Some people may worry “what if the insurance company goes out of business, what will happen to my policy?”
Answer: Each state has a Guarantee Association composed of all insurers licensed to sell life insurance, health insurance, and annuities in the state. In the event that a member insurer is found to be insolvent and is ordered to be liquidated by a court, the Guarantee Association Act enables the guarantee association to provide protection (up to the limits spelled out in the Act) to residents who are holders of life and health insurance policies, and annuity contracts, with the insolvent insurer.
Most states will honor contracts up to the state limit of $250,000.
Find information about your state’s association: http://www.nolhga.com/policyholderinfo/main.cfm/