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| What happens when my insurance company goes out of business? In most cases, the guaranty association will continue life insurance and annuity contracts, up to the statutory limits as long as premiums are paid or cash value exists. It may do this directly, or, most often, it may transfer the policy to another insurance company. In any case, policyholders should continue making premium payments to keep their coverage in force. Continuation of health insurance will depend upon the terms of your existing health insurance policy. |
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| How is policy coverage determined? Coverage is determined by Delaware law and policy language at the time the guaranty association is activated to provide protection (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. |
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| What is the Delaware Life & Health Insurance Guaranty Association? The Delaware Life & Health Insurance Guaranty Association was created by the Delaware legislature in 1982 to protect state residents who are policyholders and beneficiaries of policies issued by an insolvent insurance company, up to specified limits. All insurance companies (with limited exceptions) licensed to write life and health insurance or annuities in Delaware are required, as a condition of doing business in the state, to be members of the guaranty association. If a member company becomes insolvent, money to continue coverage and pay claims is obtained through assessments of the guaranty association's other member insurance companies writing the same line or lines of insurance as the insolvent company. All 50 states, the District of Columbia, and Puerto Rico have life and health insurance guaranty associations. |
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| Who is protected? Life and health insurance guaranty associations cover individual policyholders and their beneficiaries; typically, persons protected by certificates of insurance issued under policies of group life or group health insurance are also covered. Limits on benefits and coverage are established by state law. For more information about coverage, see the questions below or contact the guaranty association or state insurance department. |
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| Does it matter where I live? Yes. The guaranty association generally covers only Delaware resident policyholders and certificate holders. Residency is determined on the date that a member insurer is declared insolvent. Guaranty association coverage is, however, currently provided to residents of all 50 states, Puerto Rico, and the District of Columbia through other guaranty associations. If you are a resident of another state, please contact your department of insurance for contact information for the guaranty association in your state or visit the "Facts & Figures Association Contact Info" section at www.nolhga.com for a complete list of guaranty associations. You may also want to go to the Links section of this site to determine if your state's guaranty association has a Web site. Note that guaranty association coverage varies by state. As a result, coverage provided by the Guaranty Association Act of this state may not be the same as coverage provided by another state's law. |
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| What contracts are covered? Generally, direct individual or direct group life and health insurance policies as well as individual annuity contracts issued by the guaranty association's member insurers are covered by the association. Such coverage is limited by the terms of the Delaware Life & Health Insurance Guaranty Association Act (a link to the Act can be found in the Additional Info section). Types of property and casualty insurance--such as automobile, homeowners, professional liability, medical malpractice, workers' compensation, etc.--may be protected by the Delaware Insurance Guaranty Association. That guaranty association can be reached at: Delaware Insurance Guaranty Association 220 Continental Drive, Suite 309 Newark, DE 19713 302.456.3656 |
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| Are all policies fully protected? Not always. If your insurance company fails, the maximum amount of protection provided by the Delaware guaranty association for each type of policy, no matter how many of that type of policy you bought from your company, is: Life Insurance Death Benefit - $300,000 per insured life Life Insurance Cash Surrender - $100,000 per insured life Health Insurance Claims - $500,000 for basic hospital, medical or surgical (per insured life) insurance or major medical insurance - $300,000 for disability insurance - $100,000 for health insurance coverages not defined as disability insurance, basic hospital, medical or surgical insurance or major medical insurance Annuity Benefits (Present Value) - $100,000 per contract owner Unallocated Group Annuity Benefits - $1,000,000 per contract owner Please see the Delaware Life and Health Insurance Guaranty Association Act (a link to the Act can be found in the Additional Info section) for specific terms of the limitations or coverage. |
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| For example, if I own three annuities worth $100,000 each and my insurance company fails, how much is protected? The total protection per owner per member company is $100,000 for all annuity contracts. As a result, if an individual owned three $100,000 annuities with the same insolvent insurance company, the individual would have total guaranty association coverage of only $100,000. The value in excess of this statutory coverage limit would be eligible for submission as a creditor claim in the receivership, and the annuity holder may receive distributions as the company's assets are liquidated by the receiver. |
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| What will happen to my insurance coverage if the guaranty association becomes liable for my policy? Protection can be provided in one of several different ways. For example, the guaranty association may arrange for a financially sound insurer to take over the troubled company's policies and assume the responsibility for continuing coverage and paying covered claims. The Delaware guaranty association may provide coverage directly by continuing the insurer's policies or issuing replacement policies with the guaranty association; in some situations, the Delaware guaranty association may work with other state guaranty associations to develop an overall plan to provide protection for the failed insurer's policyholders. The amount of protection provided and when you receive it may depend on the particular arrangement worked out for handling the failed insurer's obligations. For certain cancelable insurance policies, state law provides for the guaranty association to continue your coverage only for a limited time. |
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| When might the guaranty association provide benefits? If your insurer is no longer able to fulfill its obligations, ongoing benefit payments to you may be reduced or suspended by the courts in order to sort out the affairs of the financially troubled insurer. As a result, you may have to wait many months before the guaranty association is activated to provide benefit payments. Hardship provisions may be instituted by the receiver to continue benefit payments. |
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| Are all life and health insurance policies and annuity contracts protected by the guaranty association? No. The following is a listing of some of the types of policies, contracts and other benefits not covered by the guaranty association: Policies with insurers not licensed to do business in Delaware; Health Maintenance Organization (HMO) contracts; contracts issued by a hospital or medical service organization; reinsurance contracts; policy benefits the insurer does not guarantee or for which the policyholder bears the risk (such as the non-guaranteed portion of a variable life insurance or annuity contract); self-insured employer plans; interest rate yields that exceed an average rate; and fraternal benefit society insurance certificates. Certain, less commonly known insurance policies and arrangements not listed here are also not protected. If you are unsure about whether your policy is excluded from guaranty association protection, you should review the current Guaranty Association Act (a link to the Act can be found in the Additional Info section). |
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| How will I know if my life or health insurance company has failed or is unable to fulfill its obligations to its policyholders? You will generally receive a notification from the receiver if your insurance company is found to be insolvent and ordered liquidated. |
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| How can I find out if my company is licensed in Delaware? Call the Delaware Insurance Department at 302.739.4251 or check the department Web site. The department maintains complete and current records of all insurance companies licensed to do business in the state. |
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| Why hasn't my agent or company told me more about the Delaware Life & Health Insurance Guaranty Association? The law prohibits insurance agents and companies from using the Delaware guaranty association in any advertising. The guaranty association is not and should not be a substitute for your prudent selection of an insurance company that is well managed and financially stable. Agents are prohibited by statute from using this Web site or the existence of the guaranty association as an inducement to purchase insurance. For more information, see our Advertising Prohibition in the Additional Info section. |
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