Which term best describes a situation where normal insurance policies are inadequate to cover certain risks?

The term that best describes a situation where normal insurance policies are inadequate to cover certain risks is referred to as "Non-Standard Coverage." This term acknowledges that there are risks that are so unique or severe that typical insurance solutions cannot provide adequate protection.

In the context of insurance, non-standard coverage often applies to situations involving high-risk individuals, unusual properties, or specialized businesses that might not fit into the standard underwriting criteria of traditional insurance markets. For instance, commercial ventures in certain industries—like amusement parks, high-rise buildings, or even specific niche markets—may present risks that standard insurers are unwilling or unable to underwrite.

When insurance needs surpass what the conventional market can offer, surplus lines insurance becomes relevant. This is where non-standard coverage becomes available through surplus lines insurers, who can take on these higher risk profiles and provide policies that are tailored to meet the specific needs of those unique circumstances. This flexibility is crucial for ensuring that all types of risks can be adequately managed and covered.

In short, non-standard coverage highlights the necessity for specialized policies due to the inadequacy of standard insurance in addressing certain risks.