Finance expert Mike Periu on how insurance claims are protected if your insurer goes out of business.
After a natural disaster like Hurricane Sandy, consumers and small-business owners take it for granted that their insurance companies will take care of the damages. But if the losses exceed what the insurance company planned for, there is a risk that they may not be able to make good on those claims.
When a state insurance regulator believes that an insurer lacks the capital to make good on all of its customers’ claims, it takes the company to court, asking a judge to give the regulator control of the company. Once this is granted, the regulator works with the state’s liquidation agency that conducts an audit and pays out what it can from the assets. If after this process there isn’t enough money to settle all claims, each state has a special rainy day fund—paid for by insurance companies—to cover the difference between what a failed insurance company owes and what it can pay. These funds will cover 100 percent of the difference up to a certain limit. Be careful though because the limits in some states can be low.
About Mike Periu
Mike is a seasoned executive with experience in small business finance and management. He is the founder of Proximo, LLC a leading provider of corporate, consumer and small business education and training services with an emphasis on finance and technology.
Mike Periu is also a leading national voice for individual empowerment through financial education and entrepreneurship. He has been interviewed over 500 times in national and international media, including NBC, Univision, CNN en español, Telemundo, HITN, TVE, RTE, SBS, MegaTV and others.
Mike writes regularly for American Express OpenForum, Yahoo! Finanzas and is a Huffington Post contributor.
Mike has degrees in Finance and International Business from Georgetown University. He is on the Board of Directors of the Council for Economic Education and was a Fellow at the Kauffman Foundation’s Labs for Enterprise Creation.
