What to know: The N.Y. insurance guaranty fund

August 23, 2024

Insurance is meant to protect you when unexpected events happen, but what happens if your insurance company goes out of business? That’s where the New York insurance guaranty fund comes in. This fund is designed to protect policyholders and ensure that claims are paid even if their insurance company fails. Here’s a quick guide to help you understand how it works.

The role of the N.Y. insurance guaranty fund

The New York insurance guaranty fund is a safety net established to protect consumers in case their insurance company becomes insolvent, meaning it can no longer meet its financial obligations. If an insurance company goes out of business and can’t pay its claims, the guaranty fund steps in to cover those claims up to certain limits.

How does it work?

The guaranty fund is supported by insurance companies that are licensed to operate in New York state. These companies contribute to the fund, ensuring that there’s money available if one of them fails. When an insurance company becomes insolvent, the fund covers the payment of claims and refunds any unearned premiums—the portion of your premium that covers future coverage that you’ve paid for but won’t receive because the company is no longer in business.

What does it cover?

The New York insurance guaranty fund provides coverage for a variety of insurance types, including:

  • Auto insurance
  • Homeowners insurance
  • Workers’ compensation
  • Personal injury protection

However, there are limits to how much the fund will pay on a claim. In New York state, the fund typically covers up to $1 million per policyholder for most types of claims.

What should you do if your insurer fails?

If your insurance company becomes insolvent, you’ll be notified by the New York State Department of Financial Services. The DFS and the guaranty fund will work together to handle claims and ensure you receive any payments you’re entitled to.

In the meantime, it’s a good idea to contact your insurance agent or broker to discuss finding a new policy with another insurer to avoid any gaps in your coverage.

Bradford J. Lachut, Esq.
PIA Northeast | + posts

Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.

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