People typically buy long-term care insurance years before they need it. As a result, they are taking a gamble that the company will still be around when it is time to pay out. What happens if the company goes out of business?
Usually, insurance companies do not just suddenly shut their doors.
Most commonly, another insurance company will buy out or absorb a company that is in trouble, and the new company will honor the old company’s policies. But in cases where an insurance company simply fails, every state has an insurance guaranty association that protects consumers. The California Life & Health Insurance Guarantee Association is a statutory entity that was created in 1991 when the California legislature enacted the California Life and Health Insurance Guarantee Association Act. The guarantee association is composed of all insurers licensed to sell life insurance, health insurance, and annuities in the state of California. In the event that a member insurer is found to be insolvent and is ordered to be liquidated by a court, the Guarantee Association Act enables the guarantee association to provide protection (up to the limits spelled out in the Act) to California residents who are holders of life and health insurance policies, and annuity contracts, with the insolvent insurer.
If your policy is purchased by another company or is taken over by a guaranty association, be sure to continue paying your premiums, because failing to do so could result in the policy’s termination.
Ms. MacDonald’s practice is limited to Estate Planning, Probate, Elder Law and Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite B-124 in Valencia, California. She can be reached at 661-294-6464.