Excess and surplus lines insurance

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

• Type of carrier. Standard insurance is offered by admitted carriers that are licensed and adhere to all regulations in the state where the policy is sold. E&S insurance is offered by non-admitted carriers, which are licensed in their home state but do not need to be licensed in all states where they operate.
• State guarantee funds and oversight. Because non-admitted carriers are not backed by the state, the state's guaranty fund will not cover claims if the carrier becomes financially insolvent. You also cannot appeal to your state's department of insurance (DOI) 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 admitted carriers' 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, non-standard, or specialized risks, policies bought from the E&S market almost always cost more than comparable policies purchased from the standard market.

You can expect a surplus insurance policy to provide protection that is similar to a standard insurance policy of the 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 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 or expensive claims, then standard carriers may be unwilling to insure your company.
• You work in a new or emerging industry. For example, businesses in the cannabis, cryptocurrency, or drone operation industries often have a hard time buying insurance from standard carriers as the industry is new and traditional risk models do not yet exist.
• You face risks of natural disasters. Floods, earthquakes, and wildfires are more likely in some states, which can make it harder to secure coverage from admitted carriers. For example, businesses in California may need to find a non-admitted carrier for commercial property coverage 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 unique liability exposures, 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 or E&S 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 liability insurance. It is similar to commercial umbrella insurance, which boosts coverage across several liability policies. For both, the coverage activates when the underlying policy reaches its limit, typically with the same terms and exclusions.