Almost everyone knows that the money we have in the bank is protected by the Deposit Guarantee Fund. But what about other types of savings? What if, for example, we have our money in life insurance companies?
In that case, you should know that your life insurance benefits from a guarantee system that does not depend solely on the financial health of your insurer. Although with some specific characteristics, a system similar to the Deposit Guarantee Fund.
Life insurance, like other insurance, is covered by a specific fund that is currently managed by the Insurance Compensation Consortium, which is a public institution. As of January 31, 2015, there were 1,866 million euros in that Fund. Although the Consortium is best known for coverage of insured losses caused by catastrophes, it also has other functions. And one of them is to operate as a guarantee fund in the event of the Liquidation of insurance companies.
Obviously, if one day the money you have in life-savings insurance is in danger, it will be because your insurer has problems; problems that, if they are very serious, will place it in the cause of Liquidation.
Life insurance is covered by a fund managed by the Insurance Compensation Consortium.
But, if the insurer is liquidated with your money inside, does your money disappear? Well no.
What role does the Consortium have with your savings?
The Consortium has an obligation to protect all clients to whom an insurer with problems owes money; in the case at hand, you have savings insurance. The Consortium endorsed these debts, which therefore assumes the payment: the money is no longer owed to you by an entity with problems, but by a public institution with solid financial health and a specific fund to pay.
In this way, the insurance client does not have to wait for the entity to be liquidated (a process that can take longer). The client charges earlier and charges more than he would in a normal settlement process. In the history of this system, which is already a long one, clients “caught” in an insurer with problems have recovered an average of 83 euros out of every 100 they had; but more than a quarter have recovered everything.
The Consortium has an obligation to protect all clients to whom an insurer owes money.
It is important to note that, unlike the deposit guarantee fund, which has a limit of 100,000 euros per client, the guarantee offered by the Consortium through the Fund for the Liquidation of insurance entities is not subject to any amount limit.
The experience of the liquidation guarantee system of the insurance sector has been extremely positive since its creation in 1984. For more information on the operation of the liquidation function of insurance entities carried out by the Consortium, you can consult the frequently asked questions section. Regarding this function, the website of the Insurance Compensation Consortium.
So you can save in peace. Your money benefits from a good security system that watches over it.
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