Hard to Find Home Insurance
Occasionally an insurance agent is presented with a home or business they cannot place with one of the insurance companies they represent. There may be a number of reasons such as a house that is vacant or a home in close proximity to the ocean such is the case with many homes in New Bedford. Whatever the reason, an insurance company may deem it too risky or outside their guidelines. When this happens, an agent can look to what is called Surplus Lines Insurance – a market place where hard-to-place insurance can be purchased. The surplus lines insurance agency has contracts with “non-admitted” insurance companies to sell their policies. These policies normally include an inspection fee and a tax. Below is a brief review of the difference between the two types of insurance companies doing business in our state; Admitted and Non-admitted.
“Admitted” Insurance Companies
An admitted insurance company or “carrier” must receive approval from the state’s insurance department for their rates they charge and policy forms. The benefit to the policyholder is that the insurance company is backed by the state’s insolvency fund. In Massachusetts, each policyholder is eligible to receive up to $300,000 per policy for the portion of covered claims that went unpaid due to insolvency of an admitted insurance company. Insurance rates are often lower than those of non-admitted insurance companies. However, their underwriting and what they choose to insure, can be restrictive.
“Non-admitted” Insurance Companies
On the other hand, the non-admitted insurance company, does not have to abide by the same rules and guidelines set by the state’s insurance department. The non-admitted carrier can set rates higher than what the insurance department would normally permit for the ‘admitted’ carrier. The policyholder with the non-admitted carrier is not eligible to receive benefits from the state’s insolvency fund should the insurance company become insolvent or bankrupt and unable to pay the claims they owe.
When considering whether or not to purchase a policy from a non-admitted insurance company, one of the most important considerations is the financial rating of the insurance company. The rating can be a more important factor to consider than its’ admitted vs. non-admitted status. There are a few rating companies that analyze the financial strength of an insurance company. They give an opinion in the form of a grade of how well the insurance company is able meet their obligations and claim-paying ability to their policyholders. Rating companies vary in the depth of their analysis. A very good insurance rating company such as A.M. Best, conducts an in-depth analysis and scores the insurance company with a range of grades. The best being A++ and A+. Companies scoring less than A- or a B++ have a less favorable financial position in comparison. Borden Insurance Agency Inc. in New Bedford will always check the A.M. Best rating to be sure it is rated in the A’s before quoting and placing a policy with a non-admitted insurance company. In doing so, the need for the state’s insolvency fund as a safety net is greatly diminished.