What must brokers disclose to insureds regarding non-admitted carriers?

Brokers must disclose to insureds that non-admitted carriers may involve greater risk for the policyholder, which is vital for informed decision-making in the insurance process. Non-admitted carriers, unlike admitted carriers, are not regulated by the state’s insurance department and do not provide the same level of consumer protections. This means that if a non-admitted carrier fails or becomes insolvent, the policyholder may have fewer avenues for recourse compared to policies from admitted carriers.

This disclosure is important because it allows insured individuals to understand that while non-admitted carriers might offer coverage for risks that admitted carriers will not, the trade-off could be a higher risk. Better awareness of these potential risks helps policyholders make more informed choices when considering insurance policies from non-admitted carriers, emphasizing the importance of understanding the implications of such insurance choices. While other options may have partial truths, they do not encapsulate the critical need for clarity about the increased risks associated with non-admitted carriers.