Self-insured groups are usually NOT covered by state guaranty funds.

• A. True
• B. False
• C. Not applicable
• D. Sometimes

Answer: (A)

State guaranty funds exist to protect policyholders when an insurance company writing workers’ compensation coverage becomes insolvent. Self-insured groups, on the other hand, do not obtain coverage from an insurer; they fund and pay their own claims through a pool or trust. Because there isn’t an insolvent insurer behind a self-insured arrangement to step in, there’s typically nothing for a guaranty fund to pay out. That’s why self-insured groups are usually not covered by state guaranty funds. (If a self-insured program also carries traditional insurance policies, those policies would be covered, but the self-insured portion itself isn’t.)