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What is the difference between state guaranty associations and FDIC insurance? The FDIC is an independent federal agency that provides deposit insurance for bank deposits. State guaranty associations are nonprofit organizations that operate at the state level to protect insurance policyholders.
Insurance guaranty associations provide protection to insurance policyholders and beneficiaries of policies issued by an insurance company that has become insolvent and is no longer able to meet its obligations. All states, the District of Columbia, and Puerto Rico have insurance guaranty associations.
State guaranty funds guarantee payment for insurance policyholders should the insurance company default. The fund only covers beneficiaries of insurance companies where the insurer is licensed to sell products in that state.
Reviews and approves new life, accident, health, auto, property, casualty, and other types of policies that are sold in Wisconsin. Examines the financial condition of insurance companies and reviews their corporate activities. Reviews rates filed by insurance companies doing business in the state.
The state insurance commissioner gives insurance guaranty associations their powers. Most of these organizations are funded with the money they collect from conducting assessments of member insurers. The total payout in most states is capped at $300,000 per individual.
The Wisconsin Insurance Security Fund is a non-profit legal entity created by the Wisconsin legislature to protect Wisconsin resident policyholders in the event of an insolvency of a member insurance company.
The Guaranty Fund is funded through assessments against member insurers made after a member insurer is declared insolvent by a court of law. These funds are used to pay valid claims, as well as administrative expenses.