Filing a claim with an insolvent insurer

When a home insurer is declared insolvent and ordered into liquidation, you do not lose a covered claim, but you deal with someone new. A state guaranty association takes over covered claims, up to the association's cap, and the liquidator (usually the state insurance department or a court-appointed official) sets a deadline for claims and cancels the policy. Your job is to find out who is handling your claim, meet the deadline, and replace your coverage before the policy ends.

This guide covers the claim itself. For the bigger picture of what happens to policies and premiums, see what happens if your home insurer goes insolvent, and for how the safety net is built and paid for, see property and casualty guaranty funds explained.

Rehabilitation and liquidation are different

A regulator takes control of a troubled insurer through receivership, and there are two kinds. In rehabilitation, the regulator tries to fix the company, and policies usually continue. Claims may be slowed or limited while it happens, so you should keep paying premium unless told otherwise. In liquidation, the court finds the insurer insolvent and orders it wound down. That order is the event that activates the guaranty association in most states.

The distinction matters to you for timing. A claim reported before liquidation is generally an open claim the association inherits. A loss that happens after the order is covered, in many states, only until the policy cancellation date, which the order sets. Florida is a useful example because its liquidations are documented: the Department of Financial Services (DFS) listed policy cancellation dates roughly 30 days after each liquidation order for the property insurers it took over from 2019 through 2023, including St. Johns Insurance Company (order February 25, 2022, with policies transitioned to another insurer on March 1, 2022) and United Property & Casualty (order February 27, 2023, cancellation March 29, 2023, except flood). The state can extend the continuation period by 15 days under Florida Statutes 631.252(3). Other states have similar but not identical rules.

Who pays your claim

The guaranty association in the state where the insured property sits steps in for "covered claims," which are generally claims under policies issued by an admitted insurer that is now insolvent. Florida's association, FIGA, is an example: it states that it generally pays up to $300,000 per claim, with an additional $200,000 available for structures and contents on homeowners claims, according to its posts on the United Property & Casualty and other liquidations. Limits, exclusions and what counts as a covered claim differ by state, so look up your state's association rather than assuming Florida's numbers apply.

Three consequences follow:

• Your claim may be capped. If a total loss exceeds the cap, the excess is not paid by the association. It becomes a claim against the insolvent insurer's estate, which may pay a fraction of its value, years later, or nothing.
• Your deductible still applies. The association pays covered losses as the policy would have, less the deductible.
• Surplus lines policies are different. In most states a guaranty association covers only admitted insurers. If your policy was written by a non-admitted insurer, there may be no association to cover it. Find out which kind of company you had; see admitted vs surplus lines home insurers: what you give up.

Some states have also changed who shoulders open claims after a failure. Florida, for example, passed a 2023 law (SB 7052) requiring Citizens to cover property with open claims being handled by FIGA, according to the legislature's analysis. That is a Florida rule, not a national one.

Steps if your insurer is in liquidation

Work through these in order.

1. Confirm the order. Look for the notice from the insurance department or the liquidator. The department's website lists companies in receivership, with the order date, cancellation date and claim deadline. Do not rely on a social media post or a rumor.
2. Find the guaranty association. The state's association is usually named in the liquidator's notice. Contact it, and give it your policy number, your claim number and the adjuster's name.
3. Write down the deadline. The liquidation order sets a date to file claims with the liquidator, often called the proof of claim deadline or claims bar date. It is not the same as the policy cancellation date. Missing it can cost you the right to be paid from the estate. File a claim form for any open or possible loss, even if you expect the association to pay it.
4. Report new damage promptly. If you have damage that was not reported, report it now to the association and to the liquidator under the process in the notice. Do not wait until you have replacement coverage.
5. Keep a paper file. Save the claim notice, the adjuster's estimate, any payment, photos, receipts for emergency repairs, and a log of calls. The files at the insolvent insurer may take time to transfer, and your records can fill the gaps. The hurricane and wildfire season insurance checklist lists what to gather, and a proof of loss form may be needed.
6. Make reasonable repairs. You are still expected to protect the property from further damage. Tarp the roof, stop the water, and keep receipts for the association to review.
7. Replace coverage before the cancellation date. The cancellation date is when your coverage ends for new losses. Shop right away, using the nonrenewal action plan, because an insolvent insurer's policyholders all go to market on the same days. If your home is hard to place, the state's FAIR plan or Citizens-type plan is the fallback; see finding coverage for a hard-to-insure home.
8. Tell your mortgage company. Your lender will receive a cancellation notice for the mortgagee clause. Send the new declarations page promptly to avoid force-placed coverage.
9. Ask for your unearned premium. If you paid premium beyond the cancellation date, you are generally owed a refund of the unearned premium. The association or the liquidator will explain how to claim it, and the process can take longer than a normal cancellation refund.

A hypothetical timeline

Say your roof is damaged by wind in March and you report the claim. The adjuster inspects, and no payment has been made when the insurer enters liquidation in June. The order cancels policies on July 15 and sets a claim deadline of the following February. The cap in your state is $300,000, and the estimated repair is $28,000.

You contact the guaranty association, send the adjuster's report and your photos, and file the liquidator's claim form before the deadline anyway. The association reviews the claim, then pays the covered amount less your $2,500 deductible. Because you replaced coverage by July 1 and sent your lender the new declarations page, there is no gap. The same facts with a $450,000 total loss would leave a shortfall above the cap that you would pursue as an estate claim. These numbers are invented to show the sequence.

When you disagree with the association

A guaranty association is not the company that wrote your policy, and its role is limited to covered claims under the policy terms. You can still disagree about the scope of damage or the amount, and you can still use the same tools you would use against a solvent insurer: a written dispute, an independent estimate, and the policy's appraisal clause if it applies. Associations also have their own review procedures. If you cannot get a response, the state insurance department's consumer division is the place to complain; see how to file a complaint with your state insurance department. A denial letter works the same way as any other, as explained in homeowners claim denied: what to do next. Disputes involving amounts above the cap or the liquidator's claim determination follow the receivership court's process, and that is a point at which an attorney is worth consulting.

Key takeaways

• Liquidation activates the state guaranty association, which handles covered claims up to its cap. Look up your state's association, because limits and rules vary.
• Two dates matter: the policy cancellation date, which is about when your coverage ends, and the claim deadline, which can come later and should not be missed.
• Amounts above the cap, and claims not covered by the association, become claims against the insolvent insurer's estate and may be paid slowly or only in part.
• Keep your own claim file, report new damage right away, and make and document emergency repairs.
• Replace coverage before the cancellation date and send the new declarations page to your mortgage servicer.