Michigan Property & Casualty Practice Exam

Surplus and excess insurance is specifically designed to provide coverage that is above and beyond the limits of standard insurance policies and to address risks that are not typically covered by these standard policies. One important aspect of surplus and excess insurance is that it should not be utilized merely to obtain lower-cost coverage.

Using surplus lines to seek lower premiums contradicts the fundamental purpose of these types of insurance, which is to provide coverage for unique, high, or specialized risks that the standard market cannot adequately address. These insurances are intended for high-risk situations where the standard insurers might refuse coverage altogether.

In contrast, surplus and excess insurance can indeed cover non-admitted risks and insure high-risk individuals, as it's designed specifically for those situations. Furthermore, while it can provide substantial coverage for various risks, it typically does not offer "universal" coverage in the sense of covering everything without restriction. Each of these other contexts aligns with the proper use of surplus and excess insurance, focusing on their role in managing specific risks rather than simply providing a cost savings.