What Does Non-Admitted Insurance Mean?
Non-admitted insurance is insurance that is sold by an insurance company that has not received approval from the insurance department of the state in which it is sold.
Because they are sold by companies that have not received approval, non-admitted insurance products do not need to comply with state regulations, including those that govern pricing. This allows non-admitted insurers more flexibility in their product offerings; however, the policyholders cannot appeal to the state if the insurer goes bankrupt.
Insuranceopedia Explains Non-Admitted Insurance
Even if they are not approved by the insurance commission of the state, non-admitted insurance products are still regulated by the state through its surplus lines department.
The clear disadvantage of getting a product from a non-admitted insurance company is that, if that company goes bankrupt, the state will not intervene on behalf of its clients and extend compensation to them.
Customers may still prefer non-admitted insurance products despite this risk. In addition to sometimes offering lower insurance rates, non-admitted insurers can also cover special risks that admitted companies cannot or will not insure.