Most states have guaranty funds to help pay the claims of financially impaired insurance companies. State laws specify the types of insurance covered by these funds and the dollar limits payable. Coverage is usually for individual policyholders and their beneficiaries, not group contracts. Most states also restrict insurance advisers and companies from advertising the funds' availability.
These guarantees apply to all insurers licensed to sell life insurance, health insurance, and annuities. If a member insurer becomes insolvent and is liquidated by court order, the state guarantee provides protection up to the limits spelled out in state law for residents who are holders of life and health insurance policies, and annuity contracts, with the insolvent insurer.
When a member insurer becomes insolvent, a special deputy receiver typically takes over the insurer under court supervision and processes the assets and liabilities through liquidation. The guarantee also provides for the servicing the company's policies and provides coverage to resident policyholders.
Following is a brief summary of various state guarantee laws' coverages, exclusions and limitations.
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