If you are a business owner, you must have come across the terms: admitted and non-admitted insurance. These two types of insurance policies are specially designed for business owners who seek to protect their business and company against a wide range of risks.
Perhaps you seek answers to what the difference is between admitted and non-admitted insurance. You are in the right space to get all the information you need.
What is Admitted Insurance?
Admitted insurance simply refers to coverage options provided by insurance companies that are backed up by the state insurance commission. Insurance companies that are admitted are expected to follow the state insurance laws and regulations that guide the process of insurance.
Typically, admitted insurance must meet the capital requirements of the state, and also the policies are backed up by the state guarantee funds should, in case, the insurance company files for insolvency.
One of the benefits of admitted insurance is that it provides more consumer protections and financial stability for policyholders. This type of insurance is also the most common type of insurance coverage that business owners often opt for.
What is Non-Admitted Insurance?
Non-admitted coverage is the direct opposite of admitted coverage. While the latter is backed up by the state insurance department, the former is not approved by the state.
This means that the insurance company does not have to comply with the laws and regulations of the state. Unlike admitted insurance, which covers claims in the event of bankruptcy, non-admitted insurance does not offer a guarantee for the payment of claims if the insurance company goes bankrupt.
Some of the key features of non-admitted coverage include:
- It is not subject to state premium taxes.
- It is not licensed or regulated by state insurance commissions or departments.
Summarily, non-admitted insurance offers coverage for higher risks that are not covered by admitted insurance, such as complex commercial risks and liability coverage that exceeds the standard limits.
Benefits of Admitted Insurance
There are several benefits of buying a business insurance policy from an admitted insurer, some of which include:
- It offers broad coverage.
- It features pricing stability.
- The insurance company is licensed and regulated by the state’s insurance department.
- In the event of insolvency, the state guarantee funds will cover claims made by policyholders.
- You won’t be asked to pay tax or any other fee when purchasing an insurance policy.
Furthermore, if your insurance company handles your claim process in an unjust way, you have the option of appealing to the state insurance department for the issue to be rectified.
Benefits of Non-Admitted Insurance
Although non-admitted insurance is not backed up by the state insurance departments, it has its own benefits. Many states regulate non-admitted insurance companies even when they don’t fall under traditional insurance regulations. Some of its benefits include:
- Flexible policy terms and conditions.
- Less restrictive regulatory requirements.
- Faster underwriting and policy issuance.
- Ability to respond to emerging risks.
- Capacity of higher risk exposures.
When choosing the type of insurance for your business, ensure you weigh your options carefully and factor in your unique risks. This would help to determine the best type of policy that suits your business or company.
Tips on How to Choose the Right Policy for Your Business
For business owners, choosing the best policy for their business is essential, and most times, they are often confused on the type of policy to buy. Nevertheless, there is an easy way to go about it; you just need to assess the risks and perils your business is exposed to. By assessing the risk, you can then determine the right policy for your business.
• Evaluate your unique risk
Before deciding to purchase any policy for your business, you need to assess the type of risk and challenges your business faces. You can reach out to an insurance specialist who would guide you through the process of identifying the risk your company faces and how to choose the best policy.
At the end of the day, the choice is left to you to choose between buying admitted or non-admitted coverage. It all depends on the needs of your business and the risks it faces on a daily basis.
• Compare performance reviews
Another way through which you can choose the right policy for your business is by reading customers reviews on the two types of policies. This will give you more insight on the reputation of the company and their financial stability.
What is the Main Difference Between Admitted and Non-Admitted Insurance?
While admitted insurance is regulated and licensed by the state insurance departments, non-admitted insurance offers greater flexibility than admitted insurance. Admitted insurance policies provide state guarantee funds, but this provision is not offered under a non-admitted insurance policy.
