Is Your Home Adequately Insured by the Right Company?
Do you know what an "admitted" insurance company is? Some folks hit by the Paradise, Calif., fire learned that lesson and a couple others the hard way.

Nov. 8, 2018, began as a beautiful, sunny day for the residents of Paradise, Calif., a small town in rural Northern California. Within hours, most of the city was gone, with over 18,000 structures destroyed in the deadliest, most destructive wildfire ever to hit the state.
But there was one nightmare none of the residents of Paradise could have imagined, and no matter where you reside in the United States, what they are going through right now — their same fate — could be yours if you make one serious mistake.
I’ll tell you in a moment what it is, but first, this question:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When purchasing homeowners insurance, given the fact that most policies are fairly similar, does it matter which insurance company you go with? If you are presented quotes from several carriers to choose from and they all get reasonably good Yelp reviews, wouldn’t you agree that price should probably be the main reason you select company A over B?
One former resident of Paradise I spoke with told me, “I thought that it didn’t matter whose policy I had. I was so wrong, and it wasn’t because of the way our family was treated after the fire by the claims adjuster — because there was no claims adjuster!”
Merced Property and Casualty Company Goes Under
Within days of the fire, a small regional insurance carrier that had policies on many Paradise properties announced that it was insolvent and was immediately placed into conservatorship by the California Department of Insurance. It had $23 million in assets and about $65 million in likely claims.
Now, does this mean that the people who were insured by Merced wound up with nothing? “No, because when an admitted insurance company (like Merced) is found insolvent, policyholders have some protection by the California Insurance Guarantee Association,” explains Los Angeles-based insurance broker Karl Susman, who also testifies as an expert witness on complex insurance cases.
“An ‘admitted’ or ‘licensed’ insurance company must file its rates and specific requirements with state regulators and cannot change them without authorization.
“All admitted property carriers are required to participate in a state’s Insurance Guarantee Association, and all states, Washington, D.C., and Puerto Rico have one. So, in the event that an admitted company declares bankruptcy, or depletes its reserve of funds — the association steps in to pay policyholders up to the specified limit of, for example, $500,000 in California,” Susman points out.
“Buying insurance from an admitted carrier also allows policyholders to file a complaint with their state’s department of insurance if they believe a claim has been handled improperly.
“Sadly, in Paradise, there were homes whose value far exceeded that amount. If they were insured by Merced, it truly is a tragic situation.”
Admitted vs. Non-Admitted Insurance Companies
So, you are probably wondering, “Does this mean that non-admitted insurance companies aren’t any good? What if I am insured by one of them and it goes belly-up, am I out of luck?”
Susman replies, “There are many large, financially sound insurance companies that choose to not be admitted. It is a business decision having nothing to do with their claims-paying ability. But, yes, if one of them fails, policyholders will not have their state’s guarantee association protection, so ideally, purchasing insurance from an admitted company should be a first choice, if at all possible.”
I’ll bet you are thinking, what does “if at all possible” mean?
“Many admitted insurance companies will not write insurance covering properties located in high-risk areas, and this gap is often filled by the non-admitted carrier,” and explains how a policyholder would know if a particular company is non-admitted:
“Non-admitted insurance is also sometimes referred to as Excess and Surplus Insurance, E&S, or Surplus Lines, and if you see any of those words on the policy, it means that the company may not be admitted in your state.”
You can learn if your company is admitted by going into your state’s Department of Insurance website and researching the company. Finding the word “licensed” means that it is admitted.
Are You Underinsured?
“Not having proper limits of coverage is another huge problem,” Susman says, “and we see this all the time, people being seriously underinsured for a Paradise type of catastrophic loss.”
Susman cautions that “You simply must determine what it would cost to rebuild in the event of a total loss, a worst-case scenario,” and makes these recommendations:
- Find a large, national company that is willing to send out an inspector to your home, and don’t fear the inspector. They seldom tell homeowners to fix this or that. If they do, it will protect the house, for example, a tree leaning against the roof. Most are non-insurance company employees, and their job is to point out the obvious things that are potentially dangerous.
- The inspector will give you useful information for free and a more accurate replacement cost estimate.
- If there is ever a loss, the homeowner can correctly claim, “You told me what to insure it for.”
- Call your agent and say that you want your house inspected. The company pays for it and you get a report.
- Ask your agent, “What do you think I need to insure my property for?” Get his recommendation in writing.
Finally, Susman concludes “Because a national carrier insures so many homes, their replacement cost estimators will be more accurate than those who have only insured a small number in one particular area.”
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law." Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."
-
Stocks Can't Hold Meta, Microsoft Gains: Stock Market Today
The main indexes all opened higher Thursday on impressive Big Tech earnings, but momentum faded into the close.
-
Retirement Health Care Costs Are On the Rise: What You Need to Know
A 65-year-old retiree will face significantly higher lifetime health care costs than they would have a year ago, even with Medicare. Here are the surprising totals.
-
You Don't Have to Be Wealthy to Need a Wealth Manager
Navigating complex financial decisions is hard on your own, no matter how much money you have. A wealth manager can provide comprehensive financial planning, investment management, risk management and more.
-
Despite Tariffs, These Investment Experts Are Bullish on European Equities
European equities were one of the better-performing investments during the first half of 2025. They could be a good long-term prospect for U.S. investors needing to diversify, according to these investment managers.
-
How Do You Know You Are Ready for a Gray Divorce? 15 Yes-or-No Questions
As more people 50 and older get divorced, many splits are initiated by women who want a new path. Answer these 15 questions to see if you might need to think about how you should move forward.
-
'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
'Buy Now, Pay Later' apps can get you out of a jam when you need money quickly. But using them regularly for small purchases could create problems.
-
Five Things to Consider Before Rolling Your 401(k) into a Roth IRA
Converting at least some of an old 401(k) to a Roth IRA can offer long-term tax benefits and retirement flexibility, especially if you anticipate being in a higher tax bracket later or wish to leave a tax-free legacy.
-
From Dream Apartment to Nightmare: When Your Landlord Evicts You Through No Fault of Your Own
This is what I suggested a tenant do to get out of her lease after her landlord's inexperience and lack of action made her rental situation unsafe. It's a legal situation called 'constructive eviction.'
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.