What Happens If Your Life Insurance Company Fails?

what happens if your life insurance company fails text overlaying image of a fence padlocked shut Businesses can fail, and when they do, their customers are often left wondering what they should do next. The same goes for life insurance companies. Life insurance companies can go out of business, leaving their policyholders with a lot of questions. Mostly about what will happen to the policy they’ve been paying into and how to find a new policy. The good news is that most states have what’s called a “guaranty fund” that will pay your claims up to a certain limit if your life insurance company goes out of business. Let’s look at what happens when a life insurance company goes out of business, what protections you have, and what you can do.

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Insurance companies have gone out of business before, but it doesn’t happen very often. Past economic crises in the industry have better prepared for market instabilities that could cause life insurance companies to fail. Most of the time, regulators will try and fix the issues within the insurance company before they close it down. If the rehabilitation isn’t enough, the company will be able to meet policyholder obligations with the help of statutory reserves, reinsurance agreements, and state guaranty associations. Below we’ve detailed what each of these are and how they work.

Statutory Reserves

Statutory reserves are the funds that state insurance regulators require insurance companies to keep on hand at all times. The sole reason for this is to make sure that the insurance companies always have enough money to pay all of their policyholders’ legitimate claims no matter what. State insurance regulators have two ways of setting the level of statutory reserves:


  • Rules-Based – The first is a rules-based approach, in which standard formulas and assumptions are used to tell insurers how much of their premiums they need to keep in reserve. 
  • Principles-Based – The second method, which is called the “principles-based” method, gives insurers more freedom in how they set their reserves. In particular, it lets them set reserves based on their own experience, such as actuarial statistics and how their own customers have handled claims in the past, as long as the reserves set by the rules-based approach are the same size or bigger.

Statutory reserves apply to a wide range of insurance products, not just life insurance. The rules can be different from one state to another as well as from one type of insurance to another. For more information on life insurance in your state click here.


Reinsurance is essentially insurance for insurance companies. Life insurance companies will buy reinsurance to protect their ability to pay out claims. When they insure their policies, the insurance company spreads out their risk of financial loss. Reinsurance also helps life insurance companies pay out if there is an influx of deaths all at one time such as from a natural disaster or global health crisis. Insurance companies in the U.S can only sell policies with a maximum limit of 10% of the insurance company’s net worth unless they are reinsured. So if the life insurance company wants to grow and offer bigger policies they have to be reinsured. For policyholders this means that if your life insurance company goes out of business, its reinsurer will take over your policy. This lowers the risk for everyone and ensures your beneficiaries will still get the death benefit.

Guaranty Association 

Guaranty associations, like the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), protect life insurance policies if your insurer goes bankrupt. All life insurance companies must be a part of these associations to operate. Every state has its own association and its own limits.



If an insurance company looks like it might not be able to meet its financial obligations, the association will deem it “impaired”. When this happens the commissioner will decide what steps the insurance company needs to take to lower its risk over a reasonable amount of time. This time frame is called a rehabilitation period. If the insurance company either doesn’t take the necessary steps, or the steps don’t help, the company will then be deemed insolvent.


If the insurance company is insolvent, the state guaranty association will step in. They will either give the policies to another insurance company or opt to keep covering the policyholders themselves. So, it’s important for you to keep paying your premium even if your policy is taken over by the state so that your policy remains active. If an insurance company doesn’t have enough money to pay claims, the guaranty association will use the company’s assets and the guaranty funds to pay claims. However, states have a limit on how much they will pay out in claims. Most guaranty associations cap the death benefit at $300,000 and the cash value, if there is one, at $100,000. The amount you get could be different depending on what state you live in, and it could be higher in some states.

