The nation’s property and casualty guaranty funds are a non-profit system created by state statutes that pays claimants’ outstanding covered claims against insolvent insurance companies.
Created by policymakers and the insurance industry nearly 40 years ago, the guaranty fund system was designed to protect those least able to deal with losses associated with insurance company failure – the average “citizen” or small business policyholder or claimant.
The GF system has safeguarded countless policyholders who might otherwise face financial ruin because of unpaid claims.
Since the early 1970’s, there have been about 600 insolvencies of property and casualty insurers.
In total, the system has paid out more than $30 billion.
Guaranty funds pay covered claims within limits set by individual state laws and the insurance contract. Claim caps apply: guaranty funds generally pay the amount of coverage stipulated by the policy or $300,000, whichever is less. These “caps” are fixed by state law; the guaranty funds play no role in setting coverage caps. Most guaranty funds pay 100 percent of their state’s statutorily defined workers’ compensation benefits.
The guaranty fund system offers coverage of covered claims, but not a “replacement policy.”
A guaranty fund system also exists for the life, health and annuity insurance industry; but it operates independently from the property and casualty system.
Property and casualty guaranty funds are active in every state, the District of Columbia, Puerto Rico and the Virgin Islands.
The National Conference of Insurance Guaranty Funds, an Indianapolis-based organization, provides national assistance and support to the nation’s property and casualty guaranty funds.