You’ve probably had some form of insurance in your life. And chances are, the insurance you’ve had was from an admitted insurance carrier. Although, you probably didn’t think of your insurance as admitted (nor do you know why it would be called that). Yet, if you’ve ever shopped around for special kinds of insurance coverage—especially outside of what’s normally offered in your area—“non-admitted” is a term you likely encountered. Whether or not you’ve heard of these policy terms before, there are some important differences between them to consider. This guide will help you understand all you need to know about each kind of insurance so that you can make informed decisions down the line, for yourself and your small business.

Admitted vs. non-admitted in insurance

In insurance terms, the words “admitted” and “non-admitted” have to do with 3 major factors:

  • Licensing
  • Regulation
  • Backing

Specifically, admitted and non-admitted insurance involves licensing, regulation, and backing for an insurance provider in a given state. Admitted insurance comes from an insurance provider who’s licensed in your state. Simple, right? But the thing is… so can non-admitted insurance. This makes the topic a bit tricky, as the technical elements of admitted versus non -admitted insurance can be complex. Below, we’ll detail the differences between the two and list the pros and cons of each policy. First, let’s break down the definitions of admitted and non-admitted insurance.

What is admitted insurance?

Admitted insurance is insurance provided by an admitted insurance carrier who is licensed in your state. An admitted insurance carrier who contributes to a state’s Guaranty Fund is both bound by its regulations and supported by its backing. In practice, admitted insurance is a guarantee for policyholders that their plan will follow standard regulations and they will receive coverage, even if their insurer defaults or is otherwise unable to protect them. It’s a safe option and it’s backed by a government body. Is it enough? Admitted insurance doesn’t cover everything. If it did, there would be no need for non-admitted insurance. Humans are constantly pushing the boundaries of what’s possible, and insurance is the backbone for the messiness that progress requires. It’s safe to say there will always be grey areas and things that an admitted carrier is unable or unwilling to cover in a licensed, regulated, and state-backed way. That’s where non-admitted insurance comes in.

What is non-admitted insurance?

Non-admitted insurance is provided by an insurer who’s not licensed in your state (they are likely licensed elsewhere). It also doesn’t mean the insurance is illegal, nor does it mean it’s bad. A non-admitted insurance carrier is still allowed to provide their services; it just doesn’t have the same licensing, regulation, or backing. That’s because (generally) it provides coverage for special circumstances that admitted insurance can’t or won’t. Some of these include:

  • High-risk or specialty scenarios
  • High-value items
  • Individuals with insurability issues

When you choose non-admitted insurance, you need to be able to prove that you attempted (in good faith) to purchase the same coverage from an admitted insurer. Other titles you might hear related to non-admitted insurance include “excess and surplus” (E&S) or “surplus Lines policy.” That’s because some of the scenarios above, and others it might cover, can be considered above and beyond the norm. But who’s to decide what’s normal—or needed—for you as a business owner? You are. Whatever your situation, non-admitted insurance is worth looking into (for a variety of reasons).  Again, non-admitted doesn’t mean not allowed. In fact, it doesn’t even mean not- trustworthy or unstable. While non-admitted insurance is literally (legally!) a second choice, since you have to prove you tried admitted insurance before going non-admitted, that doesn’t mean it’s a bad choice.

Admitted vs. non-admitted pros & cons

Now that you understand what admitted and non-admitted insurance are, it’s time to think about how they differ from each other. The easiest and most practical way to do that is to think about the pros and cons of each.

Admitted pros and cons

It can be easy to think of admitted insurance as good or better than non-admitted since it adheres to state insurance regulations. Why would you go with a provider that isn’t backed by the state? But that view overlooks how some of the cons might sway you toward considering non-admitted options:

  • Guarantee (pro) – Since an admitted policy is backed by the state, you can rest assured (insured!) that you’ll have coverage even through unforeseen circumstances.
  • Gaps in coverage (con) – Non-admitted insurance exists because admitted insurance doesn’t cover everything!
  • Regulation (pro) – You know what to expect based on standards all admitted insurers are held to.
  • Low flexibility (con) – Because of strict regulation regarding an admitted policy, the plans available to you are not ideal for your specific needs.

Non-admitted pros and cons

Just as it’s easy to think of admitted insurance as all positive, you should avoid the trap of considering non-admitted insurance as purely negative. To that end, consider how some of its pros might outweigh some of its cons:

  • No standards (con) – It can be hard to gauge what to expect or compare offers, with little to no standardization in place.
  • More flexibility (pro) – You can find non-admitted insurance coverage for scenarios you didn’t think you’d be able to cover. Coverage despite insurability issues, high risk, etc. Creative, responsive coverage options.
  • Higher cost (con) – Your premiums can be higher than they might be for admitted plans.
  • More coverage (pro) – Your coverage can also be more robust than what some admitted companies are willing to offer.

A complex decision

The admitted vs. non-admitted decision might already be made for you. A perfect fit for your business might exist within what’s admitted in your state. Or, it might not, and you might need to look into non-admitted options. In any case, understanding more about the complexity can help you leverage your knowledge to make the best choice for you as a business owner. When you start looking for the right insurance carrier for you, keep an open mind and remember what’s most important: coverage you can trust, admitted or not.

You know what’s not complex? Business insurance with Thimble. Our goal is to make insurance simple with plans that work when you do. The general liability insurance and professional liability insurance policies we offer help to protect small businesses from third-party claims of:

  • Third-party, non-employee bodily injury
  • Personal and advertising injury
  • Third-party property damage

To purchase coverage by the hour, day, or month (in less than 60 seconds) and get proof of insurance
 immediately.  It’s that simple.