In most cases, a guaranty association will continue coverage as long as premiums are paid or cash value exists. It may do this directly, or, it may transfer the policy to another insurance company. The policy may also be cancelled in accordance with its policy provisions and applicable law. In any case, policyholders should continue making premium payments to keep their coverage in force.
The California Life and Health Insurance Guarantee Association provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in California). To determine if a company is licensed to write business in California, you may call the California Department of Insurance at (800) 927-4357, or (213) 897-8921 from the Los Angeles area. The Department maintains current records of all insurance companies licensed to do business in California. Information about companies licensed to write insurance in California may also be obtained from the Department’s website.
If your insurance company is liquidated, you will receive a notice from the court-appointed Receiver (typically the Insurance Commissioner of the company’s state of domicile), who will oversee the liquidation of the company and inform you of any new claims procedures. There may be no change in the claims submission process—guaranty associations, working with the Receiver, sometimes continue processing claims using the liquidated company’s existing claims staff if that will maximize the speed and efficiency with which claims are processed. In other cases, the associations process the claims themselves or use an independent processing company, known as a third-party administrator, to process claims. In any event, you will be notified of the ongoing claims process.
Yes. If you are paying premiums to your company, you must continue to do so—those premiums go to the guaranty association providing you continuing coverage. If you stop paying premiums, your insurance coverage may be terminated.
Coverage is determined by California law and policy language at the time the Guarantee Association is activated to provide protection. Generally, this occurs when the member insurer is found to be insolvent and ordered liquidated by a court. In light of changes in the law and the dramatic variations in policy language, the association cannot make statements regarding coverage of a specific policy unless it is a policy with a company for which the association has been activated to provide protection.
The California Life & Health Insurance Guarantee Association is an association of all insurance companies licensed to sell life insurance, health insurance, and annuities in California. Created by state law, it provides limited protection to policyholders when an insurance company licensed in California to sell life insurance, health insurance, and annuities becomes insolvent.
The California Life and Health Insurance Guarantee Association provides LIMITED PROTECTION of your life, health, and annuity benefits if, at the time your insurance company becomes insolvent, you are a California resident policyholder, or if you are the beneficiary, assignee, or payee of such policyholder regardless of your residency.
Most life insurance policies, health insurance policies, and annuity contracts are protected subject to certain conditions and limitations.
Protection can be provided in several different ways. The Guarantee Association may provide coverage directly. Or, a financially sound insurer may take over the insolvent company's assets and policies, and assume responsibility for continuing coverage and paying covered claims. In some situations, the Guarantee Association may work with other state guaranty associations to develop an overall plan to provide protection for the insolvent insurer's policyholders. The amount of protection provided, and when you receive it depends on the particular arrangement worked out for handling the insolvent insurer's obligations.
Policies sold by insurers not licensed to do business in California; policies issued by medical, health, or dental care service corporations; managed care plans; self-insured employer plans; fraternal benefit society insurance certificates; policy benefits the insurer does not guarantee such as the non-guaranteed portion of a variable life insurance contract sold by prospectus, or benefits for which the individual policyholder has assumed the risk of loss; guaranteed interest rate yields that exceed the rate specified by the California Life & Health Insurance Guarantee Association Act; most unallocated annuity contracts; and charitable gift annuities. If you are unsure if your policy is protected you should contact your insurer.
A variable annuity contract with general account guarantees may be eligible for guaranty association coverage only to the extent of its general account guarantees. Non guaranteed elements of variable products are not covered by the Guarantee Association. Any coverage is subject to applicable limits and exclusions. Specific questions regarding coverage will be determined by the applicable guaranty association based on the terms of the contract, other relevant facts, and the guaranty association law in effect at the time of liquidation.
In general recoverable benefits are limited to the amounts set by law. However, guaranty associations, in conjunction with the Receiver, may be able to negotiate a transfer of a company’s policies, up to the amount of the guaranty association benefit limits, to a financially sound insurer. If an association administers claims against the policy and the benefit limits are reached, any claim in excess of that limit may be submitted as a policyholder-level claim against the estate of the failed insurance company, and such policyholder may receive distributions as the company’s assets are liquidated by the Receiver.