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What You Can Do To Avoid Bankrupt Insurers

Check Ratings

To avoid having to rely on a state guaranty association to protect you, you can look into potential insurer’s financial health to ensure that they are stable. There are independent agencies, each with their own rating scale and standard, that look at insurance company financial health statuses then rate them based on how stable they are. These 5 companies are:


  • AM Best – Uses a rating scale from A++ to D-
  • Fitch – Using a scale of AAA to D
  • Kroll Bond Rating Agency – Rates with a AAA to D scale
  • Moody’s – Uses a AAA to C scale
  • Standard & Poor’s – Uses a AAA to D rating scale


In general, A++, AAA, and A are the best scores. While D, CC, and CA are at the bottom of the scale and represent the weakest or worst ratings. Rating agencies give the highest rating to companies that they think are most likely to uphold their financial obligations. Agencies will give low ratings to companies that appear to have issues keeping their financial promises. The Insurance Information Institute says that you should check ratings from more than one agency because ratings can differ from one agency to the next. So, seeing more than one rating will give you an idea of where the company actually stands.

Switch Insurers

If your insurance company’s rating is in the middle of the rating scales, you don’t have too much to worry about. But if you notice your insurer’s ratings have dropped significantly, you might want to think about switching companies. It may be complicated to switch to a new life insurance company since you may have to pay more for a new policy because you’re older than you were when you bought your original one. Your best bet is to talk to a financial advisor or work with a life insurance agent to look into all of your options. If you do decide to switch policies don’t cancel your old one until your new one is in place, otherwise you risk going without coverage.

Review Customer Complaints

In addition to their financial stability, a strong indicator of an insurance company’s strength can be how they treat their policyholders and handle claims. The National Association of Insurance Commissioners (NAIC) puts out an annual Complaint Index that shows, based on an insurer’s size, how many complaints it gets from customers.


The NAIC figures out this rate by dividing the total number of complaints about a company in a given year by the total number of policies written in that same year. You can get an idea of how well your insurance company handles claims and, by extension, how they keep customers and stay in business by looking at their Complaint Index rating.


J.D. Power is a market research company that uses consumer intelligence analytics to review and rank different industries, including insurance. Its rating system looks at many things. Like how billing and claims work, how good customer service is, and what kinds of policies are available. Like the NAIC Complaint Index, this rating can give you an idea of how well your insurance company keeps customers.

Finding The Right Life Insurance Company

Nobody wants to think about losing money on life insurance. Especially if you’re counting on your policy to pay a death benefit to your loved ones. Even though there are safety measures, they may not always work, or provide enough coverage. Finding the right life insurance company goes a long way to avoid needing these safety nets. That means finding a licensed insurer that is financially stable that can and will pay out death benefits.


Our EZ agents will do everything they can to find you the best company. And we want to make it as easy as possible for you to do so! We’re here to help, and the best part is that everything we do is free. We will help you with everything. From answering all of your questions to helping you choose a policy and finish the enrollment process. We will also help you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.

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How Does The Life Insurance Underwriting Process Work?

If you’ve been looking for a life insurance policy, you probably know that you’ll need to go through the underwriting process to determine how much you will pay for your monthly premiums. But just what is this process? It simply means that, when you apply for a life insurance policy, the insurer will gather information about you so they can determine how much of a risk you will be to insure. It might sound a bit scary, but it is a very routine process, and will not prevent you from finding a great policy at an affordable price. While some insurance companies will have different criteria for their underwriting process, there are some general things you can expect.

What Life Insurance Companies Will Look At

In order to determine if they should insure you, and how much they should charge you for premiums, life insurance companies will need to gather information from you to get a glimpse of what your overall life expectancy might be. They’ll want to know if you have a relatively healthy lifestyle, or if there might be anything you are engaging in that could lower your life expectancy, such as smoking or doing a hazardous job. Things like that will be taken into account, which could mean higher rates or possible denial of your application. 

