Insurance companies are regulated by individual state agencies instead of the federal government. Insurers not licensed to sell policies of insurance in a given state are known as non admitted insurance companies.
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Admitted insurance companies are licensed and regulated by the state's Department of Insurance. The policy forms the company uses and rates it charges policyholders have all been reviewed and approved by the state.
Non admitted insurance may still be procured through surplus lines insurance brokers who are specially licensed by the state. Brokers are required to make diligent efforts to place the risk with admitted insurers prior to accessing the surplus lines market.
In many instances, complex and difficult risk requires the use of non admitted insurance since the conventional insurance marketplace may not provide adequate coverage. Policies may be tailored to the policyholder's needs more specifically than a standard form.
Non admitted insurance companies are not part of any state guarantee fund and claims will not be paid in the event of insurer insolvency. Surplus line taxes may also be imposed on each transaction.
Insurers are allowed great latitude in setting rates and premiums for policies.
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