What Happens When Your Home Insurance Company Goes Bust?

Most homeowners are aware that dealing with the insurance company after filing a claim can sometimes be difficult, but you likely feel that you can rest easy knowing that you at least have coverage in case of a disaster. If your insurer suddenly goes bankrupt, however, there may be many uncertainties surrounding your coverage.

Our team at Insurance Claim HQ is ready to answer your questions regarding what happens if your home insurance company goes under. We are a large firm that not only helps home and business owners with making accurate claims but also stands equipped to represent you and support you through a wide range of situations involving home insurance claims, such as if your provider becomes insolvent.

Why Do Insurance Companies Go Bankrupt?

Louisiana insurance company bankruptcies have become relatively common in recent times, begging the question of why an insurance company might go bankrupt in the first place. The issue stems from a company’s inability to pay claims, thus becoming insolvent. A typical cause for this scenario is when many high-value claims come in at once, such as when a large-scale disaster affects many homeowners at once.

In the state of Louisiana, this type of disaster usually comes in the form of a major hurricane. In the aftermath of such a tragic event, it is entirely possible for the worth of all incoming claims to exceed the value of the company’s existing assets.

When a home insurance company goes bust in this situation, it also loses any accreditation it has going forward. A revocation of accreditation can show that the insurance provider and those with decision-making power were guilty of mismanaging policies and assets in such a way that bankruptcy became the only option.

Does Louisiana Have a Homeowners Insurance Crisis?

Louisiana homeowners have understandable concerns about whether their own insurance companies might go bankrupt, leading many to wonder how many insurers have gone under recently. In the aftermath of Hurricane Ida in the latter months of 2021, two accredited insurance providers in Louisiana went bankrupt. Access Home Insurance and State National Fire Insurance lost their accreditation, with multiple other providers in the state also going insolvent or facing significant struggles since the disaster.

Louisiana Insurance Commissioner Jim Donelon estimates that around 120,000 policyholders have lost their policies in what many are describing as a homeowners insurance crisis. As well as asking what happens if a home insurance company goes bust, another pertinent question is what happens when an insurer ceases its operations in a state.

The financial struggles experienced by some Louisiana insurers are convincing other companies to deem the state a risky place to operate, leading several providers to discontinue writing policies for Louisiana homeowners and pull out of the state entirely.

How Does Louisiana Protect Homeowners Whose Insurance Company Goes Bankrupt?

When an insurance company goes bankrupt, the state places it into a receivership. This formation allows the state to liquidate the firm’s assets and use the resulting funds to pay the outstanding claims filed by the insurer’s policyholders.

Another way that Louisiana is attempting to protect homeowners whose insurance companies might go bankrupt is by filling the void through Louisiana Citizens, the state-run insurer. This guarantees that homeowners within the state will have an option for seeking coverage, but it is not a perfect solution. Policies under Louisiana Citizens are undergoing massive hikes in order to help guarantee that the insurer can handle a potential disaster in the future.

The state has processes and solutions in place to help Louisiana homeowners who have no other options but to wonder what happens if a home insurance company goes bust. However, there is only so much the state can do. An insurance claim attorney can go the extra mile in helping you file a claim with an insolvent insurer and plan the next steps for protecting your property.

How Is My Claim Affected by the Insolvency of My Insurer?

Filing a home insurance claim, even at the best of times, can be time-consuming, and the provider might remain unresponsive for extended periods of time or even offer you a lowball settlement at the end of the discussion. The state of Louisiana has laws and regulations in place to protect you from many of these malicious behaviors, but new frustrations emerge when the company is insolvent.

An insolvent home insurance company is one that cannot pay the claims submitted to it. What happens if a home insurance company goes bust and you attempt to file a claim is that the insurer might assert that they cannot pay for your damages because they have no assets with which to do so. They might also claim that your policy is void, that another insurance company is responsible for your claim, or that you must pay for your own losses out of pocket.

In many cases, the company might be making some or all of these claims in bad faith. In this case, a bad-faith home insurance lawyer can help expose the provider’s wrongful behavior and advocate for the compensation you deserve. Even if the company is truly bankrupt, the state will place the entity in receivership and will ensure you receive the proper payment for your legally recognized claim by liquidating the insolvent company’s assets.

Call the Lawyers Who Know What Happens if a Home Insurance Company Goes Bust

Natural disasters are an inevitable reality that all homeowners must come to terms with, especially in coastal regions like Louisiana, where the threat of hurricane damage is never far off. What makes these disasters truly frightening, though, is when nobody is there to support you through the aftermath.

Our team at Insurance Claim HQ knows what happens if a home insurance company goes bust, both in legal terms and in terms of the struggles you might experience as an affected homeowner trying to pick up the pieces. Call us today or contact us online to learn more about how our bad faith insurance lawyers can help you during a difficult and uncertain time.