No. The maximum amount of protection for which the Guarantee Association may become liable for life insurance and annuity policies is as follows:
Life insurance death benefit protection: 80% of the policy death benefit up to a maximum of $300,000;
Life insurance net cash surrender and net cash withdrawal values: 80% of the policy value up to a maximum of $100,000;
Present value of annuity benefits including net cash surrender and net cash withdrawal values: 80% of the present value up to a maximum of $250,000.
Life insurance benefits including net cash surrender and net cash withdrawal values, and annuity benefits including net cash surrender and net cash withdrawal values are subject to interest rate adjustments. Generally, interest rate reductions are made when an insolvent insurer promised a rate of interest in excess of that provided for in the California Life & Health Insurance Guarantee Association Act. The maximum total amount the Guarantee Association will provide for any one individual for life insurance and annuity coverage is $300,000, even if that individual is covered by multiple life insurance policies and annuities.
Yes. If you receive benefits from the Guarantee Association, you are deemed to have assigned your rights under the covered policy to the Guarantee Association to the extent of benefits received. The Guarantee Association may require an assignment of such rights prior to providing benefits to any person. The law provides that the Guarantee Association is a creditor of the insolvent insurer to the extent of assets attributable to covered policies. Also, the Guarantee Association has the right of subrogation, and the other equitable and legal remedies available to the policyholder.
Your beneficiary will be entitled to receive protection from the Guarantee Association in an amount up to $240,000 (80% of $300,000).
You will be entitled to receive protection from the Guarantee Association in an amount up to $100,000 (80% of $135,000 or $108,000, then reduced to the maximum benefit of $100,000). Interest rate adjustments could further reduce the amount you are entitled to recover.
Only $250,000--that is the maximum amount protected by the Guarantee Association for all annuities you purchased from a single insurer.
No. The limit applies to you and your spouse separately. You and your spouse would have combined total protection of up to $320,000. Each spouse receives $160,000 (80% of $200,000). Interest rate adjustments could further reduce the amount you and your spouse are entitled to recover.
Yes. Assuming all other conditions are met, it is protected up to the limit set for an annuity.
No. The health insurance protection for which the Guarantee Association may become liable shall be the contractual obligations for which the insurer is liable or would have been liable if it were not an insolvent insurer, up to a maximum benefit of $200,000. This maximum limit is subject to increase or decrease based upon changes in the health care cost component of the consumer price index from January 1, 1991. As of September 30, 2018, the maximum coverage was $572,940. Again, some health coverage, like that provided by managed care organizations and associations, is not protected by the Guarantee Association.
Yes, long-term-care insurance is typically considered health insurance and covered by the guaranty association.
If your employer bought a group life or health insurance policy covering you from an insurer licensed in this state, then you are protected up to the limits described above. If you belong to a "self-insured" health plan--meaning your employer, not an insurer, provides the coverage through what is called an "ERISA plan," or a self-insured plan, you are not protected by the Guarantee Association.
You will receive official notification from the Department of Insurance of the insurer's state of domicile if the Insurance Commissioner or a court declares your insurance company to be insolvent.
The Guarantee Association will endeavor to provide protection as promptly as possible. Delays are sometimes necessary to sort out the affairs of the insolvent insurer. As a result, you may have to wait several months before receiving the protections provided by law.
The law authorizes the Guarantee Association to assess all life and health insurance companies licensed to do business in California for the funds necessary to provide the protection. No tax dollars are used to provide this protection.
The Guarantee Association limits protection to policy owners who are residents of California at the time the insurance company becomes insolvent. If you purchased a policy from a company that is a member insurer of the California Life and Health Insurance Guarantee Association, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled. Generally, it does not matter where the payees or beneficiaries live. In the case of structured settlement annuity payees, resident payees are covered regardless of the residency of the contract owner.
The guaranty association of the state in which the policy owner lives at the time the company becomes insolvent provides protection. Although all 50 states plus the District of Columbia and Puerto Rico have Guarantee Associations, the amount of protection may vary. If you move to another state, you should contact the Department of Insurance or guaranty association in that state for more information.
I am a resident of California and I have a policy issued by an insurance company that is not licensed in California. Will I receive protection from the California Life and Health Insurance Guarantee Association if this insurance company becomes insolvent?
