The Illinois Department of Insurance is the state agency that oversees insurance companies and their activities. The agency closely monitors financial stability for each insurer licensed to operate in Illinois, and will declare an insurance company insolvent if it does not have financial standing to pay claims.
You will receive written confirmation of the insolvency from the Illinois Guaranty Fund, and instructions about making a claim. Losses are settled according to the coverages, limits, and deductibles outlined in your insurance policy. However, under Illinois law, the most the Illinois Guaranty Fund can pay for a covered claim is $500,000.
Situations like this highlight the importance of checking out prospective insurance companies before proceeding with a policy. Only those insurers licensed to operate in this state are required to belong to the Illinois Guaranty Fund. In addition, it's a good idea to verify the company's financial strength rating and consumer complaint record. The Illinois Insurance Hotline can offer assistance with this background information.