What Happens If Your Life Insurance Company Fails?

Consumers may question what steps to take if their life insurance company fails.  Most states have a guaranty fund that handles insurance bankruptcies similar to how the FDIC handles bank bankruptcies.  These guaranty funds will pay your claims up to a certain limit if your insurance company becomes insolvent.

For Texas specifically, if you are shopping for a Texas life insurance quote, you can take comfort knowing that the state will pay your claim even if your insurer becomes bankrupt.  According to the Texas Department of Insurance website, their state has solid safeguards in place to protect residents.  You can take steps to protect yourself by only doing business with life insurance companies that are licensed to sell insurance in Texas.  This is important to ensure you are covered under insolvency.

The Texas Department of Insurance website has a Company Lookup feature available for residents to determine if their insurer is properly licensed.  You can also call the Texas Department of Insurance Consumer Help Line directly for more detailed information.  Most valid policyholders will receive payment for their claims by guaranty associations up to certain limits which are determined by Texas law.

Most life insurance companies in Texas are members of the guaranty association, but you will still want to check to ensure you are safe.  For life insurance coverage, the Texas Life and Health Insurance Guaranty Association covers life insurance, health insurance as well as annuities.