What is a common misconception about surplus lines insurance?

Surplus lines insurance is often misunderstood regarding its regulation and safety. A common misconception is that it is unsafe due to a lack of regulation. In reality, surplus lines insurers are typically not subject to the same regulations as standard insurers, allowing them to offer coverage for risks that may not fit into the traditional insurance marketplace, particularly unique or high-risk cases.

However, this does not inherently make surplus lines policies unsafe. They are, in fact, regulated at the state level, and all surplus lines policies must still comply with certain legal requirements. Many surplus lines insurers are financially stable and capable of providing the customized coverage that businesses and individuals may require. As such, the perception of surplus lines being unsafe can deter potential clients from considering them, even though they can be a viable option for insuring unconventional risks effectively.