Here’s how excess and surplus lines (E&S) insurance opens up coverage possibilities for those shut out of the standard insurance market:
- Embracing High-Risk:
- Cater to Unusual Circumstances: E&S insurers specialize in risk profiles that standard insurers deem too unpredictable or likely to result in claims. Examples include:
- Coastal properties in hurricane zones
- Businesses with activities posing unique liability concerns (demolition, hazardous materials, etc.)
- Individuals with prior insurance claim history or high-risk hobbies.
- Flexibility and Customization:
- Tailored Policies: Unlike standard insurance’s more rigid forms, E&S insurers craft policies specific to the insured’s needs, potentially covering:
- Perils excluded by traditional insurance (like earth movement)
- Unique liability scenarios
- Combinations of coverage not usually packaged together
- Filling Coverage Gaps:
- High-Value Assets: When the value of assets (art collections, expensive homes, specialized equipment) exceeds standard limits, E&S offers additional capacity.
- Emerging Risks: E&S insurers can be quicker to respond to new types of risk, like cyber liability or drone insurance, before the standard market develops products.
- Less Regulatory Restriction:
- Rate Freedom: E&S insurers aren’t bound by state-mandated premium restrictions, allowing them to charge based on the true risk involved.
- Policy Form Innovation: They can design coverage for niche needs without the same regulatory hurdles as standard insurers.
Examples of When E&S is the Solution:
- A beachfront mansion in Florida can’t get standard homeowners insurance due to hurricane risk. A surplus lines insurer offers a policy.
- A chemical manufacturer faces unique pollution liabilities. E&S coverage is tailored to their specific operations.
- A skydiving instructor is denied standard life insurance. An E&S insurer offers a policy that takes his occupation into account.
Important Note: E&S is not a replacement for standard insurance when standard options exist. It fills the gaps where traditional insurers are unwilling or unable to take on the risk