Solve Your Home Insurance Problem

  • June 7, 2024
  • 4 min read

Have you ever heard of surplus lines insurance? Sometimes it’s called excess and surplus lines. Well, if you haven’t, you may hear about it soon, and here’s why.

Insurance Crisis
In many states, there is a very serious crisis with homeowners insurance and even auto insurance. The reason why is because many insurance companies are pulling out of different states or raising rates by 50, 60, or 70%. This is because they have experienced huge amounts of claims in the last couple of years and expect to have high claims in the coming years. Many states have allowed them to change the way they calculate their premiums, not just based on the past but also on expected rates in the future.

Impact on Homeowners
So, what does that mean for you? If you’re a homeowner, you might have been non-renewed or had your policy canceled. You may not be able to find other carriers, especially if you’re with what’s called a captive agency like State Farm or one of these that has only one type of insurance.

What are excess or surplus lines?
What are excess or surplus lines? Well, these are insurance policies from companies that are not filed in your state. Every state has a list of companies that have their policies, their forms, and their rates pre-approved and filed in that state. These have rates that are approved by the state, and the coverage and terms are set by the state.

Surplus Lines Agreement
Insurance companies can sell in your state using a surplus lines agreement if there’s not enough coverage on admitted carriers. So, if you don’t have enough carriers that will cover this type of risk, you can get excess and surplus line coverage.

History and Current Trends
In the past, it was pretty rare, mostly for commercial lines of insurance for businesses where there was a unique risk, a certain type of company that was very hard to find standardized coverage for. But now that there are more gaps in the market for insurance, more and more surplus lines are stepping in to fill those gaps.

Cost and Availability
Surplus lines are not always more money. As a matter of fact, sometimes they’re the same, and sometimes they’re even less because they don’t have to meet the same level of coverage for all the different details that an admitted carrier might have to cover. They also might be a little harder to find because not every agency carries surplus lines. It requires an extra license, so if your agency is not licensed for surplus lines insurance, they can’t even offer it to you. Even if they do, they may not have the markets in place.

What to Do If You Have Difficulty Finding Coverage
The point I’m trying to make is that if you have difficulty placing a reasonable or any type of coverage for your homeowners, ask your agent or us about looking at surplus line options. Now, certain criteria have to be met. You have to make sure that your agency does a thorough and diligent search to make sure there’s not reasonable coverage in the admitted carrier market. They also have to make sure that the coverage on the surplus line matches your risk, matches your needs, and is clearly explained to you.

Viability of Surplus Lines
But for many, especially high-net-worth affluent types of covered insurance, excess and surplus lines might be a very viable option. In fact, you might get more specialized coverage for things you want to cover more but also be able to eliminate things you don’t want coverage for that you’re paying for.

So, this is something that is certainly worth considering. Look into it. In any event, you may find that it doesn’t work for you right now, but in the future, it might be a good option. At least find out if your agency can handle surplus lines, because not every agency can do that. If they can’t, maybe at least get a quote from an agency that can offer a surplus line quote and find out if there is something from a non-admitted carrier that might be suitable for the type of risk you have and the type of coverage you need, especially when the markets aren’t there or you’ve been non-renewed.

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