What if Your Disability Insurance Company goes Bankrupt

Since it is estimated that one in five Americans will be disabled at some point for a year or more, disability insurance is becoming increasingly popular. This type of insurance can help you stay on top of your bills if you become disabled, and can make sure that you do not lose your home or have to file bankruptcy due to an unfortunate injury or disability. With the economy in a tailspin, many are worried that their disability insurance company may go bankrupt. It is a valid concern: the economy is down and many are already experiencing the ‘slow pay strategy’ from their insurers.

If your disability insurance company has said they haven’t received your paperwork, if they say they need new information, or if they are asking you the same questions over and over again, they may be trying to buy time. Delaying your claim payments with a ‘slow pay strategy’ helps to make their bottom line appear stronger and more stable. If this is happening, you may need to worry about the financial security of your disability insurance carrier.

What if it happens? What if you disability insurance company actually DOES go bankrupt? What are your options? One of the first things you should do (even before your company goes bankrupt) is review your state’s insurance guarantee fund limits and call the Department of Insurance in your state to ask what the maximum limit is if your insurance company does go bankrupt. If your coverage does end, chances are that your claim will be taken over by the Department of Insurance Guaranty Insurance in your state. While you may eventually get money for your claim, there are caps on the amount covered and you may lose some rights, such as the right to collect for emotional distress or punitive damages.

If your claim is delayed or denied, do not give up. It is important that you stick with this process because disability insurers depend on claimants to give up — and many do. Find out what you rights are and make sure to obtain legal counsel, free or otherwise. Even getting free advice on the subject can help to make you more aware and knowledgeable about the process and help you understand what you can do to make sure you are taken care of.

Carol Duncan, the writer of this article, is the founder of the Social Security Disability Resource Center.