Posted : 06/18/2009
Locked Funds Insurance is a hybrid insurance policy issued jointly by banks and governments to protect public funds over the amount of $1,000,000. In the United States, it is used to protect public funds from being tampered with or used by unauthorized parties.
Since the terms of this type of "insurance" are typically very strict, it is only put into effect in extreme cases that require the utmost in protection of money. Locked Funds Insurance isn't really a true insurance policy in the sense that other types of insurance are (such as home or automobile insurance). Its qualities are like ordinary insurance coverage and international protectorate documents which is why they're actually classified as hybrid policies.
If you're not familiar with the concept of protectorates, they are autonomous territories that are protected by stronger states or entities (the "protector") either by diplomacy or even the military against others. A protectorate is governed by international law. Historically, protectorates were established during World War I and throughout the histories of countries like Germany, England and the British Commonwealth, the Arab world and others, although not in the United States.
Locked Funds Insurance cannot be purchased by the average investor, as it is designed to prevent access to and misuse of public, not private, funds. Since the money is so securely protected, there's rarely a loss incurred and compensation for any losses are handled by the bank or government as it applies to that particular situation. Again, since it's not traditional insurance, compensation for loss is not handled in the manner we're most familiar with.
While Locked Funds Insurance policies assert the utmost in security for the money in their accounts, they are very rarely used due to the protocol involved in its issue. Any amount of money protected by this type of coverage is virtually impossible to mess with, except within the terms with which the insurance was drawn and permits. In effect, it eliminates any unauthorized tampering of funds over $1,000,000.
Copyright © 1998-2013 by Quinstreet, Inc. All Rights Reserved. Insurance licenses