What is surplus lines insurance?

Surplus lines insurance refers specifically to coverage provided by insurers that are not licensed or ‘admitted’ in the state where the policy is issued. This type of insurance is used when a certain type of coverage or risk is not available from admitted carriers. Admitted carriers are those insurance companies that are licensed and regulated by the state, and they must comply with state insurance laws and rates.

In contrast, surplus lines insurers can underwrite risks that might be difficult to find coverage for in the standard market, often due to their unique nature or high risk. Surplus lines insurance is crucial for providing options for these harder-to-insure risks, allowing consumers greater flexibility in securing the coverage they need.

The other choices do not accurately capture the essence of surplus lines insurance. For instance, insurance from admitted carriers pertains strictly to standard regulations and is not what surplus lines covers. Standard coverage refers to the typically expected insurance products available within the regulated insurance market, which does not align with the purpose of surplus lines. As for insurance covering low-risk properties, surplus lines can pertain to various risk levels and is specifically designed for situations where standard coverage is unavailable due to the nature of the risk rather than the risk being low or high.