When shopping for a residential, business or commercial insurance, the most important thing is to find out if the company is enrolled in the guarantee insurance plan of the Department of Insurance
If the insurance company is enrolled in the guarantee insurance plan, you can receive up to $500,000 from California Insurance Guaranteed Association (CIGA) if the insurance company goes bankrupt.
We should not assume that insurance companies will not become bankrupt. Several Insurance companies went bankrupt after the 1992 Los Angeles riots and many Korean businesses were unable to recover from their economic loss. Therefore, if you are planning to enroll in a policy with benefits greater than $500,000, you must choose an insurance company that is not only a member of CIGA, but also a company that has sound financial status and high consumer confidence score. Even though your Insurance agent’s recommendations are based on asset quality report from a professional organization, it may not be perfect.
If an insurance agent sells insurance plans that are not guaranteed by CIGA and the company goes bankrupt, he/she can be sued. This is because the agent must inform the insurer of the risk he/she will bear if they decide to use a company that is not a member of CIGNA.
Only a few insurance companies, business and commercial insurance companies to be specific, are not members of CIGA. It is almost impossible to be compensated if they go bankrupt, even if the claim is in progress.
You will receive up to $500,000 in compensation if CIGA member insurance company goes bankrupt. However, the process is difficult and it takes a very long time.
During this process, the expenses such as lawyer or professional services that incurred prior to the bankruptcy will not be reimbursed. The expenses incurred after the bankruptcy can be claimed, but the process if very difficult.
You may receive partial amount of the insurance premium back. To do so, you must contact CIGA and provide your insurance information.
Please review the insurance companies’ asset quality and find out if they are a member of CIGA prior to purchasing insurance plans.
Jung Park, PA
Excel Public Adjuster