What if the company that is about to go bankrupt fails to pay its insurance premiums? Seems fairly likely to happen. About-to-be-bankrupt companies generally get behind on all their bills.
Don't worry, I happen to be knowledgeable about this.
Some key differences that come to mind (obviously YMMV):
Home insurance stops almost as soon as you stop paying vs. corporate insurance which is usually a bit more lenient and even has things like "tail coverage" in place.
The regulatory protections that apply to home insurance are very different to the ones applying to corporate insurance.
It's not uncommon for corporate insurance to cover events that happened while the company was insured, even if by the time the claim is filed the policy has been canceled.
Insurance is considered an asset of a company, and a judge can rule over what happens to them. This come into play particularly when bankruptcy is involved.
Many commercial insurance contracts, under some situations, cannot be canceled by the insurer, even if the company stops paying their premiums.
Anyway, I know on a naive approach it's easy to think that "all insurance is the same", but once you scratch a bit more than the surface of it you'll see it's a very complex affair!
> it's easy to think that "all insurance is the same"
Such an assumption is not necessary. (The difference between consumer and commercial insurance is also not germane when discussing a novel bonding scheme.)
If you’re getting thrown off by the home insurance analogy, think regulatory capital instead.
> regulatory protections that apply to home insurance are very different to the ones applying to corporate insurance
We’re discussing a hypothetical regulatory environment. Given the insurance is guaranteeing consumer protections, one would expect it to be strict.
