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Choose the Right Provider for You: The 6 Main Types of Insurance Companies

Insurance is a complicated business, but it doesn’t have to be. The first step to finding the right insurance coverage for yourself and your family, your car, or even your home is knowing the differences between insurance companies. Keep reading to see the six main types of insurance companies and which one fits your needs best.

1. Standard Lines Are The Main Types of Insurance Sellers

Also called admitted carriers in some states, standard lines are able to sell some specific insurance policies in a specific state or set of states. The insurance products offered by these companies are regulated by the state. Standard line carriers will sell insurance through a network of agents.

Those agents can either be captive and only work with that insurance company, or independent and able to work with several different standard line companies to offer you the best selection possible. Standard lines will also usually pay into a state guarantee fund, which ensures that their insurance policies are still honored in the event that the company declares bankruptcy.

2. Excess Lines

Excess lines are not standard insurance companies. They specialize in products that have higher or specialty risks. This includes insuring high-risk drivers or people with poor credit scores.

Generally, excess lines will charge higher premiums and offer worse coverage to offset that risk.

3. Mutual Insurance

Mutual insurance companies operate like co-ops. The people and businesses that use that insurance company also have an ownership stake. This means that they will have a say in how the insurance company is run and can vote out board members and leadership that they do not like.

4. Captive Insurance

A captive insurance company is one that is completely owned by another business. Basically, that insurance company eliminates the profit margin that would be charged by a third party insurance company. This saves the parent company a few percentage points.

Because it takes quite a bit of money and time to set up, captive insurance companies really only exist for large corporations.

5. Direct Sellers

Direct sellers are much like standard lines, but instead of having agents spread around the state, they will sell directly to consumers. This cuts out the middleman and results in lower prices.

Direct insurance companies won’t help you pick the best coverage for you or offer advice. This means that they’re really ideal for those who know what they want and would like to save money getting it.

5. Domestic And Alien Carriers

Domestic and alien insurance carriers aren’t actually another type of insurance company, but a way of classifying the above categories.

A domestic insurance company is one that is based in the state or country that it operates. An alien insurance company is based in another state or country.

This means that an insurance company could be a domestic direct seller, for example, or an alien mutual insurance company.

Take Your Time When Choosing An Insurance Policy

Being aware of the main types of insurance companies can help you cut through the noise and find the policy you need. Take your time and compare several quotes to get the best deal.

Want more information about personal finance and protecting your financial future? Check out the Business section of our website.

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