First, state regulators are charged with guarding insurance companies’ financial health, and can step in to take over a company that is in danger of failing. When regulators get involved, they can oversee the company’s turnaround, including selling it to a financially stronger company. They also can order it into liquidation, or runoff.

If a company enters liquidation, the regulators in charge make sure that policyholders like you are paid first before any other creditors. If the company does not have enough money to pay all if its claims, regulators turn to the state guaranty funds to make up the difference — within limits.

Every state has guaranty funds to cover the claims of insolvent insurance companies. All insurance companies that do business in the state pay into the funds, so regulators have a pool of money to use when necessary.

Since 1976, about 600 companies that write car, homeowners and workers’ compensation insurance became insolvent. The guaranty funds have paid about $21 billion to cover claims from those companies.
Since 1983, about 60 life and health companies have gone insolvent. Guaranty funds have paid more than $20.2 billion for policyholders and annuity holders of those companies.

Generally, if you have a policy written by an insolvent insurer, the guaranty fund of your state would protect you.
Page 1  |  Page 2  |  Page 3  |  Page 4