Governor Cuomo signs legislation focused on life insurance coverage into law
A new law in New York will ensure that consumers will get to keep their life insurance policies if their issuing insurer goes out of business. The legislation was signed into law by Governor Andrew Cuomo, who believes that the law is necessary to ensure that consumers retain the coverage that they rely on. Typically, if an insurance company goes out of business, the policies it was responsible for become void, unless they are purchased by another insurance provider.
New law may help give consumers peace of mind
Senate Insurance Committee Chairman James Seward noted that consumers typically believe that their insurance providers will “stand the test of time” when they purchase policies. This is not always the case, however, as problematic business climates can cause major problems for insurance companies. The life insurance sector has been experiencing some difficulties in recent years, especially as fewer people see the value of life insurance coverage and opt to avoid these policies. Seward notes that the new law will provide consumers with some peace of mind if their insurance provider goes out of business.
New York fund aiding with life insurance benefits is running out of money
In 1985, New York lawmakers established a fund that life insurance companies were required to contribute to. The fund is meant to allow the state to provide life insurance customers with benefits if their insurance providers go out of business. The fund has a cap of $558 million, but by 2012, much of the money that was available through the fund is nearly depleted. The fund has been tapped several times over the past few years due to insurance companies going under.
Law removes cap imposed on life insurance fund
The new law, which has already gone into effect, has removed the cap that was imposed on the fund, which will provide more financial flexibility to the fund and help ensure that life insurance customers have some financial support if their representative companies collapse. The new law has received strong support from various consumer advocacy groups and consumers themselves.