Insurer insolvency can leave policyholders with unpaid claims. An insurance guaranty fund is a state-level mechanism that pays covered claims of insolvent insurers, up to statutory limits, using assessments on the remaining solvent insurers in the same lines of business.

Most states maintain separate funds for property-casualty and for life and health. Coverage limits and types of claims protected vary. Policyholders of the insolvent company must usually file claims with the fund and may experience delays. The fund does not protect against all losses or all policy types.

Guaranty funds are a safety net, not a substitute for choosing a financially strong insurer. Assessments ultimately affect the premiums paid by customers of solvent companies. Coordination among states is required when a multi-state insurer fails.

• State fund that pays claims of insolvent insurers
• Financed by assessments on solvent insurers
• Subject to coverage limits and eligibility rules
• Backstop for policyholders, not a guarantee of full recovery