What does the Guaranty Association pay if an insurer becomes insolvent?

The Guaranty Association is established to protect policyholders when an insurance company becomes insolvent. Its primary purpose is to cover claims that the insolvent insurer would normally fulfill. While the specific laws and limits can vary by state, generally, a Guaranty Association will work to pay certain types of claims up to a specified limit, rather than all claims in full.

The correct answer regarding the payment of claims is that the Guaranty Association typically pays for certain types of claims, and among those, workers’ compensation claims are often prioritized and covered fully. This reflects the critical nature of workers' compensation systems designed to protect employees in the event of work-related injuries. Since workers’ compensation claims involve ongoing medical care and wage loss coverage, state laws tend to ensure they are addressed fully to protect workers.

The other options do not accurately describe the functions and limitations of the Guaranty Association. Some might suggest that only claims over a certain amount are covered, while others might imply coverage for uncovered claims, which does not align with how the Guaranty Association is structured. Thus, the focus on the workers’ compensation claims reinforces the protective measure in place to ensure employees are supported during the financial failure of their insurer.