What is State Guaranty Fund? What kind of support and tasks it implies? How it accumulates...

What is State Guaranty Fund? What kind of support and tasks it implies? How it accumulates fund?

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Expert Solution

State Guaranty Fund is administered by US State to protect policyholders in case any insurance company defaults on benefit payments or declares itself as insolvent. The fund only protects beneficiaries of insurance companies that are licensed to sell insurance products in that state.

Support and Tasks

It guarantees payment to insurance policyholders when the insurance company fails to meet its obligation or become insolvent.

Many states have guaranty laws where insurers must participate in a state's guaranty fund if they are licensed to sell insurance products in that state. Unlicensed insurers such as reinsurers are not required to participate in state guaranty funds.

Accumulation of funds

Most of the states maintain separate funds for property, casualty insurance, life, and health insurance. These state guaranty funds act as insurance for insurance funds by the insurance company. The amount of funds is generally ranging from 1% to 2% of the net amount of insurance sell by the insurance company within a particular state. The amount of fund is paid by the insurance company to the State Guaranty
Fund.

Rahul Sunny answered 1 year ago

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