Are you with the right type of insurance company?

When working with your insurance agent to find appropriate coverage for your operations, there may be situations where you have multiple quotes from different insurance companies. It’s good for you, as the consumer, to know the difference between the types of insurance companies so that you and your agent can make the best decision for you. There are two main types of insurance company – admitted and non-admitted. The differences between them can be significant when deciding which quote to pursue. Admitted insurance companies These are what we all think of as standard insurance companies that advertise on national television, but there are many regional admitted insurance companies as well. They are large and well-known for financial stability and claims handling. There are some other things to know about these companies. They are accepted, therefore “admitted,” by your state’s insurance division. This means: –They must file their rates with the commissioner’s office. –They must comply with regulatory cancellation guidelines. They must give proper notice, depending on the reason for cancellation. If the policy cancels, the return premium due to you is paid without hesitation or penalty. –They must also comply with all other statutes put forth by your state’s insurance regulators. –They are protected by the Insurance Guarantee Fund, which guarantees that in the event of default or insolvency of an insurance company, the policyholders (you) are still able to receive loss payments up to a limit. The limit varies by state, but typically is $300,000. –There is no penalty for canceling a policy at any time during the policy period. You can cancel on the second day of the policy issuance if you so choose. –There are no policy fees or taxes charged to you by the insurance company. Non-admitted insurance companies These companies usually don’t advertise on television because they aren’t typically available to the public directly. You must go through an insurance agent, then that agent must go to a wholesale broker to access non-admitted insurance companies, so their marketing dollars aren’t well spent appealing to the general insurance-buying public. Following are some other things to know. They are not accepted, therefore “non-admitted,” by your state’s insurance division. This means: –They are not required to file rates with the commissioner’s office, so their rates can fluctuate radically. This can also mean their rates are sometimes less than an admitted insurance company’s rates. –They are not required to comply with state regulatory cancellation guidelines, so they can cancel or non-renew without the same notice admitted companies are required to provide. Most charge a “short rate” penalty if you should decide to cancel your policy. That means the insurance company can keep a percentage of the return premium they owe you (usually this amount is 10%). They offer no protection through the Insurance Guarantee Fund. In the event of their default or insolvency, you have no recourse or remedy through the insurance company directly other than legal action. You can cancel the policy when you wish, but most policies have a 25% minimum earned premium, which means they will keep 25% of your premium regardless of when you cancel. So, if you cancel the day after policy issuance, they will keep 25% (or three months) of premium anyway. (They are required by law to inform you of this minimum premium, so it’s a good way to know if you are with a non-admitted insurance company. The declarations page of the policy will say “25% Minimum Earned Premium.”) Because the insurance company is non-admitted in your state, the state imposes taxes. The wholesaler then will impose fees of some sort, sometimes called a “policy fee.” Those taxes and fees are passed down to you and are charged alongside your premium. (You will know if you are with a non-admitted insurance company if you see taxes and fees charged on the declarations page of your policy.) It’s important to note that non-admitted insurance companies can be very large and financially stable. And admitted carriers have also historically become insolvent from time to time. So, neither option is “bad” to choose, but it’s nice to know the differences between the two. In closing, your agent likely already knows they cannot lawfully sell you a non-admitted policy if an admitted policy is available … unless the non-admitted policy offers better coverage. Even if the non-admitted option is fewer premium dollars, they still cannot sell it to you. It must be better coverage. Work with your agent to find the best market and coverage for your operations. If you are with a non-admitted insurance company and are told that is the only option available to you, think about reaching out to another agent for other options. JD Fulwiler & Co. Insurance developed the Work Truck Total Protect program to provide the industry with underwriting, risk assessment and loss prevention services. JD Fulwiler will shop among many top insurance carriers with which it does business to find a coverage solution that best meets your needs. Learn more at ntea.com/partnerships.

Are you with the right type of insurance company?

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