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Admitted vs Surplus Lines Home Insurance in Texas
Surplus lines is a real tool for a house the standard market will not write today. Here is what changes behind the price, and how to come back.
The answer
Both are insurance. An admitted carrier is licensed in Texas, TDI reviews its forms and rates, and if it fails, the state guaranty association pays its covered claims. A surplus lines carrier is not licensed here, TDI does not review it, and no guaranty association stands behind it. Surplus lines is the right tool when no admitted carrier will take the house today, and a bridge back once it is ready. The worst day is not the day to meet an unknown.
Two markets, one house
Texas has two markets for a home policy. The admitted market, licensed and watched by TDI. And the surplus lines market, which covers what most companies cannot or will not insure, with fewer consumer protections. The law makes an agent try the admitted market first, and place surplus lines only for what the admitted market will not write. One market has a net under it. The other has only the carrier's balance sheet.
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Admitted carrier
- Licensed in Texas
- Yes
- Forms and rates
- Reviewed by TDI
- If the carrier fails
- The guaranty association pays covered claims, up to policy limits or $300,000 per claim
- The notice on the policy
- None
- What it comes down to
- A net under the promise
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Surplus lines carrier
- Licensed in Texas
- No, eligible to sell here through a surplus lines agent
- Forms and rates
- Not reviewed by TDI
- If the carrier fails
- No guaranty association
- The notice on the policy
- Required, in the words the statute sets
- What it comes down to
- The carrier's balance sheet
The notice on every surplus lines policy
The statute sets the words, and the policy has to carry them. The insurer is not licensed to transact insurance in this state. The Texas Department of Insurance does not audit the finances or review the solvency of the surplus lines insurer. The insurer is not a member of the guaranty association. And a 4.85 percent tax on the premium. Read the face of the policy before you read the price.
The house that lands there
This year it is the older home that has not had the care it needed. Chipped paint, limbs out over the side of the house, a roof past its years, a water heater past about ten. The admitted market reads that list as a claim waiting to happen and passes. Surplus lines reads it as a price. Nobody failed. The house fell behind, and there is a market for a house that is catching up. Surplus lines is where a house goes while it catches up.
What sends a Houston home to surplus lines
- Paint, trim, and siding the house has outgrown.
- Tree limbs out over the roof or the side of the house.
- A roof past the age the admitted market will write.
- A water heater past about ten years.
- Work the house needed and has not had yet.
We have seen the cheap carriers before
Some brokers love writing the cheapest policy in the room. We watched that in 2019 and 2020, when a wave of inexpensive coastal carriers wrote across the Gulf. FedNat and Maison, UPC, Lighthouse, and the list goes on. By 2023 every one of them was in receivership. All four were licensed in Texas, so the guaranty association stepped in for their Texas policyholders, inside its limits. A surplus lines carrier that fails leaves no one to step in. We are students of history, and we do not bet where a client could lose the house.
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FedNat and Maison
- Licensed in Texas
- Yes, Maison merged into FedNat in August 2022
- Receivership
- September 27, 2022, Florida
- Texas policies ended
- October 27, 2022
- What it comes down to
- Caught by the net
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UPC
- Licensed in Texas
- Yes
- Receivership
- February 27, 2023, Florida
- Texas policies ended
- March 29, 2023
- What it comes down to
- Caught by the net
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Lighthouse
- Licensed in Texas
- Yes, on the Texas guaranty list
- Receivership
- April 28, 2022, Louisiana
- Texas policies ended
- May 28, 2022
- What it comes down to
- Caught by the net
How we vet a carrier before it meets you
- 01
TDI
TDI first
The admitted market is tried first, because the law requires it. If the house needs surplus lines, the carrier is checked against TDI's eligible list, and TDI's Help Line at 800-252-3439 confirms it can legally sell here.
- 02
AM Best
The financials
The rating, the capital, and the reinsurance behind it. The question is whether it can pay the whole neighborhood after one storm, not whether it can pay you on a quiet year.
- 03
Network
A second set of eyes
McDade is part of Premier Group Insurance, an agency network with hundreds of partner agencies coast to coast, so the carriers we write are vetted at the national level as well as ours. Many eyes on the same financials.
- 04
Our rule
Time in Texas
A carrier fresh into Texas has a high probability of waiting a while before we place it. We want the best of the best, in carriers and in their claims teams, and the best have a record here.
A carrier fresh into Texas can earn our clients later. It will not meet them first.
What the contract does to lessen the risk
A surplus lines form is not the Texas admitted form, and it is written to lessen the carrier's risk. Water from a burst pipe is often capped by a sublimit. A water heater past about ten years has to be replaced before the policy will write. Inspections carry conditions, and the conditions carry cancellations. Some forms send a dispute to arbitration instead of a courtroom. A sublimit is a promise with a ceiling. Find every ceiling before you bind.
Read these lines before you bind
- The water sublimit, especially on a burst pipe.
- The water heater condition and its age.
- The roof settlement, replacement cost or a schedule.
- The inspection, and what a failed one cancels.
