What happens to the money you have put in your life insurance if the Insurance company goes out of business?

Question

What happens to the money you have put in your life insurance if the Insurance company goes out of business?

Answer 1

Good question! Each state has a Life & Health Insurance Guaranty Association, whose function is to protect the policyholders when a life insurance company is bankrupt. This ensures that you will get your cash value and/or death benefit from a bankrupt life insurance company.

All licensed and admitted insurance companies are required to participate in the association. When a bankrupt company is liquidated and the Guaranty Association needs money to pay off the bankrupt company's life insurance policies, it bills all of the remaining life insurance companies to get the funds.

There are some limits, usually about $300,000 per policy.

For more information, search the web for your own state's Life & Health Insurance Guaranty Association, or go to the National Organization of Life & Health Insurance Guaranty Associations at http://www.nolhga.com/home.cfm.

Answer 2

I guarantee , that will absolutely never happen.

If an ins company ever is on the rocks, you would get a letter stating , " Your policy with NorthSouthLife is now being serviced by EastWestLife.What happened was, EastWestLife took over some of NorthSouth's policies,and will continue to honor them ,service them , ( and of course, bill you for the premiums)

  Why? To protect the good name of insurance.  If you can't trust your insurance company to remain financially solvent, who can you trust??? you'll never lose a penny.

Answer 3

Insurance is very big business.  The government would fold first.

Answer 4

Life insurance is NOT a savings account.  You're basically buying  a promise to pay, and sometimes overbuying it, which is where a "cash value" comes in to play.

Any insurance you buy, from an insurance company admitted to do business in your state, is financially backed by your state insolvency fund.  In cases of life insurance, it's usually transferred to ANOTHER company for management.

You've probably noticed, with life insurance, you have to PAY for it every year, with most types of policies.  If you don't, and you let the "cash value" pay for it, you STILL get a statement every year.  So you SHOULD be able to track down the carrier.  If you aren't keeping the statements, contact your state insurance department for more information on an insolvent company.