So far, in the unfolding news landscape, the talk has been of companies like Zoom Airlines going under. Nevertheless, could the unthinkable happen, and an insurer of AIG's scale go bust? What then, for travel insurance?What Happens If My Travel Insurance Company Goes Bust?
The Financial Services Compensation Service (FSCS) protects British consumers if a financial institution such as a travel insurance company goes bust and is unable to pay out insurance claims.The FSCS may also supply compensation if the insurer going in to liquidation cannot provide remaining months of policy cover, already purchased by customers.
American Insurance Protection
For American consumers, a similar compensation service protects customers but is administered locally by each state.“Each state has a "guaranty association" or "guaranty fund" that handles insurance bankruptcies much like the FDIC handles bank failures.”
(Source)
The state guaranty funds are typically available for claims up to $300,000 for all lines of insurance, not only travel insurance. Below are the maximum sums covered in each American state:
- Alabama - $300,000
- Alaska - $300,000
- Arizona - $300,000
- Arkansas - $300,000
- California - 80% not to exceed $250,000
- Colorado - $300,000
- Connecticut - $300,000
- Delaware - $300,000
- Dist. of Col. - $300,000
- Florida - $300,000
- Georgia - $300,000
- Hawaii - $300,000
- Idaho - $300,000
- Illinois - $300,000
- Indiana - $300,000
- Iowa - $300,000
- Kansas - $300,000
- Kentucky - $300,000
- Louisiana - $300,000
- Maine - $300,000
- Maryland - $300,000
- Massachusetts - $300,000
- Michigan - $300,000
- Minnesota - $300,000
- Mississippi - $300,000
- Missouri - $300,000
- Montana - $300,000
- Nebraska - $300,000
- Nevada - $300,000
- New Hampshire - $300,000
- New Jersey - $500,000
- New Mexico - $300,000
- New York - $500,000
- No. Carolina - $300,000
- North Dakota - $300,000
- Ohio - $300,000
- Oklahoma - $300,000
- Oregon - $300,000
- Pennsylvania - $300,000
- Puerto Rico - $300,000
- Rhode Island - $300,000
- So. Carolina - $300,000
- South Dakota - $300,000
- Tennessee - $300,000
- Texas - $300,000
- Utah - $500,000
- Vermont - $300,000
- Virginia - $300,000
- Washington - $500,000
- West Virginia - $300,000
- Wisconsin - $300,000
- Wyoming - $300,000
(Source)
From a travel insurance point of view, Americans are covered even if the business fails, which is far from likely, but as recent economic collapses have demonstrated; nothing is impossible.
Should it be necessary to rely on the state guaranty fund, the good news is that holiday travel costs which are insured, come well within the above stated values.
It is important to stress that insurers are huge institutions and it is rare for them to go bankrupt, since their role exists to respond when other companies fail, things go wrong, or natural disasters occur. Looking in to the structure of many travel insurance companies reveals even bigger parent companies.
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Technorati tags; financial collapse, American insurance protection, travel insurance.
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