I'm hoping someone with more financial expertise than me can help - What happens when insurance companies go under?
For example, The Executive Life Insurance Company of New York just announced liquidation. As of December 31, 2010, ELNY had $905,945,201 in admitted assets, and $2,474,317,343 in liabilities, for a deficit of $1,568,372,142. This affects thousands of people and families. More info can be found at: www.ELNY.org.
My husband, who was almost killed by a drunk driver in a car accident as a child, had a court settlement there that paid out small amounts over time (it was nothing huge, but enough to help us pay the mortgage and plan for retirement). I had thought insurance companies and court settlements were safe, but just learned that nothing is safe from this economy as we received a letter today stating that as a result of the liquidation only a portion of the money we were owed would actually be paid. I understand about taking risks in stocks, but this I thought was secure. What can one do in this type of situation as I'm sure it's not the only insurance company to go under? I read that it affects those with life insurance too. So, if a family buys life insurance so that their family is covered in case of the loss of a parent and then the economy goes bad, that family may lose the protection they thought they had secured and now a family without a parent is also at a loss for funds they thought were secure. For my situation it just messes up our ability to pay our mortgage and retire, but it's still a devastating loss.
Can people in this situation take legal action to fight to get the payments they are entitled to? Are there ways to protect oneself when buying insurance or when settling a court case to prevent something like this from happening? I'm trying to figure out what I can learn form this and to share this experience so others can learn and do not experience this painful hit due to the economy.