State Guaranty Association

What is State Guaranty Association?

A state guaranty association is a state-mandated nonprofit that protects insurance policyholders if a member insurance company becomes insolvent. Every state has at least one guaranty association, and every licensed insurer is required to be a member. It is a last-resort backstop, not FDIC insurance, and state law bars insurers and agents from using it to sell insurance.

How Coverage Works

If a court orders a member insurer liquidated with a finding of insolvency, the guaranty association steps in to either continue the contract under another carrier or pay benefits up to the state’s coverage limit. Coverage limits vary by state but most states protect annuity benefits up to $250,000 in present value per insurer per individual. Some states protect up to $300,000 or $500,000 for certain product types. Coverage generally starts only at liquidation, which can take years, so our guide to whether annuities are safe starts with judging the insurer.

Coverage Is Per Insurer, Per State, Per Insured

If you own annuities from three different carriers and each fails, you receive guaranty coverage on each one separately – up to the limit. This is why licensed agents often recommend splitting large annuity premiums across multiple carriers when totals exceed the state’s per-insurer limit. A $750,000 deposit split across three carriers in a state with a $250,000 limit gives you full coverage; the same amount with one carrier exceeds the limit.

What’s NOT Covered

Guaranty associations don’t cover unregistered or non-resident transactions, contracts issued in states where the carrier wasn’t licensed, or amounts above the coverage limit. They also don’t pay until the carrier is formally declared insolvent – which can take 18-24 months. See our state guaranty association page for current coverage limits in your state.

Frequently Asked Questions