What Happens When My Texas Insurance Company Goes Into Receivership

The Texas Department of Insurance has a web site that provides some useful information when an insurance company goes into receivership. An earlier blog at this site discusses the financial situation that will result in an insurance company being placed in receivership.

Other than the claims handling process, there are two main questions most people will have concerning their insurance policies when their insurance company is taken over by a receiver. The first is, “What happens to my unearned premium?”, and the second is “What happens to my coverage and benefits?”.

Unearned premium is the amount you paid to the company in advance that did not actually buy coverage. For instance, if you bought a six-month policy and paid all the premiums in advance, but the company failed two months later, you would be due a refund for four months of premiums.

If a property and casualty company fails, the receiver will refund any unearned premium to you, minus any applicable fees, up to a maximum of $25,000. To get a refund, you must ask for it in writing or on a proof-of-claim form. You can request this form from the receiver if he does not send one to you automatically.

Life and health coverage will normally continue after a company fails, so there is usually no unearned premium to refund
If your insurance company is placed in receivership, the outcome of your coverage and benefits will vary depending on the type of policy you have. Here are a few examples:

Life, health, and annuity policies: The life and health guaranty association must keep paid-up life policies and annuities in force. The association must also keep guaranteed renewable life and health policies in force as long as you pay your premiums. The association may nonrenew other policies at the end of the policy period.

Health care coverage: Health insurance that cannot be canceled by the insurance company will continue if you pay your premiums. Medical providers may not demand payment from you, other than your usual copayments.

If you have an HMO – you are not protected. You need to find new health care coverage as soon as possible.

Property and casualty policies: The court will cancel your policy. If you pay your premium, the policy will stay in effect for at least 30 days to allow you to find new coverage. The guaranty association will pay valid claims incurred during this period.

Workers’ compensation benefits: The association will continue paying your benefits.

Pension plan benefits: The rules will vary here.

Bottom line is that if your insurance company is placed in receivership and taken over by a guarantee company, you need to consult with an experienced Insurance Law Attorney in order to make sure your rights and assets are properly protected.