is merely an administrative classification. Admitted insurance carriers are subject to the following requirements:
- They must have every rate and insurance product approved by the state insurance department before they can be sold to clients.
- Because these carriers must file their rates with the state, they do not have the same pricing flexibility as non-admitted carriers.
- Claim decisions made by admitted carriers can be appealed to the state department of insurance if the client feels that the claim wasn’t handled properly.
- If an admitted carrier cannot pay out claims, then clients have protection through a state guaranty fund. This fund will pay out their claim costs.
- Clients who purchase coverage from an admitted carrier can avoid surplus lines insurance fees and taxes.
Also known as surplus lines and excess lines, non-admitted insurance carriers face laxer regulations than their admitted counterparts. Rather than being governed by state insurance departments, non-admitted carriers are overseen by non-profit surplus lines associations within each state. Features of non-admitted carriers include the following:
- Non-admitted carriers are not required to have their rates or insurance products approved.
- Because their rates do not need to be approved, non-admitted carriers have more flexibility with their pricing and product offerings. This allows non-admitted carriers to offer coverage for unique and specific risks.
- Because they are not backed by state guaranty funds, non-admitted carriers are required to have larger capital reserves.
- Non-admitted carriers are subject to fees and taxes that can make their products more expensive than admitted carrier options.
Which Option is Right for You?
Many business owners wonder why they would use a non-admitted carrier they are riskier than admitted carriers. Well, in many cases, businesses have no choice. If your business faces unique or very specific threats, then admitted carriers might not offer a coverage option to address these risks. However, you will likely find the coverage that you need with a non-admitted carrier. Ultimately, businesses usually carry a combination of admitted and non-admitted insurance options to protect themselves. They use admitted carriers for their standard coverages, and non-admitted carriers for their niche insurance needs.
This is what you need to know about admitted and non-admitted insurance carriers. Do you need further assistance with your business insurance in Whitestone, New York? If so, then contact the experts at 01 Insurance. We are ready to assist you with all your commercial coverage needs today.