Glossary
Guaranty fund
A state safety net, financed by charges on licensed insurers, that pays covered claims up to a cap when an insurer is declared insolvent.
Also called: insurance guaranty association, state guaranty association, property and casualty guaranty fund, guaranty association
When a licensed insurer fails and a court orders it liquidated, the state's property and casualty guaranty association steps in to pay covered claims that the failed company cannot. Every insurer licensed in the state must belong, and the association raises money by assessing those member insurers, usually after a failure, within annual limits set by statute. It also draws on whatever the failed insurer's estate recovers.
Coverage is capped, and the caps differ by state. The National Conference of Insurance Guaranty Funds' 2024 comparison shows many states at $300,000 per claim and some at $500,000. Say your state caps covered property claims at $300,000 and a fire loss comes to $380,000: the fund pays up to $300,000, and you file a claim in the insurer's estate for the rest, which usually pays only a fraction. Unearned premium refunds are often capped lower.
Two limits catch homeowners. Policies commonly end within about 30 days of a liquidation order, so you need replacement coverage quickly. And in most states a surplus lines insurer's policyholders are not covered, which makes the surplus lines insurer rating matter more. Flood policies under the NFIP are federal and sit outside the system.
Details are in the guaranty fund guide and what happens if your insurer fails.
Last reviewed October 10, 2026