When you buy insurance, you expect the company to be there when you need it. Sometimes, however, an insurance company may become insolvent and be unable to pay its claims. This publication provides answers to questions people often have when their insurance company fails.
Guaranty associations pay policyholders' claims when licensed insurance companies fail.
Funds to pay claims on a failed company's policies come from charges, called assessments, paid by all licensed companies writing the same type of coverage. Companies recover these charges through tax write-offs. If you are a Texas resident and the company is licensed in Texas, you probably are covered, subject to some exceptions and limits. If your company is based in another state, you're still probably covered, if your company is licensed to sell insurance in Texas and you're a Texas resident. Unlicensed insurers and certain types of licensed carriers are not covered.