“What should I think about when considering whether to file a claim on my insurance?”

People buy insurance so that when they have a covered claim they can get paid for their loss.  However, as surprising as it may seem many people give up their rights under their insurance policy because they don’t want to file a claim. Read More→

“The quote I got from my broker indicates that the insurer is a ‘Surplus Lines Insurer’.  What is a Surplus Lines Insurer and why does it matter?”

Surplus Lines Insurers, also known as ‘Non-admitted Insurers’ are insurers that specialize in providing insurance for exposures that most regular insurers do not want to provide.  Regular insurers, which are also known as ‘Admitted Insurers’, are insurers that have filed as such with the State Department of Insurance in your state and have had their rates and policy language approved by the Department of Insurance.  Admitted Insurers policies are also subject to your state’s ‘Guarantee Fund’ which bails out bankrupt insurance companies.  Surplus Lines Insurers’ policies are not subject to Guarantee Funds so that if the insurer is not financial able to pay claims, the claims will go unpaid.

Surplus Lines Insurers often will write types of policies that admitted insurers won’t, or cover people that have significant previous claims, or provide insurance for classes of business that admitted insurers won’t.  However, Surplus Lines policies are often subject to MANY more exclusions and SERIOUS limitations than standard policies are.  Likewise, premiums are likely to be higher.  Surplus lines policies are also subject to policy fees and taxes that admitted policies are not.  While most Admitted Insurers will allow directly billed installment payment plans, Surplus Lines insurers want to have the entire estimated premium paid in advance.  If a policyholder needs to make payments in installments, premium financing is usually the only option.

In some states, it is illegal to offer a Surplus Lines policy that is lower in price than an Admitted policy providing similar coverage.  Likewise some states make it illegal to offer a Surplus Lines policy if there are Admitted Insurers willing to offer coverage.  These administrative rules have been put in place because where an admitted insurer is willing to offer the coverage the insurance consumer is nearly always better off buying the coverage from an admitted insurer.

Because state guarantee funds don’t apply to Surplus Lines policies, it is critical to make sure that any Surplus Lines insurer quoting is stable financially, otherwise you may find that in the event of a claim there is no money to pay the claim or even if there isn’t a claim your customers may be unwilling to accept a certificate of insurance issued by a financial weak insurer.

There are some Surplus Lines Insurers that quote low premiums while adding some oddball extra coverage, that few people if anyone at all would buy, to get around the rules that prohibit offering such policies at lower than Admitted insurers.  Don’t be fooled by that approach.  Even if technically not a violation of the law, you’ll still be subject to all the downsides of a Surplus Lines policy.

If you’re in the cleaning business and you do exterior windows above 3 stories or you do floor waxing at grocery, drug or other locations with large tile or linoleum floors you probably should be insured with a Surplus Lines insurer.  Likewise if you had several losses or if you use a lot of subcontractors you may find that Surplus Lines insurer are willing to provide coverage for you even if Admitted insurers will not.

“I work out of my home and have a homeowners’ policy.  Won’t my homeowners’ policy cover my home based business exposures?”

What we can say with certainty is that homeowners’ policies are not designed to cover business exposures.  While often they provide some minimal coverage, it is totally inadequate for most home based businesses. Read More→

“All my workers are subcontractors.  How can I avoid having to pay premium at audit time on my Workers Compensation policy?”

The simplest and most fool proof way to avoid owing Workers Compensation premium at audit on the work of subcontractors is to always obtain a certificate of Workers Compensation insurance from your subcontractor.  A Workers Compensation certificate will be regarded as proof by the auditor that the worker was an independent contractor and not an employee unless other evidence demonstrates it to the contrary. Read More→