State guaranty funds

State Guaranty Fund

A fund administered by the government of a U.S. state protecting policyholders and pensioners from the default of an insurance company. That is, if an insurance company is licensed to operate in a given state, policyholders within that state are protected because, if the company defaults on its payments, the state guaranty fund will pay the policyholder instead. Insurance companies pay a small percentage of their revenues to different states to finance state guaranty funds.

State guaranty funds.

State guaranty funds, which are offered in every state, protect contract owners against the insolvency of an insurance company that has issued insurance contracts, including annuity contracts.

However, each state's laws set different limits on benefits and coverage. The guaranty funds are backed by an association of insurance companies, not the state or federal government.

But all insurance companies in the state must belong and contribute to the fund in order to be licensed to sell their products. However, if you buy your contract from a highly rated company, its financial strength and reputation stand behind your contract.

Rating services such as Standard & Poor's, Moody's, A.M. Best, and Fitch rank insurance companies on their overall financial condition, which underlies their ability to meet their obligations. You can request these reports from the insurance company. They are also available in public libraries, on the Internet, and from your financial adviser.

References in periodicals archive ?
Surplus lines insurers generally do not participate in state guaranty funds and coverage may only be obtained through duly licensed surplus lines brokers.
Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.
But one of the enduring values the organization provides to state guaranty funds is legislative services: legislative information, legislative expertise.
Risks insured under an RRG are considered "nonadmitted" and aren't governed by state guaranty funds.
With these heightened public concerns, agents now find themselves facing increased questions about insurer balance sheets, fiscal viability, and the protections offered by state guaranty funds.
During the same period customers of a little over a dozen interstate annuity carriers received cash from state guaranty funds.
In addition, alien surplus lines insurers are not required to participate in state guaranty funds in most states and, as such, policyholders do not receive guaranty fund protection in the event of insurer insolvency.
Additionally, RRGs do not participate in the system of state guaranty funds nor do their policyholders receive the financial backstop ensured by participation in guaranty funds.
In the case of USTs, FK frame the failure of private market initiatives squarely in a traditional asset-substitution argument: The existence of flat fee/taxed state guaranty funds trades post-loss remedies for pre-loss pr evention.
He said that Workers Compensation benefits provided by insurance are backed by a state guaranty funds, so that, if an insurer goes insolvent, the guaranty fund, which is financed by all carriers participating in that state, will ensure the payment of claims.
State guaranty funds can play an important role with respect to transactions with insolvent insurance companies.

Full browser ?