Excess and Surplus Lines
Insurance coverage provided by non-admitted insurers for risks that standard insurance companies won't cover due to their unusual nature, high risk, or unique circumstances. These insurers aren't licensed in the state where the policy is sold but are authorized to provide coverage for hard-to-insure risks through licensed surplus lines brokers.
Example
“When the haunted house tour business couldn't find coverage through regular insurers, they obtained liability insurance through the excess and surplus lines market.”
Memory Tip
Think 'EXcess = EXtra risky' - these are for the extra risky situations regular insurance won't touch.
Why It Matters
Excess and surplus lines insurance provides crucial coverage for unique businesses and high-risk situations that would otherwise be uninsurable. This market ensures that even unusual risks can find coverage, preventing businesses from operating without protection.
Common Misconception
People often think excess and surplus lines insurance is substandard or unreliable because the insurers aren't 'admitted' in their state. However, these are often specialized, financially strong insurers that simply choose not to go through state licensing procedures, focusing instead on complex risks that require expertise.
In Practice
A special effects company creating explosions for movies couldn't find coverage through standard insurers due to the extreme fire and explosion risks. They worked with a surplus lines broker who found coverage through a non-admitted insurer specializing in entertainment risks. The policy cost $15,000 annually for $2 million in liability coverage - significantly more than standard business insurance, but the only option available for their unique risk profile.
Etymology
Named because these lines of insurance handle the 'surplus' or overflow of risks that exceed what standard 'admitted' insurance companies will cover in their regular business lines.
Common Misspellings
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Related Terms
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