If a company does fail, chances are good that your protection will be honored. The insurance regulators (state and federal agencies) work with other companies to pick up the policies from a failed company. If that effort fails, your policy may be picked up by a guaranty association, a state association made up of all the insurers in your state who collectively ensure that you won’t be left in the lurch.
Although these backups are comforting, if your state association picks up your policy because no other insurance company will, you may lose some of your benefits. Most state guaranty associations have limits on the death benefit (generally not more than $500,000), and they also may not match the interest you’re guaranteed on a cash-value policy. Check with your state insurance commission for more information about insurance company bankruptcies. The best thing you can do to make sure you don’t lose your investment or your protection is to choose your life insurance company wisely.
Although these backups are comforting, if your state association picks up your policy because no other insurance company will, you may lose some of your benefits. Most state guaranty associations have limits on the death benefit (generally not more than $500,000), and they also may not match the interest you’re guaranteed on a cash-value policy. Check with your state insurance commission for more information about insurance company bankruptcies. The best thing you can do to make sure you don’t lose your investment or your protection is to choose your life insurance company wisely.
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