What do I do if my insurance company goes bankrupt? Author:    Posted under: Life InsuranceLife Insurance questions answered

Worry. Panic. Stress-out. Bankruptcy can be dreadful, but don’t panic! You’re still ok.

The National Organization of Life & Health Insurance Guaranty Association’s article “What Happens When an Insurance Company Fails” discussed that if an insurance company went bankrupt it may still pay policy benefits from a guarantee association or guaranty fund. When the company went bankrupt, the guarantee accounts are still open and the death benefit has not been paid, there could be a settlement. On the other hand, if the guarantee accounts for that company have been closed, there will be no help from that avenue.*

Policy holders start to question what would happen if their insurance company went bankrupt, after a major insurance company failed in September, 2008. There is no specific answer for this question because each state has its separate agency that governs the insurers’ accreditation to do business in the state. Every state differs from another, some have more extensive protections for insureds than the others. Most states guarantee around $300,000 in life insurance death benefits; this amount also varies from each state.  There may be differences among states, but most states lay down basic coverage guarantee limits:

  • $300,000 in life insurance death benefits
  • $100,000 in cash surrender or withdrawal value for life insurance
  • $100,000 in withdrawal and cash values for annuities
  • $100,000 in health insurance policy benefits **

Now you know that worrying is not the answer. The best thing is to do research, know how to file your claim.  Then place a call to the state insurance commissioner, get hold of the contact information through the National Association of Insurance Commissioners (NAIC), ask the condition of their bankruptcy, then ask whether the insurance company was bought by another insurance company or if NAIC took control of the company assets. Search out the correct contact information concerning the insurance company or guarantee association that’s now in charge for the policy. Call the insurance company and give the complete information of the deceased policy holder to the customer representative.  You may also ask for any info regarding corrections to the policy that may affect benefit. Request a benefits claim form, then fill it out and mail it in with a death certificate to make the claim. If the company is not absorbed by another insurance company, make contact with the Guarantee Association and confirm the state guarantee limits.  Get a death benefit form then Fill it out, submit it to the guarantee association together with the death certificate. A $300,000 guaranteed limit will be pay out to the beneficiary.

If Your Insurer Becomes Bankrupt. You don’t need to worry a lot. We are protected by the law and by the state. Just follow the instruction above, research and talk to the right people concerning the situation.

*Life insurance policy payout mystery lingers


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