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Where do guaranty funds get the money to pay the claims?

Guaranty funds largely are funded by assessments on member insurers. These assessments raise funds to pay claims and to cover administrative and other costs.
In South Dakota, assessments are capped at two percent of a company’s net direct premium written in similar lines of business in the state the prior year. Member insurers can also be assessed $150 a year to pay administrative expenses of the guaranty fund. The other source of funding is recoveries from receivers of the insolvent insurance companies. Assessment costs are recouped by various means.

faq | by Dr. Radut