What is the primary function of the Guaranty Fund?

The primary function of the Guaranty Fund is to ensure that claims from insolvent insurance companies are paid. This fund serves as a safety net for policyholders when an insurance company goes bankrupt or becomes unable to meet its obligations. In such scenarios, the Guaranty Fund provides the necessary financial resources to cover valid claims, thereby protecting consumers and maintaining trust in the insurance system. This mechanism is designed to minimize the disruption and financial hardship that could result from the failure of an insurance company, ensuring that policyholders can still receive the benefits they are entitled to under their insurance policies.

The other options do not accurately describe the primary purpose of the Guaranty Fund. Tax benefits for insured individuals pertain to different financial considerations and are not linked to the purpose of the fund. Regulating insurance premiums collected and offering loans to insurance companies in distress do not align with the protective role of the Guaranty Fund, which is focused solely on providing compensation for policyholders affected by insolvency rather than on operational or regulatory activities.