What happens if an insurer becomes insolvent in Connecticut?

When an insurer becomes insolvent in Connecticut, policyholders are protected by the Connecticut Guaranty Association, which ensures that claims are paid up to specified limits. This organization is designed to provide a safety net for policyholders in the event of an insurer's failure, thus reducing the financial risk and uncertainty faced by individuals holding insurance policies with that company.

The Guaranty Association operates under state laws to cover various types of insurance, which means if an insurer cannot meet its financial obligations, the association steps in to fulfill those obligations, allowing policyholders to receive compensation for covered claims, up to the limits established by the law. This protection provides a critical layer of security for consumers, helping them avoid total loss resulting from an insurer's insolvency.

The other options do not accurately reflect the protections offered. Claims may still be paid up to the limits if an insurer becomes insolvent, policies do not automatically become inactive, and there is no requirement or guarantee that new insurers will take over existing policies.