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What happens if your insurance company goes out of business?

When a property insurance company goes out of business in North Carolina, policyholders with open claims may initially feel a wave of panic and uncertainty. The dissolution of an insurance company doesn’t mean that claims will be left unpaid; however, the process of getting those claims resolved can become more complex. Here’s what happens and what you should do if you find yourself in this situation:

Understanding the Safety Nets

**1. The North Carolina Guaranty Association:** North Carolina, like other states, has a safety net in place for policyholders of licensed insurance companies that go bankrupt or become insolvent. The North Carolina Insurance Guaranty Association steps in to cover the outstanding claims of insolvent insurance companies up to a certain limit. This association is funded by assessments on all insurance companies operating in the state, ensuring that policyholders are protected even if their insurer fails.

**2. State Insurance Department Oversight:** The North Carolina Department of Insurance plays a critical role in monitoring the financial health of insurance companies operating in the state. If an insurance company is in financial trouble, the department can step in with corrective measures or, in extreme cases, take control of the company to manage its obligations and ensure that policyholder claims are addressed.

Steps to Take If Your Insurer Goes Out of Business

**1. Stay Informed:** If your insurance company is declared insolvent, you’ll likely be notified by the company itself, the North Carolina Department of Insurance, or the North Carolina Guaranty Association. Keep an eye on official communications to understand how your claim will be processed.

**2. File or Maintain Your Claim:** Continue with your claim process as directed. The guaranty association or the liquidator appointed by the state will inform you of any specific steps you need to take or if you need to file your claim directly with them.

**3. Understand Coverage Limits:** Be aware that the North Carolina Guaranty Association has limits on how much they will cover for each claim. Recent legislation at the end of 2023 raised the general limit from $300,000 to $500,000 per claim, but it’s important to check the current limits and how they apply to your specific situation at the time of reading this blog.

**4. Seek Legal Advice:** If you’re facing significant challenges with your claim or if the coverage limit does not fully address your losses, consulting with a legal professional who specializes in insurance law might be beneficial. They can guide you through the process and help protect your rights.

**5. Consider Alternative Coverage:** Look for alternative insurance coverage to ensure you’re protected in the future. It’s important to research potential insurance companies’ financial stability and customer service records to make an informed decision.


While the insolvency of an insurance company in North Carolina can create uncertainty for policyholders with open claims, the state’s protective measures and the North Carolina Guaranty Association offer a significant safety net. By staying informed, following the directed steps for your claim, and understanding the coverage limits, you can navigate through this challenging situation.

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