Which statement is TRUE regarding placing insurance with an unauthorized insurer?

When placing insurance with an unauthorized insurer, the key aspect is that the transaction should only occur when there is no option available from an authorized insurer. In Michigan, as in many other states, surplus lines legislation mandates that a licensed producer must first seek coverage from authorized insurers. If they are unable to obtain the desired coverage from authorized sources, then they can approach unauthorized insurers.

Choosing to place insurance with an unauthorized insurer when there is an option with an authorized insurer is not compliant with regulations, which aim to protect consumers and ensure they have access to stable and authorized insurance products. Therefore, the statement that it's not allowed if there is an authorized insurer option is accurate, as it reflects the legal framework governing surplus lines insurance transactions.

In the context of the other options, it’s clear that the alternative statements either misunderstand or misrepresent the situation regarding unauthorized insurance placement. For instance, suggesting that placing insurance is always allowed regardless of coverage availability disregards the regulatory intention to prioritize authorized insurers, while stating that it is only permitted for commercial lines inaccurately limits the scope of surplus lines insurance. Additionally, claiming it is allowed based on higher coverage does not address the underlying requirement of seeking authorized coverage first.