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What Happens if an Insurance Carrier Can’t Pay Your Client’s Annuity?

What does the “claims-paying ability” of the insurance carrier mean? What happens if the insurance carrier that I am purchasing my fixed annuity from becomes insolvent or goes bankrupt like one of the recent banks? Does the FDIC guarantee my money is protected from loss? Will I still get my guaranteed lifetime income? What happens to my money?

Have you been asked these questions by your clients and prospects? How do you answer them?

As part of Annuity Awareness Month, AIP Marketing Alliance wants to share how state guaranty associations provide your clients and prospects with a safety net in the case where the insuring company of an annuity is declared insolvent.

The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) was created to provide nationwide protection to ensure policyholders receive coverage up to limits spelled out by state law including Puerto Rico and District of Colombia. Insurance companies (with limited exceptions) licensed to sell life or health insurance or annuities in a state must be members of that state’s guaranty association.

According to NOLHGA, the guaranty association cooperates with the commissioner and the receiver in pre-liquidation planning. Once the liquidation is ordered, the guaranty association provides coverage to the company’s policyholders who are state residents (up to the levels specified by state laws).

While laws governing maximum limits and types of policies covered vary from state to state, most states are consistent with the NAIC Model Act and provide coverage at least in the amounts specified below.

  • $300,000 in life insurance death benefits
  • $100,000 in cash surrender or withdrawal values for life insurance
  • $250,000 in present value of annuity benefits, including net cash surrender/withdrawal values
  • $500,000 in major medical or basic hospital, medical and surgical insurance policy benefits
  • $300,000 in long-term care insurance policy benefits
  • $300,000 in disability insurance policy benefits
  • $100,000 in other health insurance benefits

NOLHGA also states the aggregate benefit level for an individual life in any one insolvency in most states is $300,000 (except if there is covered major medical insurance or covered basic hospital, medical and surgical insurance, in which case the aggregate benefit is $500,000). The above coverage levels apply separately for each insolvent insurer.

You can review each state’s guaranty association and specific coverage amount by clicking this link, which also includes the contact information for the guaranty association. NOLHGA also provides a frequently asked questions section for consumers here if your clients/prospects have questions about what is covered if an insurance carrier becomes insolvent.

Guaranty associations should provide an extra layer of confidence when talking to your clients and prospects about how annuities can provide “guaranteed lifetime income” based on the claims-paying ability of the carrier. If they ask the follow-up question about carrier insolvency, you can explain how states have their annuity protected up to a certain level.

If you need additional sales and marketing materials to promote annuities throughout June, contact AIP Marketing Alliance’s Business Development team at (800) 783-5206 or We have you covered throughout Annuity Awareness Month!

This article is for informational and educational purposes only. It should not be used to make a buying decision.

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For more than 40 years, AIP Marketing Alliance (AIPMA), an Integrity Company, serves as a premier life insurance and annuity distribution partner to provide full-service support to independent wholesalers, brokerages and agents from our Troy, Michigan office. NOT AFFILIATED WITH OR ENDORSED BY THE GOVERNMENT OR THE MEDICARE PROGRAM. Copyright 2024