This is a great question that is often asked. As the owner of a life insurance policy, it’s natural to be concerned about what would happen to your policy if the insurance company went bankrupt. Since insurance companies are heavily regulated, there’s a process they have to go through before they could be declared insolvent and be liquidated.
Prior to an insurance company declaring bankruptcy, the will go through rehabilitation where the state insurance commission will try to help the company regain financial stability.
If the company cannot be successfully rehabilitated, the company would be declared bankrupt, and a court would order the liquidation of the company. Coverage would continue and pay claims – claims will be covered and paid by state insurance guaranty associations (coverage limits are generally around $300,000, but the actual limits can vary by state and type of coverage).
More Life Insurance Questions:
Term Life Insurance | Whole Life Insurance | Universal Life Insurance | No-Exam Life Insurance | Risk Classifications | High Risk Life Insurance | Steps to Buying