Startup Risk Tips: Admitted / Non-Admitted Insurance Policies
Carl Niedbala
COO & Co-Founder
COO & Co-Founder
Insurance quotes are a pain to read. If you’re not in the industry, most of the terms might seem like complete jibberish. One term that comes up is the whether the policy is with an Admitted or Non-Admitted insurance carrier. Here’s the deal:
Think of admitted insurance policies like bank accounts at FDIC-insured banks. As a regulatory body, the FDIC creates a set of standards/rules that banks must meet in order to become FDIC-insured. If the bank meets these standards, they can qualify for government assistance in the case of a run on the bank or something otherwise going wrong. It creates an extra cushion for the account holder: if the bank fails, the government (FDIC) will pay out.
Admitted insurance policies are the same thing for the insurance industry. The soon-to-be admitted insurance carrier has to jump through a bunch of state regulatory hoops to gain admitted status. Once admitted, the policies the carrier writes in-state are backed by the state’s insurance authority. The policyholder then has an extra cushion just as with an FDIC-insured bank account.
Non-admitted insurance policies are just that: written by a carrier not yet “admitted” by the state insurance authority. As such, non-admitted policies don’t have extra backing from the state if the insurance carrier goes under. The insured will have to pay “surplus lines taxes” on the policy because of its non-admitted status.
At first glance it probably seems like admitted insurance policies are the only way to go. This isn’t the case though. Here’s why:
While admitted status is nice, it’s not everything. Going with a financially stable insurance carrier that provides strong, comprehensive coverage and great customer support should always be the goal.
To learn more, you can always reach out to a member of our team by emailing info@foundershield.com at any time. Or create an account here in order to get a quote for a comprehensive program that protects your business!
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