Excess and surplus lines
Excess and surplus lines insurance is property and casualty coverage placed with an eligible insurer that is not licensed in your state, usually because licensed insurers will not or cannot cover a specialized risk. It can fill that gap, but the policy can carry different wording, fees, taxes, renewal terms and guaranty-fund protection.
Also called: surplus line, surplus lines, excess and surplus insurance, non-admitted insurer, nonadmitted insurer
When a quote or declarations page says "excess and surplus lines," it is telling you who the insurer is and how the policy was placed, not what kind of damage it covers. The insurer is a nonadmitted company, meaning it is not licensed in your state but is eligible to accept this business under 15 U.S.C. § 8206 (opens in a new tab). That status can change the forms, fees, taxes, renewal rules and insolvency protection that come with the policy. What it pays after a loss still depends on the insuring agreement, exclusions, limits, deductibles and endorsements.
How the cost and a claim work, with an example
Connecticut charges a 4 percent surplus-lines premium tax on the premium itself, and broker, service and policy fees are not subject to that tax, according to the Connecticut Insurance Department (opens in a new tab). The premium, loss, limit and deductible below are illustrations; the 4 percent rate is the state's figure.
Hover or tap a row to highlight it.
| Item | Amount |
|---|---|
| Policy premium | $12,000 |
| Connecticut surplus-lines tax (4%) | $12,000 × 0.04 = $480 |
| Premium plus tax | $12,000 + $480 = $12,480 |
| Covered loss (limit of at least $20,000) | $20,000 |
| Deductible | $2,000 |
| Insurer payment | $20,000 − $2,000 = $18,000 |
A separately charged broker, producer or policy fee is added according to the quote. You generally pay the billed premium and tax to the producer or broker, and the surplus-lines broker sends the tax to the state. You carry the $2,000 deductible plus any excluded or uninsured amount.
Options and variations that change what you pay and receive
The policy and the state set these details.
- Admitted or surplus-lines placement. An admitted insurer holds a license in your state; a surplus-lines insurer does not but may be eligible for nonadmitted business. That difference can change available forms, regulatory oversight, taxes, disclosures and guaranty-fund protection, according to the NAIC (opens in a new tab).
- Full or partial placement. In Connecticut, surplus-lines coverage may be placed only as excess over what authorized insurers will provide, subject to statutory exceptions and the Exportable List, according to Connecticut Insurance Department Bulletin SL-5 (opens in a new tab).
- Limits and deductibles. Quotes can differ on dwelling, personal property, liability and loss of use limits and on deductibles. A higher limit increases what is available for a covered loss, and a higher deductible increases your share; the premium effect comes from the quote.
- Fees. Fees may be charged separately where state law permits. Michigan allows one only when it is not part of the premium, is reasonable and is disclosed in writing, under Mich. Comp. Laws § 500.1915 (opens in a new tab).
- Policy wording. Texas does not regulate surplus-lines forms and rates the way it regulates licensed insurers, according to the Texas Department of Insurance (opens in a new tab), so exclusions, valuation, defense costs and cancellation refunds can differ.
In this setting, "excess" does not automatically mean an extra layer of limits above another policy. The declarations page and insuring agreement show whether the policy is primary, excess or both.
Where you will see the term
The label appears on property and casualty coverage: specialty homeowners, condo and renters policies, commercial property, liability, commercial auto, marine, aviation and professional liability. Surplus-lines companies sell primarily property and casualty policies and do not sell auto liability, life or health insurance in Texas, according to the Texas Department of Insurance (opens in a new tab). You may see it on a quote or proposal, a binder, the declarations page or policy cover, a renewal notice, a surplus-lines disclosure or stamping document, an endorsement, or claim letters that name the insurer. If your homeowners insurance moved to one of these insurers at renewal, the guide to a Connecticut homeowners insurance increase covers related questions.
What Connecticut and New York require
Connecticut lets a licensed surplus-lines broker buy coverage from insurers not authorized in the state, except coverage available through a residual-market mechanism, under Conn. Gen. Stat. § 38a-794 (opens in a new tab). Placement requires a diligent effort unless the risk is on the Commissioner's Exportable List, under Conn. Gen. Stat. § 38a-741 (opens in a new tab), and three documented declinations from authorized insurers can establish that effort, according to Bulletin SL-5 (opens in a new tab). The 4 percent tax comes from Conn. Gen. Stat. § 38a-743 (opens in a new tab). Every covered policy issued or renewed on or after January 1, 2015 must state on its cover, in at least 12-point bold capitals, that it is a surplus lines policy not protected by the Connecticut Insurance Guaranty Association or subject to review by the Connecticut Insurance Department, under Conn. Gen. Stat. § 38a-745 (opens in a new tab).
New York calls these "excess line" placements. A broker must use due care in choosing the unauthorized insurer, and the broker and insured generally affirm that a diligent effort, usually three declinations, failed to find the coverage from authorized insurers, under N.Y. Insurance Law § 2118 (opens in a new tab). The same section requires declarations pages or cover notes to be submitted for recording and stamping within 45 days after procurement, subject to its exceptions.
Questions to ask an agent or insurer
- Is the insurer admitted in my state, or is it an eligible surplus-lines insurer? The answer sets its regulatory status and whether state guaranty-fund protection applies.
- Why is this risk going to the surplus-lines market, and was admitted coverage unavailable? Connecticut and New York both require placement steps tied to admitted-market availability, exportable lists or diligent effort.
- What are the major exclusions, deductibles, sublimits, valuation rules, vacancy conditions and claim deadlines? The policy wording, not the label, decides a claim.
- What is the full amount I will pay, including premium tax, broker and policy fees, inspection charges, minimum retained premium and cancellation charges? Taxes and fees can raise the invoice or shrink a cancellation refund.
- Who handles claims, what is the insurer's exact legal name and domicile, and what happens if it cannot pay a claim? You need the right claims contact and a clear answer on guaranty-fund protection.
Frequently asked questions
Three short answers about these policies.
Is surplus-lines insurance legal?
Yes. Federal law permits nonadmitted property and casualty insurance to be placed directly or through a surplus-lines broker with an eligible nonadmitted insurer, and state licensing, eligibility, tax and placement rules apply on top of that.
Does a surplus-lines policy have the same protection as admitted insurance?
Not necessarily. Guaranty-fund protection and state review of forms, rates, cancellation terms and solvency can differ. Surplus-lines insurers are not members of the Texas Property and Casualty Insurance Guaranty Association, according to the Texas Department of Insurance (opens in a new tab).
Why would a property need surplus-lines coverage?
It can cover unusual, specialized, high-risk or hard-to-place exposures that the admitted market does not offer. Ask the agent for the specific reason your risk was placed there, and whether an insurance broker or agent is handling the placement.