Non-Admitted vs. Admitted Insurance for Restaurants, Bars or Taverns

It is important for restaurant, tavern and bar owners to have the right insurance, however, there are so many different types of policies, and even when you zero in on what is needed, the options are often complex and difficult to compare.

Let’s face it. You are in the hospitality business. You know food, drinks and how to deliver an entertaining night out. When it comes time to purchasing or renewing your insurance for general liability, liquor liability and other coverages, all policies are not created equal. Knowing what questions to ask and how to compare can be the difference between being covered or not – when the time comes to make a claim.

When deciding on your insurance protection, one of the first considerations is whether to purchase admitted or non-admitted insurance. A non-admitted insurance company has not been approved by the state’s insurance department. An admitted insurance company is one that that has been approved and licensed to operate as an insurance company by a state’s insurance department. There are differences between non-admitted and admitted insurance.

Non-Admitted Insurance

Non-admitted insurers or “surplus lines” insurers are not approved by the state and are not regulated by a state’s insurance department. This type of insurance is typically more expensive since non-admitted insurers can set their own rates and policies which can work against the consumer.

If a non-admitted insurance company goes bankrupt the state will not cover any outstanding claims. Also, non-admitted insurers do not have to follow the same underwriting, rating, or coverage protocols that admitted insurers must follow. In addition, if you purchase non-admitted insurance, you will pay surplus lines fees and taxes.

Admitted Insurance

An admitted insurer must conform to all state insurance regulations established by the National Association of Insurance Commissioners (NAIC). Admitted insurers must file their rates and coverage forms and receive state approval by a state’s insurance department. Furthermore, if the insurance company fails for whatever reason and becomes insolvent, the state will step in to cover all outstanding claims up to a pre-determined maximum. If you believe your insurance company has mishandled a claim, you have the ability to file a complaint with the state insurance department. This kind of protection is not typically offered by a non-admitted insurance policy.

Also, additional expenses such as surplus lines fees and taxes are unnecessary because of the status of an admitted insurance company. Understanding the difference between non-admitted and admitted insurance puts you in the best position to choose which is better for your restaurant, bar, or tavern. Be sure to read the fine print and discuss your insurance options with your insurance agent or broker. Less expensive is not always less expensive in the long run.