Insurance companies use risk statistics to determine the policies to sell and their respective premiums. An insurance company will only sell coverage if risk analysis shows that the carrier shows that the coverage is financially viable. Thus, you might be out of luck if you need insurance coverage for a risk that standard insurance companies don't want to touch.

That is where excess and surplus line insurance comes in.

The Meaning

Excess and surplus lines (E&S) insurance covers complex risks that standard insurance doesn't cover. E&S insurance policies come from out-of-state insurance carriers.

The involvement of out-of-state carriers makes sense since state-licensed insurance carriers must observe insurance state laws and regulations. State insurance laws and regulations determine which services insurance companies provide, the premiums they can charge, and dispute resolutions between insurance carriers and their clients.

On the other hand, out-of-state insurance carriers don't have to pay by the same rules. These carriers can design unique policies for complex risks without worrying about state laws and regulations. They can even charge premiums that state laws don't allow licensed carriers to charge.

Who Needs E&S Line Insurance?

Anyone who cannot find standard insurance for their needs should consider E&S line insurance. Below are examples of commercial operations that usually carry E&S line insurance.

High-risk Casualty Insurance

Some businesses are inherently more risky than others. Examples are businesses that use dangerous tools and equipment, such as chainsaws and power tools. Others are businesses whose workers face high risks of falling due to their elevated worksites, such as tree trimmers and roofers. Standard insurance carriers usually leave such coverage for E&S line carriers.

New Businesses

Insurance companies evaluate your business history when designing your coverage. Your history of claims, mishaps, insurance, and business experience matters. From insurance carriers' point of view, no news (statistics) is bad news.

Unfortunately, insurance companies won't have adequate data to evaluate your risk if your business is relatively new. The risk is even higher if your business is novel and the insurance companies don't understand it well. You might have to look for E&S line insurance in such a case.

Commercial insurance is not just a question of peace of mind. Insurance coverage can determine how fast you get back to business operations after a disaster or whether you return to the business. Evaluate all the risks your business face and look into the insurance industry for the best coverage possible.