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What Happens If Your Insurance Company Files Bankruptcy?

Rehabilitation - What Happens Prior To An Insurance Company Bankruptcy


As a policy owner of a life insurance, annuity, long term care, or disability policy, it is natural to be concerned about what would happen to your benefits should your insurance company go bankrupt. It may not be as bad as you think.

Rehabilitation - Prior To An Insurance Company Bankruptcy

Prior to an insurance company bankruptcy, the insurance company will go through a process called rehabilitation - dictated by the laws of the state — whereby the state insurance commission will make every attempt to help the company regain its financial footing.

If it is determined that the company cannot be rehabilitated, the company is declared insolvent, or bankrupt, and the court orders the liquidation of the company.

Guaranty Association Takes Over In The Event Of Insurance Company Bankruptcy

When an insurance company goes through bankruptcy insurance coverage will continue and policy claims will be covered and paid by state insurance guaranty associations, subject to each state's coverage limits.

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