What happens if my life insurance company goes bankrupt?

What happens if my life insurance company goes bankrupt? It depends on the kinds of consumer protections your state’s Department of Insurance has in place. Each state has a Guaranty Association that is meant to protect policyholders from insolvent life insurance companies. All licensed life insurance companies must be members of their state's Guaranty Association. However, if you’re insurance company was purchased by another company, you may still have your policy left intact. Sometimes, though, terms may change. In this guide, we teach consumers how to spot a financially strong life insurance provider, and what to do if your provider goes under. If your life insurance company goes bankrupt, start comparing life insurance quotes online to find a new affordable policy. Use our free tool below to get your free life insurance quotes now.

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Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites.

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UPDATED: Nov 18, 2020

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Quick Facts

During difficult financial times, consumers are more careful and suspicious when choosing a life insurance company to purchase a term life insurance policy. Company histories are compared, the web is scoured for good or bad information.

So, what happens if my life insurance company goes bankrupt?

One of the more common worries we hear from our customers during an economic slump is regarding the stability of life insurance companies. We can help with five things to consider when comparing life insurance companies because we understand your concerns. 

We can’t guarantee that any life insurance company won’t fail, but we can promise you’ll be more prepared if your life insurance company goes bankrupt.

Learn how to protect yourself if your insurance company files for bankruptcy, how to find the best life insurance company, and save on life insurance using our FREE quote tool above. Get started now.

Table of Contents

Choosing a Strong Life Insurance Company

When shopping for life insurance quotes online, the first thing you can do to ease your mind is to check your prospective life insurance company’s financial ratings.

Our website automatically lists the Standard & Poor and AM Best ratings of each company quoted, and you can also find a description of what these life insurance company ratings mean.

Top Life Insurance Company Ratings
CompanyA.M. Best RatingS&P Rating
Northwestern Mutual LifeA++AA+
New York LifeA++AA+
MassMutualA++AA+
State FarmA++AA
Minnesota Mutual GroupA++AA-
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Most life insurance companies also list their Moody’s and Fitch Ratings, which you can usually find directly on the company’s website.

Some life insurance companies list their financial documents as well; although this information may be more useful to investors than prospective term life insurance consumers.

Now, let’s take a look at some sample life insurance rates. Check out the table below to get an idea of what your life insurance quotes will look like if you go with some of the top life insurance companies around.

Top Term Life Insurance Companies Rates Comparison
Companies$100,000, 20-Year (Male - 40)$250,000, 20-Year (Male - 40)
Minnesota Life$11.04$21.00
MassMutual$12.53$20.68
State Farm$21.40$33.72
Prudential$17.50$24.50
Farmers$33.93$36.85
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As you can see above, some of our top-rated life insurance companies are very competitive with monthly rates. Keep in mind that these rates are based on 40-year-old men that are non-smokers. So younger females could see rates as low as $7.04 with our top-rated term life insurance companies.

Reviewing financial ratings is also warranted for other forms of insurance, especially those with major investments.

What happens if my home insurance company goes bust? What happens if a disability insurance company goes out of business? These issues could cause severe financial issues, so we always encourage choosing companies with strong financial ratings.

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Life Insurance Company Bankruptcies and Take-Overs

To ease your worries, it may help you to know it is fairly common for troubled life insurance companies to merge with or be acquired by another life insurance company.

For example, just within the past 10 years or so, we’ve seen Protective Life acquire Empire General, Zurich, and Chase life insurance companies.

What happens if your life insurance company goes bankrupt?

When such an event occurs, the company that buys another company also assumes responsibility for existing policies, to include maintaining them and paying any death benefit claims made. How often do insurance companies fail?

This is tricky because there are so many companies that merge together before they file bankruptcy.

Can COVID-19 impact the financial health of your insurer?

Despite the coronavirus pandemic, there is hardly a list of insurance company bankruptcies in 2020.

However, you can see below how companies can quickly merge together to salvage their financial status. Because of the investment required for life insurance, what happens if your car insurance company goes out of business is much less scary.

Life Insurance Company Mergers as of July 2020
CompaniesMerged CompaniesTypes of Insurance
Hilb GroupCIA Financial GroupLife, Health, Dental, Disability
HigginbothamBorden InsuranceLife, Health, Home, Auto
Valley Insurance Agency Alliance (VIAA)Insurance Plus, LLCLife, Home, Health, Auto
Keystone Insurers GroupKevin Brewer & AssociatesLife, Property & Casualty
AssuredPartners Inc.ENV Insurance Agency LLCLife, Auto, Homeowners, Condo, Watercraft
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Despite insurance company bankruptcies being less common, they are possible. In 2017, Penn Treaty was declared insolvent, meaning they were unable to repay their debts to customers. This could be regarded as one of the largest insurance company bankruptcies of the 2000s.

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State Guaranty Associations

Life insurance is a product that is offered virtually worldwide. So what happens if my life insurance company goes bankrupt in the U.S.?

Each state has a Guaranty Association that is meant to protect policyholders from insolvent life insurance companies. All licensed life insurance companies must be members of their state’s Guaranty Association.

If a company is found by the association to be insolvent, they will be liquidated, and their policies will be transferred to a solvent life insurance company.

The Guaranty Association provides limited coverage to the policyholders of the company in question, according to the specific laws of each state.

You can see how much coverage the Guaranty Association in your state allows. What happens if my life insurance company goes bust? The U.K. may have some different regulations than the U.S., so not only is it state-by-state, but country-by-country.

You can also contact your state Guaranty Association for a complete list of the largest insurance company bankruptcies. Learn more about the providers in your area by entering your ZIP code. 

Licensed Term Life Insurance Professionals

You can learn a lot from the Interweb, but misinformation and biased opinions can make it difficult to sort out the useful tidbits from the nonsense. Sometimes it’s better to seek out the views of an industry professional.

Talk with an experienced term life insurance agent to prevent four common mistakes made when purchasing term life insurance.

What questions should I ask before buying term life insurance? Don’t be afraid to ask the same questions to multiple professionals to make sure every aspect of your question is answered.

What happens to your life insurance policy if you don’t die? Each company might have a slightly different response. When you are powered with knowledge, finding a competent and stable life insurance company is no longer an intimidating task.

Asking your potential agent what happens to an insurance policy if a company fails might allow you to get a special rider in your policy to protect you.

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Be Prepared for the Unexpected 

It is becoming increasingly-rare for life insurance companies to go bankrupt. In the past decade, there is hardly a list of insurance company bankruptcies.

The year 2019 saw nearly 24 percent growth in life insurance/annuities written from 2010 per the Insurance Information Institute.

Although it brings peace of mind to know what happens if an insurance company closes, it’s becoming less of an issue. Be sure to research term life insurance companies and know what questions to ask agents.

Start shopping today using our FREE quote tool below to get great life insurance rates and find the best life insurance company for you. 

References:

  1. https://www.iii.org/publications/insurance-handbook/economic-and-financial-data/us-insurance-industry-all-sectors
  2. http://www.nolhga.com/factsandfigures/main.cfm/location/gaContact
  3. https://www.spglobal.com/marketintelligence/en/news-insights/trending/dx7wnoac-xke08m8ygwvpa2

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