Non-admitted insurance refers to coverage provided by an insurance carrier that has not been approved by a state's insurance department. These carriers operate in a unique segment of the market, often filling the gaps that the admitted carriers cannot.
Key Points:
- Non-admitted carriers are allowed to conduct business in cases where they address needs that admitted carriers cannot handle.
- Non-admitted carriers do not contribute to state guaranty funds, which protect policyholders against carrier bankruptcy.
- Businesses and brokers must inform policyholders if their coverage is sourced from a non-admitted carrier and confirm good-faith efforts to obtain insurance from admitted carriers first.
- Financial reliability can be assessed through A.M. Best ratings. A high-rated non-admitted carrier may be a safer option than a low-rated admitted carrier.
While purchasing insurance from a non-admitted carrier may seem riskier, understanding an insurer's A.M. Best rating can serve as a more accurate indicator of the carrier's overall financial stability and reliability.