Excess and surplus lines insurance

Standard insurance and excess and surplus lines insurance differ most in these areas:

• Type of carrier. Admitted carriers that adhere to state regulations sell standard insurance. Non-admitted or unlicensed carriers sell excess and surplus lines insurance.
• Support from the state. Because non-admitted carriers are not backed by the state, the state's guaranty fund will not help pay for claims if the carrier is unable to do so. You also cannot appeal to your state's department of insurance if you think a claim was mishandled. That makes working with a non-admitted carrier more risky.
• Flexibility. With standard insurance companies, each state’s department of insurance (DOI) reviews and regulates each company’s insurance forms, rates, and financial standing. Because non-admitted carriers are not subject to the same regulations, they can offer creative solutions to your business's high risks.
• Premiums. Because they cover higher risks, policies bought from the surplus lines market usually cost more than those purchased from the standard market.

You can expect a surplus insurance policy to provide protection similar to a standard insurance policy of that same type. As with any policy, you'll need to read the fine print and consult an agent to make sure it includes everything your business needs.

Your business may need to secure E&S insurance in the following instances:

• Your profession has high risks or unique risks. Roofers almost always need surplus lines coverage due to their increased risk of injuries. Commercial landlords may also need lessor's risk only (LRO) and building insurance policies purchased from the surplus lines market due to their specialized risks.
• You have a claims history. If your business has filed claims in the past, especially multiple claims or expensive claims, then standard carriers may be unwilling to insure your company.
• You work in a new or emerging industry. For example, cannabis businesses often have a hard time buying insurance from standard carriers as the industry is new and unregulated.
• You face a risk of natural disasters. Floods, earthquakes, and fires are more likely in some states, which can make it harder to secure coverage. For example, businesses in California may need to find a non-admitted carrier for property insurance because insurers are increasingly concerned about losses from forest fires. Coastal businesses in Florida and elsewhere may need to turn to surplus lines for wind and hail coverage because of costly damages from storms.
• Your business's event has unique risks. If your business holds a special event with high risks or unique risks, you may also need surplus lines insurance. That might include golf carts, fireworks displays, bungee jumping, or obstacle courses.
• Your business is new. Startups and businesses with less than three years of experience may be difficult to insure, as their short track record is considered high risk.

Basically, it comes down to your risk exposures. If a carrier's underwriting process determines they are likely to lose money from insuring your business, your application will be denied and you may need to seek coverage from non-admitted carriers.

No, these terms refer to two different insurance products:

• Excess lines insurance is another name for surplus lines insurance, which is coverage that is not available through the standard insurance marketplace.
• Excess liability insurance is a policy that boosts the limits on your underlying general liability insurance.

Excess liability insurance is similar to commercial umbrella insurance, which boosts coverage across several different liability policies. For both, this coverage activates when the underlying policy reaches its limit, typically with the same terms and exclusions.