Help! My Insurance Company Has Gone Bankrupt
The harsh reality of life is that it is you who always has to bear the consequences of nonpayment of bills, rentals, and premiums. But what about a situation if your insurance company goes bankrupt and the status of your funds is in limbo. I for one always make it a point to find out everything about the company that I invest it, be it Crypto VIP Club about which I read the full review before trading in it or the investment company I choose to put my extra dollars in. Hence, always go with a well-known company only after checking its rating.
What to do when your insurance company goes bankrupt?
While you might know about the bankruptcy later, the State Insurance Commission will be aware of the insurance company’s monetary status and will try to bail them out. But in the event the company cannot be rehabilitated it has to be liquidated in accordance with the court’s order. In such a situation, your insurance coverage will continue as the State’s Insurance Guaranty Association will take over the policy claims of course within the state’s coverage limits.
BE responsible and check the rating of your insurance company
There are several well-known websites like Moody’s which rate each insurance company based on its performance. The rating will determine which company is risky and which is a stable one. Companies that receive A++, AAA are preferable while those with D and CC are weak and best avoided. But again, the rating must not be your tipping criteria, because each company follows a different rating criterion. Always find out from your agent if the company has been downgraded or do research online.
BE prepared but don’t panic
Take heart in the fact that just like you have an emergency fund for the rainy day, all insurance companies to have reserves funds by rule of law. The actual return varies from state to state but it is most often within 8% to 12% of the total revenue. The reserve amount is determined by the number of policyholders, the amount of payout and the revenue they hope to get from the insurers. Thus, in the eventuality that the insurance company goes bankrupt, you can be assured that you won’t be unpaid. And another important point is that insurance companies can be reinsured which spreads the liability to other companies and is not limited to a single company.
It is not every day that insurance companies go bust. Most of the times these wobbly companies are taken over by more financially stable and often bigger group and hence your investment is always safe.