Accommodation Line

An accommodation line is an addition or change to a standard insurance, such as home, life or business, contract. The change is suggested, or requested, by either the broker or the insured as an addition to the plan to fit their individual needs. In this type of agreement, the broker usually receives a higher commission or bonus, the client receives greater coverage and the insurer maintains the business of a valued customer.

An accommodation line is granted to the most highly valued of customers and brokers. It can be looked at as a kind of 'thank you for your level of business' from the insurer for the customers loyalty to their company. The cost of the addition to the insurer will be less than the cost assumed if the client takes his/her entire account to a competing company. However, the broker clearly benefits too, as he or she may receive a higher commission or have the convenience of a loyal customer who will continue to pay regular premiums and payments.

As an example of how an accommodation line might work, consider Client A, who is shopping around for additional life insurance. Client A currently has a $1,000,000 life insurance policy with Company B, but is interested in purchasing additional life insurance coverage to add to their existing policy after acquiring additional income property. Unfortunately, Client A learns that most companies have the policy to never add to an existing life insurance policy, but only to purchase an additional policy to provide any necessary or desired increased coverage. Client A schedules a meeting with their life insurance agent, however, and after the pair discuss the situation, an accommodation line is added. An accommodation line is added to Client A’s current insurance policy to increase coverage for an additional agreed-upon amount that is outside of the company’s normal policy.

Because Client A has been a loyal customer of the life insurance company and because the company knows how valuable Client A is to their own business, they are willing to do the accommodation line. In the end, the company is able to keep a desired and valuable customer, while receiving higher premiums for a policy that already exists, while Client A receives the coverage that he or she was looking for without having to look into a different company to purchase the policy.