What should brokers ensure when advising clients on surplus lines insurance?

When advising clients on surplus lines insurance, it is essential for brokers to ensure that clients are fully aware of coverage limitations and disclosures. Surplus lines insurance typically covers risks that standard insurers do not, and as such, it can come with unique policy terms that may not be immediately apparent. These limitations could include exclusions on certain types of claims, reduced coverage for specific events, or unique terms that could impact how a client’s needs are met.

Educating clients about these limitations helps them make informed decisions about their insurance coverage and manage their expectations regarding what is and isn’t covered. Additionally, understanding disclosures such as the fact that surplus lines insurance is not backed by state guaranty funds is crucial for clients. This knowledge protects clients from unexpected gaps in coverage that could lead to significant financial exposure.

While understanding premium payment schedules, reviewing insurers' financial ratings, and the importance of deductibles are all important aspects of insurance brokerage, they do not address the critical need for transparent communication about what a policy includes or excludes, which is vital for client understanding and risk management in the context of surplus lines insurance.