Receivership

Receivership is the legal process a state uses when an insurer is failing. The insurance commissioner asks a state court for an order, the court appoints the commissioner or a designee as receiver, and the receiver takes control of the company's assets, books and claims. The court usually pauses most lawsuits against the insurer so the receiver can sort out what it owes. In Florida, for example, the Department of Financial Services serves as receiver.

Receivership is the umbrella; it ends in one of two ways. In rehabilitation, the receiver tries to fix the company and return it to its owners, merge it or transfer its business. In liquidation, the receiver winds the company down, sells its assets, pays creditors by statutory priority and closes it. Many cases start as rehabilitation and convert to liquidation when a rescue is not workable.

Your policy does not vanish on the day receivership begins. During rehabilitation it generally stays in force, though claim payments may slow or be restricted. If the court orders liquidation, coverage commonly ends within roughly 30 days, so you need new coverage lined up, and the guaranty fund takes over covered claims within its limits.

Read every notice from the receiver, since claim filing deadlines are strict. The guide to filing a claim with an insolvent insurer has the steps.