I understand that if a member insurer of the Insurance Guarantee Association is found to be insolvent, the Guarantee Association Act enables the guarantee association to provide protection (up to the limits spelled out in the Act) to policyholder.
Then what happens when "the Association" itself goes bankrupt? Is there any law that stipulates if the state government will pay for policyholders in place of the

First- every insurance company is required by law to participate AND pay into its state's guaranty association so there is continual funding. The guaranty associations limit the amount they will pay out to avoid bankruptcy/insolvency on their part but also, they will move policies to a different (more financially sound) company when possible. The way they work is similar to the way the FDIC backs up bank failures.

The guaranty association will pay out the max per its state's limits then the balance of the claim will be made against the insurance company. Any remaining assets are then paid to the policyholders.

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Originally Posted by nikosmom

First- every insurance company is required by law to participate AND pay into its state's guaranty association so there is continual funding. The guaranty associations limit the amount they will pay out to avoid bankruptcy/insolvency on their part but also, they will move policies to a different (more financially sound) company when possible. The way they work is similar to the way the FDIC backs up bank failures.

The guaranty association will pay out the max per its state's limits then the balance of the claim will be made against the insurance company. Any remaining assets are then paid to the policyholders.

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Thank you so much!
So consumers are not worried that a guaranty association fails due to, for instance, wrong doing in its fund management or flaud? Like we are not worried about FDIC?
I'm studying about health insurance system of your country from overseas and don't really know how Americans feel about it. Secure or not secure, etc.

No, consumers are not worried. Mainly because the guaranty assoications transfer policies to other companies when possible (then they avoid paying out) and even when they do pay out, they limit what they pay.

The only question becomes if a person has coverage beyond what the association secures. So a person with a $1 million dollar policy will only have coverage guaranteed by the association for say $300,000 (this is most states' limit) but the remaining $700,000 is made as a claim on the insurers assets so the policyholder will recoup a higher percentage of their claim.

Thank you!! :)