- The arbitration clause, if the form carries one.
- The notice and the tax line on the first page.
Big banks and small banks
A carrier is a financial institution, like a bank. Bigger banks can write more loans and carry more money. Smaller banks have to make their money too, and they are fine in certain scenarios, as long as you can live with the drawbacks. The drawback that bothers us most lands on the worst day. A small carrier often rolls out a third-party adjuster who has never read its policy, and the claim slows while a few more people get involved. Travelers keeps over 11,000 claim professionals of its own, and in our experience that is who shows up. Pick the carrier whose adjuster has seen your worst day before.
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A large carrier
- Capital
- Deep enough to carry a bad season
- Who adjusts your claim
- Its own claim professionals, trained on its own form
- Who has seen your loss before
- Thousands of them
- What it comes down to
- Handled, and paid
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A small carrier
- Capital
- Thin enough that one storm can test it
- Who adjusts your claim
- Often a third party meeting the form for the first time
- Who has seen your loss before
- Fewer, and sometimes nobody
- What it comes down to
- A few more conversations
What happens when you send it
You want one thing from this page. To know whether the quote in your hand is a bridge or a trap, and what it would take to get the house back to the admitted market. Here is the whole path.
- 01
Free
Send it
The quote, or the nonrenewal letter, and the inspection report if you have one.
- 02
On our desk
We read both markets for your house
What the admitted market would need to see fixed, what the surplus lines contract caps, who adjusts the claim, and what the carrier has been through in Texas.
- 03
Your call
You get one of three answers
An admitted carrier that will take the house, a surplus lines policy read line by line with a date to shop again, or stay where you are. About 40 percent of the time we tell homeowners to stay with their current carrier, and sometimes even with their current agent, because that is the right answer for the family.
You get the market that fits the house today, and the date we look again.
I do not gamble on my house
I am a student of history. I watched the cheap coastal carriers of 2019 and 2020 get written all over the Gulf, and I watched the receivership orders come in 2022 and 2023. On the worst day the gamble is the unknown. How long has this carrier been here, how long have its adjusters, what have they seen, how do they read their own contract. I have an amazing tax professional and I keep great lawyers close for the same reason I keep great carriers close. I want the person looking at my problem to have been there, done it, and seen it before. When it is the worst day, I am not willing to play with unknowns if I could have done enough to control it.
Charles McDade, LUTCF
Questions readers ask
Is surplus lines home insurance bad?
It is a tool, and sometimes the only one. It covers what the admitted market will not, with fewer protections. The policy has to say on its face that the carrier is not licensed in Texas and that no guaranty association stands behind it. Read the contract, know the carrier, and keep a date to shop the admitted market again.
Why did my agent put my house in surplus lines?
Because no licensed carrier would take the house as it stands, and Texas law makes an agent try the admitted market first. An older home with chipped paint, limbs over the roof, or a water heater past ten years is the usual reason. Fix the list and the admitted market usually comes back.
What happens if a surplus lines carrier goes out of business in Texas?
No guaranty association stands behind it, and TDI says it plainly, your claims could go unpaid. With an admitted carrier, the Texas Property and Casualty Insurance Guaranty Association pays covered claims up to policy limits or 300,000 dollars per claim, whichever is less, and refunds unearned premium up to 25,000 dollars. That net is the biggest difference between the two markets.
Why is there a 4.85 percent tax on my surplus lines policy?
Chapter 225 of the Insurance Code puts a 4.85 percent tax on surplus lines premium, and the notice on the policy has to say so. On an admitted policy you never see a tax line. On a surplus lines policy it is a line you can read.
How do I get my house back to the admitted market?
Do the work the admitted market asked for, the paint, the limbs, the roof, the water heater, and keep the photos. We put a date on the surplus lines policy the day we place it, and we shop the admitted market again at that renewal.
Sources worth opening before you decide
- Surplus lines insurance guide, Texas Department of Insurance, updated April 25, 2025
- What is surplus lines insurance?, Texas Office of Public Insurance Counsel, updated August 13, 2026
- Texas Insurance Code, Chapter 981, Sections 981.004 and 981.101, surplus lines authorized, the required notice
- Texas Insurance Code, Section 225.004, the 4.85 percent surplus lines premium tax
- Frequently asked questions and companies in receivership, Texas Property and Casualty Insurance Guaranty Association
- FedNat liquidation FAQ and UPC liquidation FAQ, Texas Department of Insurance, 2022 and 2023
- Travelers claim capabilities, Travelers, August 29, 2023
- About Premier Group Insurance, Premier Group Insurance, opened October 15, 2026
The purpose is to help the reader ask better questions before claim time.
Know what you are really buying
A surplus lines quote is a contract like any other. We read it with you before you bind.
Send the quote, or the letter that sent you shopping. A licensed Texas agent reads the surplus lines contract line by line, names every sublimit and condition, checks the carrier against TDI's list and its own record in Texas, and tells you plainly whether the admitted market would take the house, client or not. We translate the contract before you sign for another year.
The audit is free. The decision is yours. No broker fees for personal lines clients.
