What does it mean when an insurance company is “non-admitted?”

A non-admitted insurance company is a company that is not licensed to do business in a particular state or jurisdiction. Non-admitted insurance companies operate outside of the state’s regulatory system, and policies issued by non-admitted insurance companies are not protected by the state’s guarantee fund. 

What does it mean when an insurance company is “admitted?”

When an insurance company is admitted in a state, it means the company is licensed to sell insurance in that state and is subject to the state’s regulations, including its solvency requirements and consumer protection laws. The state verifies the company’s policy forms, rates and requirements. 

Policies issued by admitted insurance companies are protected by the state’s guarantee fund, which provides coverage in the event that the insurance company becomes insolvent. This means the state’s insurance fund could kick in and help make payments on claims, keeping your business covered. 

In contrast, a non-admitted insurance company is not subject to the regulations and oversight of the state in which it operates, and policies issued by non-admitted insurance companies may not be protected by the state’s guarantee fund. In other words, your claim won’t get paid if your non-admitted insurance company becomes insolvent.

Do the risks outweigh the benefits?

While non-admitted insurance companies may offer lower premiums or specialized coverage, such as coverage in a high-risk tornado zone or coverage for very high-value homes, there are also potential risks associated with using a non-admitted insurance company, including reduced financial stability and regulatory protection. 

When you work with an admitted carrier, you can also appeal to the state if you feel that your agency didn’t handle your claim properly. You will not have the opportunity to appeal if you work with a non-admitted insurance company. 

How do you choose?

It is important to carefully consider the financial stability and regulatory protection offered by an insurance company before purchasing a policy. You may also want to consult with an insurance professional to help you evaluate the options available to you.

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