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 ?
State guaranty funds exist to cover unpaid claims of insolvent insurers, but these guaranty funds are generally limited in the coverage they provide to certain types of insurance and with thresholds of the amounts they can pay.
UnitedHealth appears to be one of the health insurers that would like to see life and annuity product issuers play a bigger role in helping state guaranty funds shoulder the burden of protecting long-term care insurance policyholders against insolvencies involving issuers such as Penn Treaty.
State guaranty funds may set different limits on guaranty fund protection, In Iowa, for example, the guaranty fund is providing only six months of protection for CoOportunity enrollees.
Surplus lines insurers generally do not participate in state guaranty funds and coverage may only be obtained through duly licensed surplus lines brokers.
Roughly half of this $2 billion hole--created under the watchful eyes of a long string of superintendents--was filled by state guaranty funds while the other half, or close to $1 billion, was foisted primarily on a small segment of ELNY policyholders --structured settlement annuity holders--who could least afford the loss.
But one of the enduring values the organization provides to state guaranty funds is legislative services: legislative information, legislative expertise.
The comprehensive Executive Life of New York (ELNY) liquidation plan involving the capacity a majority state guaranty funds, top regulators in multiple states, millions upon millions in life insurance company coffers, and thousands of waiting policyholders has cleared a major obstacle with the dismissal of the appeal by a group of annuitants claiming the liquidation plan was unfair and they were denied due process.
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.

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