Can life insurance companies go bankrupt

Generally, when an insurance company goes bankrupt, the guarantees that are being offered on the contract are gone. For instance, if you have a death benefit, or a income guar … antee, those will usually be lost. As for the money you've invested in the variable annuity, if your money is invested in the sub-accounts (the various investments that are usually managed by mutual fund management whose names you will usually recognize), that money is still being managed by those companies, and is separate from the now bankrupt insurance company. That is the long way of saying, your money in the sub accounts is safe. However, if you have money in the fixed interest account, that is usually held by the insurance company, and that money may be in jeopardy. (MORE)

Founder Secretary of the NGO 'Oriental Mother Welfare Foundation', India. Expert Writer at Answers Writers Platform .

If a life insurance company goes bankrupt or becomes insolvent, the  life insurance policyholder may be protected by the life insurance  guaranty fund in their state, if the … life insurance company was a  licensed insurer in the state. Guaranty funds usually provide from  $100,000 to $500,000 of protection per policy, but many states  provide up to $300,000 of protection. The National Organization of  Life and Health Guaranty Associations provides information on the  specific state rules as to the protection afforded to life  insurance policyholders in a particular state. You can visit their  site at www.nolhgaand look up State Guaranty Laws to determine  the coverage that may apply to you, and further research this  topic. Before declaring bankruptcy or insolvency before the  competent Court, they are to meet up the liabilities of their  sundry creditors and policy holders whose maturity payments have  become due, to the full satisfaction of the Hon'ble Court of the  country. (MORE)

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The "bankruptcy" of an insurance company is referred to as "insolvency". It is roughly defined as the financial inability to pay claims as they accrue. As a condition of bec … oming authorized (licensed) to transact insurance business in the company's state of domicile, it is required to pay a portion of its income into the insurance guaranty association of the state. This is essentially a state-administered pool of funds which is used to pay claims (although not always in full) when an insurer becomes insolvent. Important to note is that only authorized (licensed) insurers are required to participate in and pay into guaranty associations, and therefore, only when you have a policy issued by an authorized insurer, do you have the chance to participate in the guaranty fund if the need arises. It is therefore important that you ensure that you are ensured by a licensed insured and not by a phony one. Illegal insurers crop up periodically, especially during periods of hard insurance markets, which tend to be cyclical. That said, there is an alternative market of insurance which is quite legitimate, but which is not covered by guaranty associations. This is the surplus lines market. It caters to often unusual risks that are not able to be insured in the more customary market. Most states have Surplus Lines Offices which offer some level of regulation to this market, but it is far less than for the authorized market. When a licensed insurer becomes insolvent, a Receiver is appointed in the domicile state to administer its and to run the company. Ancillary receiverships may be established in other states where the insurer did business. Assets are marshalled, a date is set for policy coverage to end, and decisions are made as to whether the company is susceptible to rehabilitation or whether it must be liquidated. Claims are handled in as orderly a fashion as possible, with priorities assigned to claims of various types laid out by statute. Time limits are set by which claims must be filed with the Receiver, and if they are not they are barred. (MORE)

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