What Does Excess and Surplus Lines Insurance Mean?
Excess and surplus line insurance protects an insurer against any financial risks that are too high for other insurance companies to take on. Unlike regular types of insurance that can be purchased from an unlicensed insurance, the excess and surplus line insurance need to be purchased from a licensed insurance agent. It is important for the agent to have a surplus lines license to sell this type of policy. This insurance makes it possible to get insurance for entities that come with unique risks that other insurers will not cover.
Insuranceopedia Explains Excess and Surplus Lines Insurance
This type of insurance carries a risk for the policyholders as it does not come with a guarantee fund which claims payment can be obtained especially if the insurer goes bankrupt. The claim can be paid out through a state guarantee fund.
An excess and surplus lines insurer is referred to as a non-admitted or unlicensed carrier, but it does not indicate that their policies are not valid. It is just that they are subjected to different regulations compared to standard carriers or those allowed by the government. Thus said, this type of insurance often cost more than regular insurance because it can protect against higher than usual risks that other insurance companies will never cover.