The factors that insurers take into account include: clipboard with medical information on it

  • Medical Factors– Insurers will want to know your height and weight, if you smoke, if you use any prescription or recreational drugs such as marijuana, if you have a history of medical conditions like heart disease or diabetes, and your family’s medical history. 
  • Lifestyle Factors– They will also look at your driving and criminal record, and will want to know about anything risky that you engage in, such as skydiving or even foreign travel. 
  • Financial Factors– Finally, you will have to disclose your current occupation and income, as well as your financial history, including any bankruptcies. 

How the Underwriting Process Works 

Now to look at how the underwriting process works when you apply for a life insurance policy. Your insurance company will go through the following steps:

  1. Reviewing your application– The insurer will check your application and make sure that the information you provided is complete and correct, including your listed occupation, your date of birth, and what type of coverage you are looking for.
  2. Administering a medical exam– Depending on the type of life insurance policy that you choose, you might have to undergo a medical exam to determine how healthy you are. It will check your weight, height, and blood pressure, and you’ll be required to give blood and urine samples. However, if you choose to purchase a no medical exam life insurance policy, you will skip this step.
  3. Checking databases– After reviewing your application and your medical exam, the insurer will look at some third-party sources to get information, including your driving record and prescription records over the last few years. This is to make sure that you did not lie about your medical history on your application, and to make sure that you do not have any past DUIs or major infractions on your driving record.
  4. Requesting your physician’s statement– This step will usually apply to you if you are older and applying for a large amount of coverage. Life insurance companies might ask your physician for a statement certifying that you are in good health, to make sure that you are not taking out a life insurance policy because you are battling a terminal illness or are likely to pass away soon.

The underwriting process can take up to 8 weeks. Once it is complete, your insurance company will assign you an insurance classification. There are four basic classifications that determine your rate and eligibility for a policy: gold circle seal

  • Preferred Plus is the best rating that you can receive, and will allow you to get the lowest rates available.
  • Preferred means you are in fairly good health and can receive affordable premiums.
  • Select classification means you will be approved, even though you might have a history of previous illnesses.
  • Standard classification means you have a family history of health problems and other issues, and that you will pay higher premiums. 

Every life insurance company has different criteria for its underwriting process, which is why it is important to shop around and compare plans from multiple insurers. There are many different kinds of life insurance policies to choose from, including whole life insurance, term life insurance, and final expense insurance, so if you’re not sure where to begin, consider using online tools, or speaking with an agent. The right policy for you is out there! 

We have provided the top insurance companies that offer life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.

What Life Insurance Company Ratings Mean

Think about how you make most of your purchasing decisions. These days, most of these decisions are based on ratings, like online reviews. You want to work with companies that are highly rated, whatever you’re looking to buy – and life insurance companies are not excluded. But when it comes to life insurance companies, it’s about more than looking at online reviews, it’s also about looking at the ratings given to them by external organizations. So how are life insurance companies rated? And what do these ratings mean?

What’s A Life Insurance Company Rating? illustration of papers and a pen over them

Life insurance companies are rated by independent agencies, and these ratings are based on the financial strength of the insurance company. Rating agencies will look at a variety of factors, including how well the company is doing financially, how it is run, and how vulnerable it is to natural disasters. 

The independent agencies that provide these ratings are typically A.M. Best, Fitch, and Moody’s. Each agency has its own rating scale and rating standards, which means an insurance company rated A by one agency might not be rated the same by another agency.

What Are The Ratings Based On?

Because each agency is trying to evaluate the financial strength of the insurance company, the ratings are based on certain criteria including:

  • Amount of cash on hand
  • Diversity of revenue streams
  • Quality of insurance policies written
  • Debt ratio
  • Risk management protocols 

As stated above, each agency has its own rating scales. For example, A.M. Best has 6 ratings for the best insurance companies to work with:

  • A++, A+ (Superior)
  • A, A- (Excellent)
  • B++, B+ (Good)

They also have 10 ratings for companies deemed vulnerable:

  • B, B- (Fair)
  • C++, C+ (Marginal)
  • C, C- (Weak)
  • D (Poor)
  • E (Under Regulatory Supervision)
  • F (In Liquidation)
  • S (Rating Suspended)

Why Are The Ratings Important?

letter ratings from A being green to G in red
Ratings are important because you want to make sure that your life insurance plan is from a reputable company that will uphold the policy when you’re gone.

