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What happens when your insurance company goes bankrupt?

On Behalf of | Jul 26, 2022 | blog, Homeowner Claims

Almost 80,000 Florida homeowners are scrambling for new coverage in the wake of Southern Fidelity’s bankruptcy declaration. Southern Fidelity is the latest of four property insurance companies to go bankrupt in the state, prompting lawmakers to hold a special session to deal with the crisis.

What options do homeowners have when their insurance company goes bankrupt?

Options for homeowners

Homeowners who have already paid their insurance premiums may receive prorated refunds when their insurance company goes bankrupt. However, refunds can take some time to process. It is unwise to wait for refunds to obtain new coverage due to the risk that a storm or other catastrophe could damage your home during this time.

If you can not afford to pay for an entire year of coverage, consider financing options, such as splitting your premium into multiple payments or using a credit card. If you have difficulty finding new insurance, the state-owned Citizens Property Insurance may be an option.

State guaranty funds

In some cases, the state guaranty association may transfer the policies of a bankrupt company to another insurer or provide the coverage itself while it attempts to rehabilitate an insolvent insurance company. If this happens with your insurer, continue to pay your premiums until you obtain coverage with another company. The Florida Insurance Guaranty Association limits claims to $300,000. Additionally, FIGA will cancel most policies 30 days after a liquidation order.

While FIGA protects homeowners whose insurance company goes bankrupt, the protection is not complete or indefinite. If your insurance company goes bankrupt, it is wise to seek new coverage as soon as possible.