• 27
  Oct
  2009

• Plusses and Minuses of Surplus Insurance

  
  Filed Under: Blogging
  Author: Blog Writer

When you approach your insurance agent with specific insurance needs— yacht crew insurance needs, for instance—he may sometimes refer you to surplus line policies. Surplus line policies refer to special policies obtained through brokers when the requested policy is not available through companies licensed in your state of residence. They are used in situations where admitted insurance carriers do not provide comparable insurance.

Buying surplus line insurance is legal, but it is much less regulated than insurance companies. Your agent can only suggest surplus line coverage after checking that similar coverage is not available through any admitted insurance company.

The main advantage of using surplus line insurance is in case of unique insurance needs. Surplus line insurance differs from state to state, and mainly consists of business insurance where the risks are deemed too steep for admitted insurance companies. It is usually a last resort for most agents. Surplus line coverage can only be obtained through agents or brokers who are licensed to conduct business with non-licensed carriers.

The disadvantages in using surplus line insurance are many, but the primary one is the lack of any guarantee in case of non-payment of claims, or in case of the company going bankrupt. They are not covered by the Insurance Guaranty Association. It is always better to look for similar options with licensed and reliable insurance carriers whose policies are underwritten by reputed companies such as Lloyds of London and AIG.

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