Residents of New York who purchased life insurance from an insurance company that goes out of business will still be covered under the new law. In November 2014, New York Governor Andrew Cuomo signed a bill that removed a cap on a New York fund that pays benefits to New Yorkers who bought life insurance policies with companies that became insolvent.
Originally the fund was set up in New York in 1985 and life insurance companies were required to pay into a fund that the state could use to pay out benefits to policyholders if an insurance company goes out of business.
This fund was capped at $558 million. The new law that took effect in November 2014 removed this cap.
When people purchase life insurance coverage, they expect that the benefits will be available in the future. Policyowners expect the life insurance company to honor its promise to pay the proceeds and rarely think that a company that goes out of business may not have the benefits they relied on. With the new law, this issue is resolved.
Even if a life insurer goes out of business, residents of New York will still be able to get their life insurance benefits.