What do residual markets consist of?

Residual markets consist of insurance markets that provide coverage for risks that are typically considered non-insurable in the standard market. These residual markets exist to ensure that individuals or businesses that may be unable to obtain insurance through normal channels still have access to necessary coverage. This can include high-risk drivers, certain types of property, or businesses that fall outside the underwriting guidelines of traditional insurance companies.

By offering coverage through residual markets, often managed by state programs, these markets help stabilize the insurance system by ensuring that all sectors of the population have access to some level of insurance. This is important for maintaining a balance in the insurance ecosystem, as it prevents gaps in coverage that could lead to larger societal issues.

The other choices refer to specific insurance offerings or types that do not align with the purpose of a residual market. High-net-worth individuals typically find coverage through standard markets, life insurance operates under its own set of rules and markets, and commercial insurance options generally cater to businesses that meet certain risk assessments and underwriting criteria.