To qualify as a ____, an employer must post a surety bond or other collateral with the workers compensation administrative agency of the state to guarantee the security of benefit payments.

• A. Assigned Risk Plan
• B. Self-Insurer
• C. State Guaranty Fund
• D. Competitive Fund

Answer: (B)

When an employer becomes a self-insurer, they must demonstrate they can reliably pay future workers’ compensation benefits by posting collateral with the state workers’ compensation agency. This guarantee, often in the form of a surety bond or an equivalent collateral arrangement, ensures that funds are available to cover claims even if the employer runs into financial trouble. Self-insurance lets the employer handle claims directly rather than buying a policy, but it comes with strict financial and administrative requirements, including maintaining the collateral and meeting state oversight.

The other options don’t fit this requirement: the assigned risk plan is a market for employers who can’t obtain coverage in the standard market, not a self-guarantee arrangement; the state guaranty fund exists to protect policyholders if insurers fail, and isn’t funded by the employer posting collateral; and a competitive fund isn’t the mechanism described here.