Life insurance allows you to provide a financial safety net for the people that you love in the event that something happens to you. You want to make sure that, when you pass away, your family will receive your death benefit, but that will not be possible if the life insurance company you worked with goes under. Ratings should be one of the factors you take into consideration before purchasing a policy from a life insurance company: these ratings will help you understand how credible and reliable they are.

Finding A Top-Rated Life Insurance Company

One of the ways that you can check out a life insurance company’s rating is to go to the websites of rating agencies and look up the specific companies you are considering working with. Some agencies will require you to pay a fee before gaining access to these ratings, but there are other ways to access life insurance ratings:

  • Search the insurance company’s website for their most recent ratings.
  • Contact the life insurance company and request their most up-to-date ratings.
  • Search for company reviews from trusted sources that include ratings.
  • Work with a licensed agent who can look up the ratings for you.

Choosing the right life insurance policy will ensure that your family gets the benefits they need. It might seem complicated and frustrating to find the right one, but it can be done, with some help. The best way to find the right life insurance policy from a company with great ratings is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.

Universal Life Insurance Explained

If you’ve made the decision to buy life insurance, congrats! As you’ve been researching policies, you’ve probably come across multiple types of policies, including universal life insurance, which might be a good option for you because of the many benefits it offers. Universal life insurance is a type of permanent life insurance that covers you for life as long as you pay your monthly premiums, and, like whole life insurance policies, universal life insurance has cash value that grows over time. What makes it more appealing than other types of whole life, though, is that it is less expensive. But that is just one of the advantages of universal life insurance.

How Universal Life Insurance Works

Having a universal life insurance policy is like having two forms of financial coverage in one. With one of these policies, you will pay a monthly fee that splits into two parts: one part goes toward your life insurance policy and the other part goes into savings, similar to a savings account. 

The great thing about universal life insurance is that it’s all about flexibility. You have the option to increase or decrease your death benefit, as well as the flexibility to change the price of your premium. You can choose to pay the minimum premium amount set by your insurance company or you can choose to pay more; you can even skip a payment as long as there is enough cash value in your policy to cover it. If you decide to pay more than the minimum premium amount, that extra payment is added to your cash value. This cash value will grow over time with an annual interest rate that is set by your life insurance company. This is why it is important to shop around and compare all of the insurance companies offering policies in your area.dollar bills rolled up and stuck into dirt.

Cash Value Options

In addition to the flexibility of universal life insurance, one of the most popular parts of this type of policy is undoubtedly the cash value that it offers. What’s even better is that you have multiple ways to utilize this money:

  • Policy Loans- You can access your cash value as a policy loan, meaning you will be charged a small amount of interest. You don’t have to repay the loan, but any loans that haven’t been repaid will be deducted from your death benefit after you pass.
  • Paid-up Policy– With a universal life insurance policy, you have the option to stop paying premiums once you reach a certain amount of cash value. Essentially the plan pays for itself after a while.
  • Withdrawals- Instead of taking out a loan, you can withdraw money from your cash value. You will not have to repay it and will not have any interest that will be deducted after you pass. Be aware, though, that withdrawing money from your policy is considered a surrender of the net cash value, meaning your death benefit and your cash value will be reduced. 
  • Policy Surrender- If you want all of the cash in your policy and no longer want the death benefit, you can surrender the policy and take all of the cash that has accrued over time. You will have to pay some fees for surrendering the policy.

3 Different Types

1. Indexed Universal Life Insurance

laptop screen with stock market on it
Indexed universal life insurance’s cash value is based on how well the stock market is doing.

