The entity that pays covered claims and helps prevent financial losses to claimants and policyowners when an insurance company becomes insolvent is

• A. The Federal Deposit Insurance Corporation
• B. The National Association of Insurance Commissioners
• C. The Insurance Guaranty Corporation
• D. The State Guarantee Association

Answer: (C)

When an insurer becomes insolvent, policyowners and claimants are protected by the insurance guaranty system, a network funded by solvent insurers to pay covered claims and help limit losses. The Insurance Guaranty Corporation is the entity described as stepping in to disburse those payments under state law, keeping claimants whole while the situation is resolved. This is specific to the insurance field, unlike the FDIC, which protects bank deposits, or the NAIC, which is a regulatory body rather than a payer of claims.