What is a surplus lines insurance policy?

A surplus lines insurance policy is defined as a coverage option that is offered by a non-admitted insurer when the same coverage is not available from admitted insurers. Admitted insurers are those that are licensed and regulated by the state, while non-admitted insurers do not have such status but can provide coverage in specialty areas or higher-risk scenarios that are not covered by admitted carriers.

The purpose of surplus lines is to enable businesses and individuals to obtain insurance for unique or high-risk situations where traditional markets are unable to provide adequate coverage. This facilitates flexibility in the insurance market, allowing for a wider range of options for those who may otherwise be underserved by standard insurers.

In contrast, other options suggest limitations or incorrect contexts that do not align with the definition of surplus lines. Policies from admitted insurers only or those that cover exclusively standard risks do not reflect the origin or purpose of surplus lines insurance. Additionally, surplus lines policies are not restricted to governmental entities, making that choice incorrect as well.