Indexed universal life insurance’s cash value is linked to an index in the stock market. If the index is doing great, your cash value goes up. However, if the stock market drops, your cash value will drop, which will also have an impact on your premiums. Be aware that your insurance company also takes a share of your cash value. 

2. Variable Universal Life Insurance

With variable universal life insurance, you have the option to put your cash value into a mutual fund, which is essentially a pool of money that is managed by investors. Your cash value will be invested into different companies and, while this lowers your risk, you will also have to pay a lot in fees, which will take away from your earnings.

3. Guaranteed Universal Life Insurance

Choosing this option means your premiums will stay the same regardless of how well the stock index is doing. This is because the interest rates on your cash value are set when you purchase your policy. The only downside to this type of universal life insurance is that cash value will be a lot lower than with other types of universal life policies, because these policies are not designed to build cash value.

Just Know…

If you do not use your cash value, you will lose it, and it will revert back to your insurance company. Your family will only receive the death benefit, not the cash value that accrued over your lifetime. caucasian man holding a young toddler with a cap onPurchasing a life insurance policy means that your loved ones will be taken care of when you are no longer around. Universal life insurance is a great choice because it will last throughout your lifetime as long as you continue to pay your premiums, and it is very flexible. You can adjust your death benefit, your cash value earns interest, you can withdraw money or borrow from your policy’s cash value, and you have flexibility with premiums. You can choose to pay the minimum and let your cash value build up, and then, if you don’t want to lose your cash value, you can use it to pay your premiums and save more money. 

The best way to find the perfect policy for you and your family is to compare policies and companies. There are many different life insurance policies and life insurance companies to choose from, so consider using online tools, or speaking with an agent. We have provided the top insurance companies that offer universal life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check universal life insurance rates today.

Why You Should Consider Joint Life Insurance

Getting married and setting up a life with your partner is a joyful time, and life insurance might not be at the top of your minds. But it’s an important subject to discuss: after all, you both want to support each other for as long as possible. There are multiple options to consider when looking into life insurance policies, but did you know that you can get coverage for you and your spouse on one life insurance policy? With a joint life insurance policy, you can cover two people, often for less than the price of separate policies!

What Is Joint Life Insurance?

african american hand holding a caucasian hand with rings on the ring fingers
Joint life insurance will cover you and your spouse under one policy, which can be cheaper than two policies.

Joint life insurance is a type of universal life insurance, meaning that it is permanent life insurance and will remain in effect for your whole life. Depending on how your policy is structured, it might build cash value that grows, tax-deferred, over the life of the policy. The unique thing about joint life insurance is that these policies cover two individuals on one plan. It is perfect for couples, because it allows you to provide for your spouse after death. But it is also a great policy for business partners! A joint life insurance policy will give you the financial security to keep your business going in the event that one of you passes. 

The best way to find the right plan for your needs is to shop around and compare plans and prices. As you begin your research, be aware that you will come across two types of policies, first-to-die and second-to-die life insurance. 

First-To-Die Policies

First-to-die life insurance will pay out after the first-named insured of the spouses or partners dies. For example, if you and your spouse are covered under a first-to-die policy, and your spouse passes, you would collect the entirety of the death benefit. After you collect the money, the insurance policy is exhausted, meaning you will no longer have life insurance coverage and must apply for a new policy. You have the option to use the money however you see fit, whether for mortgage payments, expenses that were supported by your spouse, for your growing family, etc. 

Second-To-Die Policies

Also called survivorship policies, second-to-die insurance policies will pay the death benefit after both policyholders die. For example, if you and your spouse have a policy and your spouse dies first, the insurance will not pay out until after you pass as well. Unlike with first-to-die policies, once the first person dies, the second person has to keep paying premiums to keep the policy active. This kind of policy is best for estate planning purposes, as it allows you to leave money behind for dependents. It is also well-suited for business partnerships, if you want to keep the business going after both partners pass.

money tree in a plant pot being watered
Your cash value grows over time with a joint life insurance policy.

