Michigan Insurance Law: What to Do If Your Insurer Goes Bankrupt

When an insurance company faces bankruptcy, it can be a stressful situation for policyholders in Michigan. Understanding your rights and the steps to take can help mitigate potential losses. This article outlines the essential actions you should consider if your insurer goes bankrupt.

First and foremost, it's important to know that Michigan is one of the states that has specific laws designed to protect policyholders in the event of an insurance company bankruptcy. The Michigan Insurance Code provides mechanisms to ensure that consumers are not left unprotected.

If you find out that your insurance company is going bankrupt, follow these steps:

1. Contact Your Insurance Agent

Your first point of contact should be your insurance agent. They can provide you with up-to-date information about your policy and the status of the insurer. Agents may also offer advice on your next steps and options for obtaining new coverage.

2. Review Your Policy

Examine your insurance policy carefully to understand coverage limits, exclusions, and any clauses that are applicable in the event of bankruptcy. This is crucial in determining what your financial exposure might be.

3. Stay Updated on Bankruptcy Proceedings

Keep an eye on the bankruptcy proceedings of your insurer. This information is typically available online or through court records. Knowing the timeline and processes can help you remain informed about any potential claims you may need to make.

4. File a Claim with the State

In Michigan, if an insurer goes bankrupt, all claims and requests for payment must be submitted to the Michigan Liquidation and Rehabilitation Office. This office oversees the management and settlement of claims filed against bankrupt insurance companies.

5. Seek Coverage from the Michigan Insurance Guarantee Association (MIGA)

MIGA provides limited coverage for certain types of insurance policies in the event of an insurer’s bankruptcy. Typically, they cover up to $500,000 for life insurance policies and $300,000 for other types of claims, such as property and casualty insurance. Contact MIGA to understand the full implications and how they can assist you.

6. Look for New Insurance Coverage

After a financial institution’s bankruptcy, ensure that you seek new insurance coverage promptly. Contact other insurers to obtain quotes and compare their terms. Make sure to disclose your situation to potential insurers; however, a bankruptcy of your previous insurer should not adversely affect your ability to get coverage.

7. Contact an Attorney if Necessary

If you feel overwhelmed or believe your rights are being violated, consider consulting an attorney who specializes in insurance law. They can provide personalized guidance and may assist you in navigating complicated legal matters arising from your insurer's bankruptcy.

8. Keep All Correspondence

Document all correspondence with your insurance company, agents, and any related parties. This will be critical for any future claims or disputes and can serve as proof of your efforts during this turbulent time.

In conclusion, while the bankruptcy of an insurance company can be daunting, understanding your rights and the steps you can take in Michigan can help protect your financial interests. Always stay informed, keep in contact with your representatives, and take proactive measures towards obtaining new coverage.