Will life insurance policies pay benefits in this economy?

Yes, your life insurance policies should pay benefits in this economy. Life insurance companies are state regulated. In each state their is a State Guaranty Fund that provides security for up to $300,000 per life insuranc epolicy, usually. The State Guaranty Funds differ by state. However, some life insurance companies do fail, or go into default and are taken over by the State Department of insurance. It's important to review the financial stability ratings of your insurer on a regular basis to determine the financial strength of the company, and their ability to pay claims. Usually, an AM Best rating of "A" Excellent, or higher, is a financially safe and secure carrier. However, AIG was rated "A++" I believe, and they had a financial crisis. But, they are backed by state guaranty funds.