State Life and Health Insurance Guaranty Associations
Although there's no federal program in place that protects consumers from insurance company failures, each state has an insurance guaranty association (GA) that backs up insurance company policies in the event of the insurance company's bankruptcy. Guaranty Associations are funded by assessments on insurance companies licensed to do business in a particular state.
If your insurance company should fail, your policy
is generally protected by the GA in your state of residence, even if
you bought the policy while living in another state. In some cases,
the protection may be provided by the state where the insurance
company had its headquarters.
The overall benefit cap in most states for an individual life is $300,000, although some states have maximums that are much higher. The above coverage limits apply separately for each insolvent insurer.
To find out what happened to a company that no longer exists go to: Life Insurance Company Trace
For the specific guidelines in force in your state of residence go to the NOLHGA National Organization of Life & Health Insurance Guaranty Associations website and follow the link to your state's guaranty association.