Insurance companies can face big payouts. That’s why they have to be financially sound in order to not only succeed, but also to serve their customers. Yet, insurance companies are businesses and, just like businesses in other fields, they fail from time-to-time. When it looks like an insurance company is on shaky financial footing, then state governments oftentimes step in to see if they can rehabilitate the company. If that’s not possible, then the company deemed insolvent.
What happens when an insurance company is considered insolvent?
When an insurance company is deemed insolvent, very real concerns can arise about how pending and new claims will be paid out. Fortunately for policyholders, state guaranty associations oftentimes step in to help. These associations have access to remaining funds in the insolvent company as well as assessments against other insurance companies operating in the state. These funds allow the guaranty association to pay out some claims, although those claims may be limited.
Steps to take if your insurance company is insolvent
If you discover that your insurance company is insolvent, then you need to take the steps that are necessary to ensure that you’re protecting your claim. To start, make sure that you understand whether your claim can be covered by the guaranty association, as there may be limits on the type of policies that are paid out. Then, understand where you need to file your claim. Once you’ve done that, then you can assess your case and ensure that you’re presenting a claim that is backed up by evidence and therefore less likely to be denied.
Seek help navigating the complexities of insurance law
The realm of insurance law can be fraught with complexities that are challenging to navigate if you’re unfamiliar with this field. That’s why it might be in your best interests to discuss your situation with an attorney who is competent in this field and can help guide you throughout the process.