What Happens If My Long Term Care Insurance Company Goes Out of Business?

We are often asked, “What will happen if my long term care insurance company goes out of business?”

Long-term care insurance has been around for over 40 years.  There has been only one insurance company selling long-term care insurance that has gone bankrupt and its claims are being paid by the state guaranty associations.  It was a very small insurance company and it always had very low financial ratings.  Because of its low financial ratings, we never recommended that company to any of our clients.

Regardless of what products an insurance company sells, if it did go out of business then the state guaranty associations kick in to help pay the claims.  You can learn more about the state guaranty associations by clicking here.

Many of the largest, most respected, insurance companies in the country sell long-term care insurance including State Farm, Mutual of Omaha, New York Life, Northwestern Mutual, Massachusetts Mutual, John Hancock, Thrivent Financial, and Transamerica.

Others have asked us, “If one of the largest insurance companies in the world (AIG) can go bankrupt, then why should I put my trust in any insurance company, even the big ones?”

Insurance companies are highly regulated and have very strict requirements for setting aside sufficient assets to pay all of their future claims.

When AIG needed a bailout, it was NOT the AIG insurance companies that went bankrupt.  The AIG insurance companies NEVER needed a bailout.  The non-regulated part of AIG that sold non-regulated credit default swaps needed the bailout from the federal government.  AIG ended up selling many of its insurance companies (which were all very profitable) in order to pay back all of the “bailout money” plus a profit for the federal government of about $22 billion.

Scott