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What if your insurance company went belly up? In today's turbulent financial times, this is becoming an increasingly important question. This article will walk you through the steps you should take to obtain benefits from an insolvent insurance company.

1. Do Not Panic

In the event that your car, home or life insurance company is declared insolvent, your state has legal and financial provisions in place to help protect your interests. Every state also has a guaranty fund or association that assumes responsibility for the insolvent company's claims and other policy obligations.

A guaranty fund or association is a body mandated by state law to protect policyholders and claimants who may potentially be harmed by an insurance company failure. It provides an essential safety net for the individuals and small businesses that are least capable of absorbing the financial impact if an insurer lacks the resources to pay a valid claim. Think of it as insurance for your insurance - only you do not have to pay for it.

If an insolvent insurance company has insufficient assets to pay its claims, the state guarantee fund will meet these obligations by levying funds from the state's remaining solvent insurers.

Some states have a separate fund set up specifically for property and casualty claims, and another for life and health insurance claims. In California, for example, this coverage is provided by the California Insurance Guaranty Association and California Life and Health Insurance Guaranty Association respectively. Every insurance company licensed in any given state is legally required to become a member of its guaranty association.

2. Just Follow Instructions

When an insurance company is declared insolvent, this triggers the state's guaranty fund, which immediately becomes liable to pay the company's claims. The fund also
assumes the responsibility for the insolvent insurer's claims administration.

The state guaranty association will contact every policyholder and claimant who has an open claim on file with the insolvent insurer. This communication notifies them of their rights under the Guarantee Act, and provides instructions on what they need to do.

If you have already filed a claim with the insolvent insurer, you will not need to file the same claim again with the guaranty association. The association will obtain your claim file directly from your insurance company its receiver and proceeds to settle it. Your claim will usually be settled within 60 to 90 days from the date

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