Insurance companies base their business models around assuming and diversifying risk. Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets.

How do the insurance companies make money?

There are two basic ways that an insurance company can make money. They can earn by underwriting income, investment income, or both. The majority of an insurer’s assets are financial investments, typically government bonds, corporate bonds, listed shares and commercial property.

What happens if your insurance company goes out of business?

First, the commissioner will try to rehabilitate the company to improve its financial situation. If that doesn’t work, the commissioner can declare the company insolvent and sell off its assets, according to the National Organization of Life & Health Insurance Guaranty Associations.

What happens when your insurance company goes through bankruptcy?

Guaranty Association. When an insurance company goes through bankruptcy insurance coverage will continue and policy claims will be covered and paid by state insurance guaranty associations, subject to each state’s coverage limits.

What happens if you change your life insurance company?

Once the new policy is in place, you can cancel your old policy and make sure you get a refund for coverage you already paid for but didn’t use. Switching to a new life insurance company may be more complicated.

What happens if I abandon my life insurance policy?

If you abandon a policy, you can expect to pay a higher premium for a new one because of your older age. Health conditions you’ve developed will also push up your new cost. If you are looking to ditch a permanent life insurance policy, you might be able to get back the cash value, minus any surrender charge.