Written by: Chloe Silverman, Senior Writer at The Hartford
Reviewed by: Gene Marks, CPA, Author & Small Business Owner
What Is the Difference Between Admitted vs Non-Admitted Insurance Carriers?
How do admitted and non-admitted insurance companies differ? If an insurance company is admitted, it means they’ve met the regulations set by the state Department of Insurance (DOI) in the areas they work. In comparison, non-admitted insurance carriers have not met their state’s requirements. So, what are the benefits of admitted vs non-admitted insurance?
One of the main benefits from buyingsmall business insurance from an admitted insurance carrier is that you won’t have to pay certain fees or taxes on your policy because the company follows regulations, so the expenses are unnecessary. However, policies from non-admitted insurers can be more flexible in the risks they insure. This helps them offer coverages forbusiness risksthat the regular insurance market won’t always write policies for.
To learn more about different types of insurance you may need,get a quote today.
Admitted Insurance Carriers
Admitted insurance carriers are licensed by the State Department of Insurance or insurance commissioners where they operate. This means that these insurance carriers comply with their state’s regulations. The state also verifies their:
- Policy forms
- Rates
- Requirements
On top of this, if the admitted insurance company fails, the state’s insurance fund will help make payments on claims if needed. This guarantees coverage for your small business.
Non-Admitted Insurance Carriers
Non-admitted carriers do business through wholesale brokers in states where they do not have insurance licenses. This means they aren’t required to follow the same state regulations as admitted carriers. It also means that if the insurance company fails, the state would not step in to make payments on claims. However, non-admitted insurance carriers are regulated by the state surplus lines office.
Admitted vs Non-Admitted Insurance: Which Is Better?
Both admitted and non-admitted insurance companies have benefits. Thetypes of insurancecoverage you need and the risks you face can determine which is right for you.
Remember, admitted insurance companies are required to follow state regulations. If they fail, the state will step in and pay claims. Generally, they offer standard market coverages for small businesses. Non-admitted insurance companies aren’t required to follow state regulations which can make their coverage options more flexible.
Benefits of Admitted Insurance Carriers
Admitted insurance companies are regulated by the states they operate in. They also follow state regulations. Some of the benefits that come from getting coverage from an admitted insurance company include:
- The state guaranteeing your claims will be covered through the state guaranty fund if the insurance company fails
- Having the option to appeal a decision with the state department of insurance if you think your insurance company didn’t handle a claim correctly
Downsides of Admitted Insurance Carriers
While admitted insurance is a great option for some businesses, certain operations will require more flexibility in coverage options. This is especially true if your small business faces unique or very specific risks on the job. In this case, admitted insurance may not be able to provide coverage that’s tailored to your needs.
Benefits of Non-Admitted Insurance Carriers
The benefit of working with non-admitted companies is that you’ll have more flexibility when you’re choosing coverage. This can allow you to get coverage for risks that may be complicated or not typically covered by insurance companies. For example, if your business is located in an area that’s high risk for tornados, hurricanes or other natural disasters, you may need to work with a non-admitted insurance company for property coverage.
Downsides of Non-Admitted Insurance Carriers
Non-admitted markets and insurance carriers are not covered by the state if the insurance company becomes insolvent. In this situation, your claim may not be paid. This is why it’s often considered high risk to work with a non-admitted insurance carrier.
A.M. Best Ratings
Regardless of whether an insurance company is admitted or non-admitted, they’re rated by the company A.M. Best. This company gives them a letter grade ranging from A++ to F. This can help you better determine which companies are reliable insurance carriers. In general, you’ll want to choose a company with a higher letter grade.
Choosing the Right Insurance Carrier
Both admitted and non-admitted insurance carriers offer coverages that can help your business succeed. To learn more about the small business insurance policies you may need,get a quote from us today. We’ve been helping small business owners get the coverage they need for over 200 years. We can help you get standard insurance coverages for small businesses as well as other polices you may need.
Last Updated: September 21, 2023
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