What is the difference between an admitted policy and a non admitted insurance policy?
UPDATED: Jul 21, 2010
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Asked July 21, 2010
Insurance is regulated on a state by state basis, and each states requires insurance companies that do business within their borders to be licensed in that state and submit their forms and policies to the state insurance department for approval. In special instances, these insurance companies are granted a license to sell insurance through a surplus plan which forgoes the licensing required for ordinary insurance practices.
An admitted policy is any insurance policy that is issued by a company that is licensed to sell insurance in the area in which it is being purchased. The company has been reviewed by the state, and its policies and insurance forms meet or exceed the minimum requirements of the state. One of the primary advantages to an admitted policy is that if the insurance becomes insolvent, the state government guarantees claims up to a specified limit.
A non admitted policy is one that is sold, usually through an insurance broker, from an underwriting insurance company that is not specifically licensed to do business in the region where the policy is being purchased. This type of insurance is generally called a Surplus Line, but it may be applied to certain types of specialty insurance as well. This does not mean that the policy is not effective, but it might mean that if the insurance company goes bankrupt you will not be able to collect on claims.
Answered July 21, 2010 by Anonymous