State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
How is the California Life and Health Insurance Guarantee Association funded?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CLHIGA is funded through assessments levied on its member insurers, calculated generally in proportion to the premiums they collect for covered lines of business. When a member insurer becomes insolvent and CLHIGA must pay claims, it assesses the other insurers to raise the necessary funds. This spreads the cost of insurer failures across the industry rather than burdening taxpayers.
Why the other options are wrong
- B) Guaranty associations are funded by the insurance industry, not by federal tax dollars.
- C) Policyholders do not donate; assessments come from insurers.
- D) Fraud fines go to the state, not to fund the guaranty association's claim payments.
Memory hook
Insurers fund the net: assessments on their premiums keep CLHIGA ready for the next failure.