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  • Which Places Are Safe
    • Fixed Annuities >
      • Fixed Annuities Overview
      • Fixed Annuity Benefits
      • How Fixed Rate Annuities Work
      • How Fixed Index Annuities Work
      • Differences Between Fixed and Variable Annuities
    • Social Security >
      • Social Security Overview
      • How Does Social Security Work
      • What Are My Social Security Benefits
      • What If My Spouse Is Deceased
      • Strategies For Maximizing Social Security Benefits
      • How To Estimate Your Social Security Benefits
    • Life Insurance >
      • Life Insurance Overview
      • Questions To Ask Yourself About Life Insurance
      • Basic Considerations For Your Life Insurance Needs
      • Common Uses For Life Insurance
      • Term Life Insurance
      • Permanent Life Insurance
    • Savings Bonds >
      • Savings Bonds Overview
      • How Savings Bonds Work
      • Savings Bonds Yields
      • Tax Advantages of Savings Bonds
      • Older Bonds / Baby Bonds
    • Banks and Credit Unions >
      • Banks and Credit Unions Overview
      • Certificates Of Deposits
      • Money Market Accounts
      • Savings Accounts
    • Critical Illness Insurance
    • Risk Money Places
  • How Safe Are They
    • FDIC - Federal Deposit Insurance Commission >
      • FDIC Overview
      • What Does The FDIC Cover?
      • How Does The FDIC Work?
      • Who Is The CDARS?
    • NCUA - National Credit Union Association
    • How Strong Is My Bank Or Insurance Company?
    • What Happens If The Bank Fails
    • What Happens If The Insurance Company Fails
    • Guaranty Associations (External Link)
  • Concepts
    • Wealth Transfer
    • Personal Pension Plan
    • Basic Money Math >
      • HOW FAST MONEY DOUBLES - RULE OF 72
      • Annual Percentage Yield Vs. Annual Interest Rate
      • Compound Vs. Simple Interest
      • Rate of Return
    • Financial Concepts >
      • Split Funding
      • Tax Deferral
      • Saving Too Conservative
      • Yield Ladders
      • Liquidity
    • Identity Theft Protection
  • Consumer Guides
  • Videos
  • Safe Money News
    • Current Issue
    • Digital Magazine
    • Subscribe
    • Contributors >
      • Raymond J. Ohlson
      • Steve Dinnen
      • TMA Small Business Accounting
      • Norm Wilkens
      • David Barker J.D.
      • Leo LaGrotte
      • Kim O'Brien
  • Resources
    • Ask A Question
    • FAQ
    • Financial Dictionary
    • Financial Basics Quiz
    • Calculators
    • Useful Tools and Links

What happens if My insurance company fails?

Insurance companies are regulated by the state governments of the individual states where they are licensed. When a state determines that an insurer is insolvent the state guaranty associations are activated. 

When there is a shortfall of funds needed to meet the obligations to policyholders, the remaining member insurers doing business in a particular state are assessed a share of the amount required to meet the claims of resident policyholders. The amount member insurers are assessed is based on the amount of premiums they collect in that state on the kind of business for which benefits are required. 

In 1983 the state guaranty associations founded the National Organization of Life and Health Insurance Guaranty Associations (www.nolhga.com). If the insolvency affects three or more states NOHLGA coordinates the development of a plan to protect policyholders.
Death Vs. Intensive Care
When FDIC steps in and takes over a bank you can order the coffin and set the time for the wake because the bank is not coming back to life. It is dead. When state insurance regulators step in they will often attempt rehabilitation of the insurer and there are insurers that have entered state receivership, been rehabilitated, and emerged from state care.

Since 2001 hundreds of banks have been taken over by FDIC and liquidated. During that same time period 9 annuity carriers have been placed under state control and three have been liquidated.

Data Sources:
  • Florida Department Of Financial Services:   http://www.fldfs.com/receiver/receivership_list.asp
  •  NOLHGA:  http://www.nolhga.com/insolvencycorner/main.cfm/location/fundamentals
  •  Illinois Office of the Special Deputy Receiver:   http://www.osdchi.org/receivership_order_menu_a.htm

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Federal Deposit Insurance Corporation

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NCUA - National Credit Union Association

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How Strong Is My Bank or Insurance Carrier?

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What Happens If My Bank Fails?

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