Insurance is critical for every company. Smart business owners have the proper insurance to protect their company and its assets. But what happens if your insurance company goes under? What does that mean for your business? What are the liabilities?
BBB has received 6,280 inquires on insurance providers and services in Greater Maryland in the past year.
A lot of small and family operated business don’t know who to trust when it comes to financial matters or even how to conduct the vetting process. However, they can be certain that they will be protected and will remain insured if their insurance company crumbles.
BBB offers answers to the following frequently asked questions on what happens to a policy-holder’s coverage if their insurance company goes out of business:
What happens when an insurance company becomes financially troubled, fails and is no longer able to uphold its end of the bargain? That's when the Maryland Property & Casualty Insurance Guaranty Corporation (PCIGC) steps in, according to The National Conference of Insurance Guaranty Funds (NCIGF). Put simply, guaranty funds provide an essential safety net for policyholders, one that meets the needs of those least able to deal with losses should their insurance company fail.
Will I still have insurance coverage? Insurance guaranty associations are designed to protect policy-holders if their insurance company becomes insolvent. In Md., an insurance company would have to be a member of PCIGC. If a company becomes insolvent, the guaranty ensures continuation of coverage, either by taking on policies directly or by transferring the policies to a financially stable insurer.
What about any claims? PCIGC provide coverage at limits of at least $300,000 for life insurance death benefits, $100,000 for life insurance cash surrender values, $250,000 for annuity withdrawal or payment values, and $300,000 for health insurance benefits, according to NCIGF.
PCIGC provide coverage on a per-claim basis for personal injury and property damages and full benefit coverage for workers’ compensation benefits.
Where does that money come from to cover claims? If an insurance company goes bankrupt, any amount of coverage that cannot be attained from the company’s liquidation is borne by other insurers in Md. according to the amount in premiums those insurers earn from Md.
How can I be sure my insurance company is safe? There’s no way to be absolutely sure that an insurance company is healthy. To help business owners evaluate their insurer, there are several businesses that rate insurance companies on their financial strength and creditworthiness. Business owners can also confirm with their state insurance department that the company is licensed to do business in Md.
For more BBB advice on insurance or other financial planning issues, visit www.bbb.org.