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Excess and surplus lines insurance

Excess and surplus (E&S) lines insurance refers to coverage for risks that are too high or too expensive for a traditional insurance company to take on. You can buy this type of coverage from non-admitted carriers, which are allowed greater flexibility but are not backed by the state.

What is excess and surplus lines insurance?

Excess and surplus lines insurance covers businesses with high risks or a history of claims that make it hard for them to obtain coverage in the traditional insurance marketplace. It also covers emerging industries, as their risks are not well known and there's a lack of standard policies and premiums.

The term is used to distinguish how the insurance is purchased. But it includes most types of property and casualty (P&C) insurance, such as:

You may see this coverage referred to as E&S insurance, excess lines, surplus lines, or specialty lines insurance depending on where you're located. For example, it's called excess lines in New York and surplus lines in California.

Insurance companies that sell this coverage are called non-admitted carriers or unlicensed carriers. They are not subject to the same regulations as other insurance companies and they do not need to be licensed in the states where they sell insurance, only in their home state. This allows for greater flexibility in the insurance solutions they can offer.

Because non-admitted carriers are not backed by the state, the state's guaranty fund will not help pay for claims if the carrier is unable to do so.

What is the difference between standard vs. excess or surplus lines insurance?

Standard insurance and excess and surplus lines insurance differ most in these areas:

  • Type of carrier. Admitted carriers that adhere to state regulations sell standard insurance. Non-admitted or unlicensed carriers sell excess and surplus lines insurance.
  • Support from the state. Because non-admitted carriers are not backed by the state, the state's guaranty fund will not help pay for claims if the carrier is unable to do so. You also cannot appeal to your state's department of insurance if you think a claim was mishandled. That makes working with a non-admitted carrier more risky.
  • Flexibility. With standard insurance companies, each state’s department of insurance (DOI) reviews and regulates each company’s insurance forms, rates, and financial standing. Because non-admitted carriers are not subject to the same regulations, they can offer creative solutions to your business's high risks.
  • Premiums. Because they cover higher risks, policies bought from the surplus lines market usually cost more than those purchased from the standard market.

You can expect a surplus insurance policy to provide protection similar to a standard insurance policy of that same type. As with any policy, you'll need to read the fine print and consult an agent to make sure it includes everything your business needs.

Standard vs. excess or surplus lines providers.
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Who needs excess and surplus lines insurance?

Your business may need to secure E&S insurance in the following instances:

  • Your profession has high risks or unique risks. Roofers almost always need surplus lines coverage due to their increased risk of injuries. Commercial landlords may also need lessor's risk only (LRO) and building insurance policies purchased from the surplus lines market due to their specialized risks.
  • You have a claims history. If your business has filed claims in the past, especially multiple claims or expensive claims, then standard carriers may be unwilling to insure your company.
  • You work in a new or emerging industry. For example, cannabis businesses often have a hard time buying insurance from standard carriers as the industry is new and unregulated.
  • You face a risk of natural disasters. Floods, earthquakes, and fires are more likely in some states, which can make it harder to secure coverage. For example, businesses in California may need to find a non-admitted carrier for property insurance because insurers are increasingly concerned about losses from forest fires. Coastal businesses in Florida and elsewhere may need to turn to surplus lines for wind and hail coverage because of costly damages from storms.
  • Your business's event has unique risks. If your business holds a special event with high risks or unique risks, you may also need surplus lines insurance. That might include golf carts, fireworks displays, bungee jumping, or obstacle courses.
  • Your business is new. Startups and businesses with less than three years of experience may be difficult to insure, as their short track record is considered high risk.

Basically, it comes down to your risk exposures. If a carrier's underwriting process determines they are likely to lose money from insuring your business, your application will be denied and you may need to seek coverage from non-admitted carriers.

How much does E&S insurance cost?

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Small businesses that buy surplus lines insurance can expect higher insurance costs due to their increased risk.

Insurers will look at the same factors to determine your premiums as they would for standard insurance policies, such as:

  • Industry risks
  • Business revenue
  • Value of your business property
  • Number of employees
  • Business location
  • Claims history

How do I get excess and surplus lines insurance coverage?

Licensed insurance brokers and agents in your state can sell you surplus lines insurance, just like standard policies. Many small businesses buy liability insurance through the admitted market, then turn to the E&S market for risks that are difficult or too expensive to place through their regular provider.

Insureon partners with Nationwide, Chubb, and Liberty Mutual to offer E&S policies for small businesses like yours. You can fill out our easy online application to get quotes for policies that match your business's risks, or consult an insurance agent to find specialized coverage.

Credit rating firms such as A.M. Best assign grades to insurance companies so you can easily compare the stability of companies within the insurance industry. A non-admitted carrier with an A++ rating could be a better option for your business than an admitted carrier with a C or lower rating.

When it comes time to renew your policy, it's likely your risks will need to be reevaluated, as the traditional insurance market may shift in terms of coverage offered.

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Be prepared with a commercial insurance renewal checklist
Just like going to the doctor for a checkup every year, it's critical to do the same for your business. One way to keep your company healthy is to assess your insurance coverage and current policies annually.

Is excess liability insurance the same as excess lines insurance?

No, these terms refer to two different insurance products:

  • Excess lines insurance is another name for surplus lines insurance, which is coverage that is not available through the standard insurance marketplace.
  • Excess liability insurance is a policy that boosts the limits on your underlying general liability insurance.

Excess liability insurance is similar to commercial umbrella insurance, which boosts coverage across several different liability policies. For both, this coverage activates when the underlying policy reaches its limit, typically with the same terms and exclusions.

What is an assigned risk plan?

There is one other way for high risk businesses to get coverage for policies that are required by state law.

Individuals or businesses that have been denied coverage from multiple providers can apply to their state's assigned risk plan, also called the assigned risk pool. They are then assigned to an insurance company that must provide coverage.

States usually have assigned risk plans for:

This allows high risk individuals and businesses to comply with their state's requirements for coverage, even when insurers are unwilling to sell them a policy. As with surplus lines, insurance purchased through an assigned risk pool costs more than standard coverage.

Get quotes from trusted carriers with Insureon

Insureon makes it easy for small business owners to get insured as part of their risk management strategy. Fill out our free application to get quotes from top-rated insurance companies. Our licensed agents will help make sure you get the right coverage options at a price you can afford. Policyholders can get their certificate of insurance quickly to show as proof of coverage.

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Updated: April 8, 2024
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