What to do I do if my insurance company goes bankrupt?
Free Insurance Comparison
Secured with SHA-256 Encryption
Asked June 8, 2010
The first thing you should do if you find out your insurance company is bankrupt or has become insolvent, is to continue paying your premiums. Just because the company you took the policy out with will no longer able to cover your claims does not mean that your policy is useless. In many cases, you may not even notice a change in how the policy is managed, and your only involvement with the insolvency will be a new name appearing on your correspondence from the company.
States have a special agency for insurance insolvency that functions similarly to FDIC for banks. This guaranty association will step in when the insurance company goes bankrupt, and will assure the company's policyholders that they are covered up to a certain amount. That amount is variable according to the state you live in, but is usually going to be a maximum claim payment of around $300,000 for all policy claims you have with the company, including home, life, and auto. This amount is determined by state law, and while it may not be as high as your policy had listed, it will be sufficient in most cases.
When your insurance company goes under, they will usually send you a notification that gives you instructs on who to contact and what to do in order to switch to a different company. If the insurance company is bought by another company, your policy may be simply transferred to the new company without the need for you to do anything at all. Finally, if you are not contacted by your insurance company, the state guaranty association will probably contact you. This contact will include information about what has happened, what the effects on your policy will be, or where and how you can contact another agency to resolve active claims.
Just remember that your policy is not automatically cancelled just because your insurance company failed. Make your regularly scheduled payments just as though nothing had happened at all, and your coverage will remain in effect until the situation has been cleared up or you have been told where to go to find similarly coverage or to transfer the existing policy.
Answered June 8, 2010 by Anonymous