Which of the following statements about state insurance guaranty funds is (are)true?
I.They limit the amount that policyowners can collect if an insurer becomes insolvent.
II.They are usually funded by general revenues of the states.

Question

Quizplus · Accepted Answer

Statement I is true. State insurance guaranty funds provide a safety net for policyholders in the event of insurer insolvency, but they limit the amount that policyholders can collect. The purpose is to prevent moral hazard and encourage policyholders to select financially sound insurers.

Statement II is false. State insurance guaranty funds are usually funded by assessments on insurers that are members of the guaranty fund. The assessments are based on the amount of premium written in the state and are used to pay claims of insolvent insurers. The funds may also receive loans or grants from the state, but they are not usually funded by general revenues of the states.

Which of the Following Statements About State Insurance Guaranty Funds