Surplus lines insurer

A surplus lines insurer is a non-admitted company: it is not licensed in your state, but the state lets it write coverage for risks that licensed insurers have declined. A home with an old roof in a wildfire zone, a coastal property, or one with a loss history may end up here.

You reach one through a licensed surplus lines broker, who usually must document that admitted companies turned the risk down, often through a diligent search of several carriers. Because the insurer does not file rates and forms for approval the way an admitted insurer does, pricing and wording can differ widely. Expect higher deductibles, roof payment schedules, narrower definitions and a surplus lines premium tax and fee added to the bill, usually itemized on the quote.

The larger catch is protection. In most states, a surplus lines insurer's policyholders are not covered by the guaranty fund if it fails, so the carrier's financial strength rating matters more. Read the policy in full instead of assuming it matches a standard HO-3.

Surplus lines is a legitimate, regulated market, and for some homes it is the only private option. The surplus lines guide explains when it makes sense. The wider market is covered under excess and surplus lines.