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Standard vs. Non-Standard Insurance Coverage

Posted by John Powter

Apr 14, 2014 8:35:00 AM

insurance_policyFinding the appropriate insurance coverage to fit your individual needs can be challenging. Many of the insurance policies you see advertised on TV are designed for a narrow group of very low risk individuals. The reality is that many people don't qualify for these "standard" insurance policies and must seek out what are referred to as "non-standard" policies. While the terms "standard" and "non-standard" can be confusing (and may make it seem like "non-standard" policies are less desirable), the only difference between the two are the types of policy forms they are written on and and the range of applicants that qualify for them.

It's important to seek advice from experienced professionals who can help you determine the difference between standard vs. non-standard insurance coverage and how recognizing the distinction benefits you. 

GDP Advisors is the product of a 3-company merger designed to guide you through the standard vs. non-standard insurance coverage dilemma. If you're turned down by at least 3 insurance companies due to unmet underwriting guidelines, you can depend on our experts to find a non-standard policy that meets your needs. Take a look at some useful information that'll broaden your understanding of obtaining coverage that best applies to your specific needs.

Characteristics of Standard Coverage

Standard coverage is designed for the low risk policy holder. These are typically cookie cutter policies that differ very little from one to the next both in terms of the scope of their coverage and price of the policy. Other common characteristics of standard policies include:

  • Standard policy forms are regulated by the State in which they are issued.
  • Standard policies participate in the Guaranty Fund, a State-operated funding program for payment of claims on behalf of a carrier that's not able to pay claims on their own.
  • Standard policies typically have more restrictions, in terms of which types of individuals they cover. Only those who fit into the low risk category are qualified to be insured. For example, specific determining factors for coverage such as auto insurance include a driving record that's doesn't contain accidents, tickets for traffic violations, and filed insurance claims.

Characteristics of Non-Standard Coverage

While non-standard insurance policies are also written on State-approved policy forms, however they are highly customized to the policyholder's needs and therefore vary widely in coverage and price.

  • Non-Standard policies are sometimes referred to as Excess & Surplus Lines (E&S).
  • Non-Standard policies may involve additional fees depending upon the specific coverage your require and your level of risk. If you are a high risk applicant you will pay premiums that reflect this.
  • Non-standard policies have a lot more flexibility regarding their acceptance of high-risk applicants who may not qualify for other standard insurance carriers.
  • Most companies require individuals to stay with a non-standard policy for a certain amount of time before they can attempt to switch over to a standard provider.

Additional Factors to Consider

Is the insurer licensed?

Insurers that aren't licensed by the State are called "nonadmitted" or "surplus line" agents. Having coverage from one of these companies can do more harm than good and result in consequences because those that aren't licensed aren't obligated to adhere to financial solvency regulations and the enforcement that applies to licensed insurers. 

How can you confirm the facts? 

Be sure to do your research and ask questions to avoid regrets about obtaining coverage from an un-licensed channel. You can also locate your state's department of insurance through the National Association of Insurance Commissions to ensure the company that you're interested in meets the necessary guidelines to be considered legitimate.

What about foreign insurers?

Non-US, or alien, insurers should still be licensed by the country in which they operate. You should also perform your own investigation into these companies before you decide to settle with a certain plan. 

Standard vs. non-standard insurance coverage is a complex topic that needs your full attention. Don't let securing insurance become an intimidating task that causes you to make unreasonable decisions. Seek consultation from experts who can effectively address your concerns and help land you the best coverage possible. 

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Topics: Insurance

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