Why might a business choose a surplus lines policy despite higher costs?

A business may opt for a surplus lines policy primarily because it offers specialized coverage that is not available through the admitted market. The admitted market consists of insurance companies that are licensed and regulated by state authorities, and they typically provide coverage that adheres to standardized guidelines. However, certain unique or high-risk situations may not be adequately addressed by these conventional policies.

For instance, businesses engaged in innovative sectors, those exposed to significant liability risks, or those needing coverage for unusual properties may find that their coverage needs cannot be met by traditional insurance options. Surplus lines insurers can tailor their products to fit these specific requirements, thus providing more relevant protection for the business's unique risk profile.

Essentially, while surplus lines policies might come with higher premiums, the value lies in their ability to provide coverage that is customized for businesses facing exceptional risks, making it a worthwhile investment for adequate protection.