Final answer:
State insurance guaranty funds limit the amount policyholders can collect and are funded by assessments on insurance companies, not state general revenues. Insurance regulators' efforts to keep premiums low may lead to insurers exiting the market.
Step-by-step explanation:
The statements about state insurance guaranty funds have specific factual answers. Firstly, state insurance guaranty funds indeed limit the amount that policyholders can collect if an insurer becomes insolvent, ensuring that policyholders receive a payout but up to a set maximum amount. Secondly, these guaranty funds are typically funded through assessments on insurance companies, not by general revenues of the states. Insurers contribute to the guaranty funds to cover potential insolvencies.
Universal generalizations about state and local government spending indicate that they must approve spending before releasing funds and that budgets supply money for many services and programs, with taxes funding various services. However, specifically for insurance guaranty funds, funding does not come directly from state general revenues, but rather from the insurance companies regulated by the state.
It's also important to note that state insurance regulators have goals to keep insurance premiums low and ensure coverage is widespread but their actions, such as setting low premiums or requiring coverage for all including high-risk parties, can lead to insurers withdrawing from the market to avoid unprofitable constraints. These dynamics show the fundamental law of insurance where the average amount paid in claims cannot exceed the average premiums collected.