No. The Guarantee Association only protects policies issued by an insurance company licensed to do business in California. You may, however, be entitled to receive protection from the guaranty association located in the insolvent company's state of domicile. You should contact the Department of Insurance or guaranty association in that state for more information.
Insurers and agents are prohibited by state law from using the existence of the Guarantee Association to sell, solicit or induce the purchase of any form of insurance. This is because the protection is limited, and in some cases there is no protection at all. The existence of the Guarantee Association, therefore, is not and should not be a substitute for your prudent selection of an insurance company that is well managed and financially stable.
Call the Department of Insurance at 1-800-927-HELP, or 213-897-8921 from the Los Angeles area. The Department maintains records of all insurance companies licensed to do business in the state.
No. The California Life and Health Insurance Guarantee Association is a statutorily created association, with its membership made up of all the life and health insurers licensed in the state (in fact, insurers which are licensed to do business in the state are required to be members of the association). The Guarantee Association was created by the legislature to serve as a safety net for residents should their life or health insurer fail. By creating the association, the legislature was able to ensure continued coverage to residents affected by their insurer’s failure. The association does work in cooperation with the Insurance Department in fulfilling its role of protecting residents whose insurance company is being liquidated.
If you have any questions that are not answered here or on the website www.califega.org, you may contact the Guarantee Association or the Department of Insurance: California Life & Health Insurance Guarantee Association, PO Box 16860, Beverly Hills, CA 90209-3319, (323) 782-0182; California Department of Insurance, Consumer Communications Bureau, 300 South Spring Street, South Tower, Los Angeles, CA 90013, 1-800-927-HELP, or 213-897-8921. The intent of this website is to explain briefly, in non-technical language, how the Guarantee Association provides protection to policyholders in the event their life or health insurance company becomes insolvent. This website does not attempt to describe every aspect of Guarantee Association coverage, and some exceptions and limitations may not be described. For a definitive statement of the laws governing the Guarantee Association, you must refer to the California Life & Health Insurance Guarantee Association Act. The Act can be found in California Insurance Code section 1067 et. seq. If there is any inconsistency between this website and any applicable law, then such law will control.
The guaranty association does not provide financial advice or comment on the financial condition of any particular company. You can obtain advice from captive insurance agents, independent insurance brokers, and rating agencies. Generally, captive agents sell products from a single insurer. Brokers usually can sell the products of multiple insurers.
Rating agencies assign comparative ratings to insurers based on various criteria. Most rating agencies are paid by the insurer to do an assessment examination and to issue a rating. This is the case with the largest and most well-known agencies, such as Standard and Poor’s, A. M. Best, Moodys, and Fitch Ratings. Since the companies pay to have themselves rated, those ratings are generally available to the public without charge. One rating agency does not accept payment from the insurer being rated—TheStreet.com. You must pay to obtain its rating results.
You may also wish to contact your state insurance department regarding information on a particular company.
The Guarantee Association does not provide advice or comments on the financial condition of any particular company. Rating agencies assign comparative ratings to insurers based on various criteria. Most rating agencies are paid by the insurer to do an assessment examination and to issue a rating. This is the case with the largest and most well-known agencies, such as Standard and Poor’s, A. M. Best, Moodys, and Fitch Ratings. Since the companies pay to have themselves rated, those ratings are generally available to the public without charge. One rating agency does not accept payment from the insurer being rated—TheStreet.com. You must pay to obtain its rating results. You may also wish to contact your state insurance department regarding information on a particular company.
Surrenders and loans may be allowed on a case-by-case basis for genuine hardship situations upon written application to the Receiver. Hardship circumstances and procedures will differ from company to company and (after liquidation) from guaranty association to guaranty association. Examples of hardship cases may include (1) terminal illness or permanent disability; (2) substantial medical expenses not covered by medical insurance; (3) financial difficulties resulting in inability to pay for essential life support needs like food and shelter; (4) imminent removal from a hospital, nursing home, or other medical care facility due to inability to pay; (5) imminent bankruptcy; and (6) immediate need for college tuition payments for a dependent child.
NOTE: This information is not intended as legal advice, and no liability is assumed in connection with its use. The applicable state guaranty association statute is the controlling authority, regardless of any information presented on this site. Users should seek advice from a qualified attorney and should not rely on this compilation when considering any questions relating to guaranty association coverage.