Which insurers are eligible for state guarantee funds if insolvency occurs?

• A. Admitted insurers
• B. Non-admitted insurers
• C. Both admitted and non-admitted
• D. Only foreign insurers

Answer: (B)

State guarantee funds are there to protect policyholders when an insurer that is licensed to operate in the state becomes insolvent. The funds are tied to insurers that are admitted—authorized and regulated by the state’s insurance department. Because admitted insurers are under state oversight and participate in the guaranty association system, their policyholders can turn to the guarantee fund for claims if the company fails. Non-admitted insurers, which operate outside the standard licensing framework (surplus lines), aren’t part of these guaranty associations, so their policyholders don’t have the same protection from state guarantee funds. In short, the insurers eligible for state guarantee funds are the admitted, licensed ones.