My Insurance Haven Everything you want to know about insurance

If a life insurance company goes bankrupt, what happens to whole life insurance benefits?

by yksin

Question by bellas: If a life insurance company goes bankrupt, what happens to whole life insurance benefits?
My Dad purchased whole life insurance through AXA Equitable which is all paid for. What happens if the life insurance company goes bankrupt or their assets are under water like so many other financial institutions these days? Will the benefits still be payable?

I also think it's strange that he had to pay $ 700 more to this insurance company as an "adjustment"(?) recently even though the policy was fully paid for a long time ago. Is this normal?

Best answer:

Answer by Chris C
If an insurance company goes bankrupt, typically the company that buys that bankrupt one has to honor the policies that were inforce.

Example: Sun Life in Canada has bought out several companies including Prudential, Clarica and Met Life. Sun Life still maintains those policies, they just have a different logo on the letterhead now.

FYI, AXA has more than $ 660 Billion in assets under management. I doubt that they will be going bankrupt. Liquidity issues maybe, but not bankrupt. There are a lot of financial companies that peopel think are going bankrupt becuase of vague headlines in the news. IE: AIG...they are no where near being bankrupt, they just have liquidity problems...think of it like you get laid off work for 2 months and you don't have any easily available cash...you use your credit card to get buy...now imagine this bailout as being your credit card, only the AIG situation has A LOT more zero's at the end. They just need a little cash until they can free up some of thier own.

Not sure about that adjustment. Depends on what type of policy it is that you have. If it's a U/L policy or something where perhaps dividends were paying the premiums then an adjustment could be very normal. Best bet is to speak with your agent and inquire obout what the adjustment is for and why it is what it is.

What do you think? Answer below!