What happens when my insurance company becomes insolvent?
In most cases, the Guaranty Corporation will continue coverage 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.
How is policy coverage determined?
Coverage is determined by Maryland law and policy language at the time the Guaranty Corporation 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 Corporation cannot make statements regarding coverage of a specific policy unless it is a policy with a company for which the Corporation has been activated to provide protection.
What is the Life and Health Insurance Guaranty Corporation?
The Life and Health Insurance Guaranty Corporation ("LHIGC") was created by the Maryland General Assembly in 1980 to protect Maryland residents who are policyholders and beneficiaries of policies issued by an insolvent insurance company, up to specified limits. All insurance companies licensed to write life and health insurance or annuities in Maryland are required, as a condition of doing business in the state, to be members of the Guaranty Corporation. If a member company becomes insolvent, money to continue coverage and pay claims is obtained through assessments of the Guaranty Corporation's other member insurance companies writing the same line of insurance as the insolvent company.
What is the Guaranty Corporation's address?
Maryland Life and Health Insurance Guaranty Corporation
6210 Guardian Gateway, Suite 195APG
Aberdeen, MD 21005
How else can I get in touch with the Guaranty Corporation?
Who is Protected?
In general, the Corporation coverage extends to:
(i). Maryland residents who are owners of individual life or health insurance policies or annuity contracts;
(ii). Maryland residents who are certificate holders under group life or health insurance policies.
(iii). beneficiaries or assignees, regardless of where they reside, of such life and health insurance policies or annuity contracts held by Maryland residents.
What Contracts are Covered?
Generally, direct individual or direct group life and health insurance policies as well as individual annuity contracts issued by the Corporation's member insurers are covered by the Corporation. Such coverage is limited by the terms of the Maryland Life and Health Insurance Guaranty Corporation Act.
Other types of insurance, such as automobile or homeowners, may be protected by Property and Casualty Insurance Guaranty Corporation. Information is available through that Corporation at:
Property and Casualty Guaranty Corporation
305 Washington Avenue, Suite 600
Towson, MD 21204-4647
If I move to another state after purchasing a policy, will I still have guaranty association coverage? If so, who will provide it?
If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, 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.
To What Extent are Benefits Guaranteed?
Maryland law limits Guaranty Corporation coverage to the following dollar amounts:
- $300,000 in death benefits;
- $100,000 in cash surrender or withdrawal value for life insurance;
- $500,000 in major medical; and
- $250,000 in the present value of annuity benefits, including cash surrender and withdrawal values.
Nothing contained in this website should be construed as a guarantee of Guaranty Corporation coverage for any particular policy or contract.
When Might the Guaranty Corporation Provide Benefits?
Generally, the Guaranty Corporation provides coverage when a member insurer has been order liquidated by the Courts of its home state. Before the Guaranty Corporation can begin paying benefits, it must receive information about who is insured and what type of coverage is involved. Generally, such information is provided by the state authorities who have taken over the insurer.
What will Happen to my Insurance Coverage if the Guaranty Corporation Becomes Liable for my Policy?
For most life insurance, non-cancelable individual health insurance and annuity contracts, the Guaranty Corporation will provide continued coverage as long as you continue to pay premiums. It may do this directly, or, in most cases, by arranging to have your policy transferred to another, solvent insurer.
In any case, policyholders should continue making premium payments unless otherwise notified if they wish to keep their coverage in effect.
Where can I get advice on purchasing life, health, or annuity products?
The guaranty corporation 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.
Are you a State agency?
No. The guaranty corporation is a private entity, with its membership made up of all the life and health insurers licensed in the state (in fact, under state law an insurer must be a member of the association to be licensed to do business). The corporation was created by the legislature to serve as a safety net (subject to statutory limits) for residents should their life or health insurer fail. By creating the corporation, the legislature was able to ensure continued coverage to residents affected by their insurer’s failure. The corporation does work in cooperation with the Insurance Department in fulfilling its role of protecting residents whose insurance company is being liquidated.
How can I determine the financial soundness of my insurance company?
Consumers can contact the Insurance Administration (410-468-2000) to determine if an insurance company is licensed to write business in Maryland. Consumers can also check the financial strength ratings of the company, which are issued by various ratings agencies (see “Where can I get advice on purchasing life, health, or annuity products?” above).
If my company is in the process of rehabilitation/conservation and I have an emergency and need to withdraw monies from my annuity, what is the process?
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.
Is long-term-care insurance covered by the guaranty corporation?
Yes, long-term-care insurance is typically considered health insurance and covered by the guaranty corporation.
Are variable annuities covered by the guaranty corporation?
Generally speaking, a variable annuity contract with general account guarantees will be eligible for guaranty corporation coverage, subject to applicable limits and exclusions on coverage. However, specific questions regarding coverage will be determined by the applicable guaranty corporation based on the terms of the contract, other relevant facts, and the guaranty corporation law in effect at the time of liquidation.
If my company is liquidated, do I have to file a claim with the corporation?
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 corporations, 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 corporations 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. If you wish to continue coverage, you must continue to pay the premium required by your policy.
Should I continue to pay my premiums?
Yes. If you are paying premiums to your company and wish to keep your coverage in place, you must continue to do so—those premiums go to the guaranty corporation providing you continuing coverage. If you stop paying premiums, your insurance coverage may be terminated.
What happens if the benefits promised in my policy are greater than the coverage limits provided by the guaranty corporation?
Guaranty as corporations, in conjunction with the Receiver, may be able to negotiate a transfer of a company’s policies, up to the amount of the guaranty corporation benefit limits, to a financially sound insurer. If a corporation 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 the contract holder may receive distributions as the company’s assets are liquidated by the Receiver.