What happens if my life insurance company goes out of business?
Answered by 4 licensed agents
Don't worry, your coverage is protected by state insurance guaranty funds. If your insurance company goes under, these funds step in to pay out death benefits and protect your policy. It's a safety net built into the system, so you're not left hanging even if the worst happens to your insurer.
If your life insurance company goes out of business, your state’s guaranty association usually steps in to continue the policy or transfer it to another insurance company. Your coverage is protected only up to your state’s legal limits, so benefits above those limits may not be fully guaranteed.
Usually when a life insurance company goes out of business, another insurance company buys their "book of business" and your policy is simply transferred.
Your terms, premium rates, and death benefit remain exactly the same—you will just start paying a different company.
It is always important to buy from a financially strong insurance company to reduce this risk. If a life insurance company goes into bankruptcy or our of business, the State that you live in Insurance Department will take over the company. You will still have coverage, it may be limited. The State will try to sell the policies to another company or take over the policies.