Joint Life Insurance Advantages

Joint life insurance is an excellent way to provide coverage for two people at a great price. These plans:

  • Are flexible– They allow you to increase or decrease the amount of your premium payments.
  • Grow over time– Your cash value will continue to grow over time.
  • Are accessible– You have access to cash value in case of an emergency or whenever you need it.
  • Are affordable– These plans are generally cheaper than buying two separate policies.
  • Offer savings– The company will underwrite both of you, and will typically focus on the healthier applicant. This reduces the risk, which means lower premiums.

Joint life insurance is the simplest and most affordable way to provide coverage for you and your spouse or business partner. You will be able to provide for your spouse after your death, or for your dependents or business after both policyholders pass. It is the cheapest yet most effective way to get coverage for two people. 

There are many different life insurance policies to choose from, which is why you have to compare plans to find the best one for your needs. Consider using online tools, or speaking with an agent. We have provided the top insurance companies that offer joint life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to ensure that you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check joint life insurance rates today.

What To Do If Your Are Denied Life Insurance

Rejection happens to the best of us. Things are no different when it comes to life insurance: some companies might reject your application for a policy. If you get denied for life insurance coverage, you might question why you were denied. There could be a number of reasons, such as your financial history, health, lifestyle, or driving record. But the good news is, just because you’ve been rejected by one company doesn’t mean you can’t get a life insurance policy! Once the shock of being denied has settled, there are steps you can take to find a great, affordable life insurance policy that will give you and your family peace of mind.

tablet with mail on it and microscope over it
If you are denied life insurance, then collect information as to why you were denied to make sure there was no mistake.

Collect Information

The first thing you need to do is begin gathering information in regards to why you were denied life insurance. This will help you to understand what happened, and help figure out if there was some sort of misunderstanding. As an applicant, you have the right to request this information.

Verify Results

One possible reason for your denial could be a simple error. You or the insurance company could have made a mistake when filling out paperwork, or the information you have given could be incomplete. In addition, you could have medical records that have not been updated or are not detailed enough. Double check with the insurance company, your doctor if the problem is related to your health, or the Department of Motor Vehicles if there was an issue with your driving record. If for some reason there was an error, you can appeal the decision with the documentation necessary to reverse the insurance company’s decision.

Make Some Lifestyle Changes

woman's hand rejecting a pack of cigarettes in a man's hand.
If you quit smoking, you can re-apply for life insurance and get a cheaper rate.

If you are denied due to pre-existing conditions, or being a smoker, you can increase your odds of being approved for a different life insurance policy by making some changes. Show that you are willing to manage your conditions with regular exercise and healthy eating. Stop smoking if you can, which will even allow you to get lower rates! And don’t give up: in some cases, a life insurance company will not deny you outright, but will postpone your application a couple of months to give you time to make some changes. They will usually do this if you have had a recent medical diagnosis, so you have time to adjust to the changes and any new medication. 

Explore Your Options!

Life insurance companies all rate the risk of different medical conditions in different ways. So if you are denied because of a medical condition, there might be another company that will provide you with coverage. Remember, too, that there are a number of different types of policies to choose from that will offer your family protection when you are gone. For example, if you get rejected for permanent life insurance, you could still apply for a different type of policy, such as term life insurance, simplified issue life insurance, or final expense life insurance. You will be accepted for simplified issue life insurance even if you have a pre-existing condition, because this type of coverage does not require a medical exam. The possibilities are endless when it comes to getting a life insurance policy, all you have to do is shop around and work with an agent. 

A rejected application doesn’t mean that you won’t be able to get life insurance to protect your family and their assets. There are many different life insurance policies to choose from, and even with health conditions, you can find an affordable plan with great coverage. Consider using online tools, or speaking with an agent. We have provided the top insurance companies that offer life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.