What Happens When A Life Insurance Company Fails? 
When life insurance companies fail , they are almost always bought by other life insurance companies . The new life insurance companies usually treat those policies as they do their own business , honoring all the guarantees and dictates that were in place when the policies were taken out . If the failed company could not be purchased by or merged with another solvent company , there are state pools that will pay out a certain amount of the death benefit in lieu of insurance companies being unable to do so . 