DEFINITION of 'Central Loss Fund'

A fund set aside by some states in order to cover policyholder claims if an insurance company is declared insolvent. A central loss fund is created by state insurance regulators through the collection of assessments on insurance companies operating in the state. Most states have a central loss fund of some type, however the details of their operations differ according to their respective state laws.

BREAKING DOWN 'Central Loss Fund'

A central loss fund is important to protect the interests of policyholders in the event an insurance company is unable to pay claims. The states' respective insurance commissioners are responsible for overseeing insurance companies and ensuring that they maintain adequate collateral to cover expected losses. However, widespread and unanticipated catastrophes may still arise which result in claims exceeded an insurance company's ability to pay.

RELATED TERMS
  1. Central Guarantee Fund

    A fund set aside by state insurance regulators to pay out claims ...
  2. Insurance Guaranty Association

    An organization that protects policyholders and claimants in ...
  3. Assessable Policy

    A type of insurance policy that may require the policyholder ...
  4. State Guaranty Fund

    A fund administered by a U.S. state to protect policy holders ...
  5. Early Warning Tests

    A series of financial ratios and other performance criteria used ...
  6. Funding Cover

    Insurance premiums held in an account and used to pay insurance ...
Related Articles
  1. Financial Advisor

    Mutual Vs. Publically Traded Insurance Companies

    Should you buy your insurance policy from a mutual or publically traded insurance company?
  2. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  3. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  4. Insurance

    Understanding Insurance Claims

    An insurance claim is a formal request made to an insurance company that asks for a payment based on the terms of the policy.
  5. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  6. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  7. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  8. Insurance

    Are You Protected If Your Insurance Company Goes Belly-Up?

    Consumer protection against insurance company failures actually falls into the hands of state governments. How much protection do you have?
  9. Insurance

    Behind the Law of Large Numbers in the Insurance Industry

    Discover how the law of large numbers helps insurance companies cope with risk, and why the theory does not always live up to reality.
  10. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
RELATED FAQS
  1. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  2. How can I invest in a mutually owned insurance company?

    Read about the difference between mutual and stock insurance companies, including how to become a de facto investor of a ... Read Answer >>
  3. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products. Insurers can deny coverage in many different instances:Non-Renewal ... Read Answer >>
  4. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  5. How does the combined ratio measure the financial health of insurance companies?

    Learn about the combined ratio, what the combined ratio measures and how it is used to measure the financial health of insurance ... Read Answer >>
  6. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
Hot Definitions
  1. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  2. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  3. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  4. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Four Percent Rule

    A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule ...
Trading Center