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What If Your Homeowner’s Insurance Company Goes Under?


You may not love your homeowners insurance company, but at least it’s insurance, and it will be there—hopefully–to pay you if you have a covered loss (or at least, it will pay when you sue and a court orders them to pay). For all the complaining about insurance companies, one of the worst things that can happen is for your insurance company to go under in the middle of your policy.

Do Insurance Companies Go Under?

It does often happen that an insurance company simply does not have the funds to pay all of the outstanding claims against it. This often happens after a storm, where there are hundreds or even thousands of homes, each with significant damage, that the insurance company must pay all at once.

Just like any other business, insurance companies can and do go out of business.

FIGA and What it Does

That’s why the state created the Florida Insurance Guarantee Assurance program, or FIGA. FIGA is designed to step in for your defunct insurance company, and evaluate and pay claims the way your insurance company would have, had the insurance company not gone under, or become insolvent.

For many, FIGA can be a lifesaver, allowing property to be repaired where it wouldn’t otherwise be because an insurance company has gone under.

FIGA will adhere to the terms of your original insurance policy. Whatever your (now defunct) insurance company would have paid, FIGA will pay and whatever your policy would have excluded, FIGA will deny coverage for.

Limitations of FIGA

But FIGA often doesn’t have to do for you what your insurance company would have had to do if they were still around. For example, FIGA has more leeway to delay claims. If your insurance company delays a claim, you can sue, and get attorneys fees. But if FIGA delays a claim, you can still sue, but you cannot obtain attorneys fees. You can get attorneys fees however, if FIGA actively denies a claim that they should have paid.

Additionally, FIGA liability is limited to $300,000. For some homes, this may be plenty to insure a covered loss, but for others, it could be well short. People with more valuable homes are encouraged to always look into the viability and solubility of their homeowner’s insurance companies.

FIGA is funded by the insurance companies. The state bases rates on how much in premiums that each insurance company receives from its customers, and then passes those costs to you. You can often find the amount your insurance company is paying to FIGA, on your policy declarations page.

What to Do If Your Insurance Company Goes Under

If your insurance policy is cancelled because the company goes defunct, you will get a notice, and will have to obtain new coverage within 30 days, to keep from being uninsured. Remember that not only is being uninsured a huge financial risk, but most mortgages require that you have an active policy, so you could end up in foreclosure if you don’t obtain a new policy quickly.

Contact the Miami property damage insurance attorneys at Velasquez & Associates P.A. today for help in your property insurance case.

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