Surplus lines
Surplus lines insurance is coverage placed with carriers not licensed in the insured's state but approved to write risks the standard, admitted market will not. Many short-term rental products are written on surplus lines because admitted carriers have not caught up with the category.
By Andrew Bate, Co-founderReviewed by Stuart BateUpdated
Why this matters for property managers
Surplus lines policies carry state surplus lines taxes and filing requirements, and are not backed by state guaranty funds. Managers should know which of their policies are surplus lines and who is handling the tax filings — Velaris handles surplus lines taxes, filings, and commissioner reporting within its programs.
Worked example
A 300-home portfolio on the Florida coast cannot get admitted quotes for guest-injury liability. The program places it with an A-rated surplus lines carrier, adds Florida's surplus lines tax to the invoice, and files the placement through its licensed broker.
Surplus lines and short-term rental insurance
Most short-term rental programs are written on surplus lines paper, because the admitted market still treats nightly rentals as an unusual risk. That is normal and not a warning sign, but it changes three things for a property manager. The invoice carries the state's surplus lines tax and stamping fee on top of the premium, usually a few percent. A licensed surplus lines broker has to file the placement, so ask who is doing it. And the policy is not backed by the state guaranty fund, so the carrier's financial strength rating is the safety net; look for an A-rated carrier and check it at renewal.
Related terms
Browse every term in the insurance glossary for property managers.
Surplus lines: common questions
Is surplus lines insurance safe?
Surplus lines carriers are regulated for solvency and many carry strong AM Best ratings. The difference is regulatory: rates and forms are not filed with the state, and guaranty-fund protection does not apply.
Why is STR insurance often surplus lines?
Because admitted forms were written for owner-occupied homes and long-term landlords; the transient-guest risk needed new forms that the surplus market could offer faster.
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