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 New York law and the terms of the insurance policy 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, or is declared impaired and placed in receivership by the New York Superintendent of Insurance). In light of changes in the law and the dramatic variations in policy language, the guaranty corporation cannot make statements regarding coverage of a specific policy unless it is a policy with a company for which the guaranty corporation has been activated to provide protection.
 
What is the Life Insurance Company Guaranty Corporation of New York?
The Life Insurance Company Guaranty Corporation of New York was created by the New York legislature in 1985 to protect New York state residents who are policyholders and beneficiaries of policies issued by an impaired or insolvent life insurance company, up to specified limits. All life insurance companies licensed in New York to write life, accident or health insurance, annuity contracts or funding agreements, are required, as a condition of doing business in the state, to be members of the guaranty corporation. If a member company becomes impaired or insolvent, money to continue coverage and pay claims is obtained through assessments of the guaranty corporation's other member insurance companies. All 50 states, the District of Columbia, and Puerto Rico have life insurance guaranty associations or corporations.
 
Who is protected?
The Life Insurance Company Guaranty Corporation of New York covers individual policyholders or annuity holders and their beneficiaries, persons holding certificates of insurance issued under group insurance policies or group annuities, and employers or others who own group annuity contracts or funding agreements. Limits on benefits and coverage are established by state law. For more information about coverage, please see the questions below.
 
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.
 
I bought my life insurance policy or annuity contract when I lived in New York, but now I live in another state. Am I protected by the Life Insurance Company Guaranty Corporation of New York?
As long as you were a resident of New York at the time of the purchase and your insurer was licensed here as a life insurance company, you are protected. You may also have protection in your current state of residence.
 
What contracts are covered?
Generally, individual and group life insurance policies, health insurance policies, annuities, and funding agreements issued by life insurance companies licensed to do business in New York State are covered by the guaranty corporation. Such coverage is limited by the terms of the Life Insurance Company Guaranty Corporation of New York Act (a link to the Act can be found in the Additional Info section).

Certain types of insurance issued by non-life insurance companies--such as automobile, homeowners, professional liability, medical malpractice, workers' compensation, etc.--may be protected by the New York Property/Casualty Insurance Security Fund. That guaranty fund can be reached at:

New York Property/Casualty Insurance Security Fund
c/o Liquidation Bureau, New York State Department of Insurance
123 William Street, 2nd Floor
New York, NY 10038
Telephone: 212.341.6500
 
Are all policies fully protected?
Not always. If your insurance company fails, the maximum amount of protection provided by the guaranty corporation for all policy types in the aggregate, no matter how many policies of the same or different types you bought from your company, is $500,000 per life. This aggregate limit applies to life insurance death benefits, life insurance cash surrender values, individual health insurance claims, individual annuity benefits, and allocated group annuity benefits. The limit for unallocated group annuity and funding agreement benefits is $1,000,000 per contract. No limit applies to group health insurance benefits. Please note that the guaranty corporation only provides coverage for policies issued by life insurance companies licensed by the State of New York.
 
For example, if I own three annuities worth $200,000 each and my insurance company fails, how much is protected?
The total protection per owner per member company is $500,000 for all annuity contracts. As a result, if an individual owned three $200,000 annuities with the same insolvent insurance company, the individual would have total guaranty corporation coverage of only $500,000. The value in excess of this statutory coverage limit would be eligible for submission as a policyholder claim in the receivership, and the annuity holder may receive distributions as the company's assets are liquidated by the receiver.
 
What will happen to my insurance coverage if the guaranty corporation becomes liable for my policy?
Protection can be provided in one of several different ways. For example, a financially sound insurer may take over the troubled company's policies and assume the responsibility for continuing coverage and paying covered claims. The Life Insurance Company Guaranty Corporation of New York may provide coverage directly by continuing the insurer's policies or issuing replacement policies with the guaranty association. In some situations, the Life Insurance Company Guaranty Corporation of New York 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 group life or health insurance, state law allows the guaranty association to continue your coverage only for a limited time: 180 days from the date the insurer was placed under an order of liquidation. This time period may be extended under certain circumstances.
 
When might the guaranty corporation 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.
 
What is NOT protected by the guaranty corporation?
The Life Insurance Company Guaranty Corporation of New York provides no protection for:

- policies and contracts with insurers not licensed to do business in New York;
- policies and contracts issued by companies other than life insurance companies (such as health insurance policies issued by accident and health insurance companies);
- 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 rates found by a court to be clearly excessive;
- policies and contracts issued outside the United States (or issued for delivery outside the United States) to the extent they cover persons not citizens or permanent residents of the United States;
- policies and contracts payable other than in United States dollars; and
- policies and contracts other than life, health or accident insurance, annuities, or funding agreements.

Certain less commonly known insurance policies and arrangements not listed here are also not protected. If you are unsure about whether your policy or contract is excluded from guaranty corporation protection, you should review the current Life Insurance Company Guaranty Corporation of New York Act in the Additional Info section.
 
I have a variable annuity or variable life insurance contract, in which my funds are invested separately from those of the life insurance company. What kind of protection do I have?
If the separate account contract guarantees a minimum return, the contract holder is protected by the Life Insurance Company Guaranty Corporation, but only for the portion of the contract that is guaranteed. The guaranty corporation provides no protection for funds invested in a separate account for which the contract holder bears the entire risk of gains or losses under the contract. However, assets in a separate account would normally retain their separate status in the event of the insolvency of the issuing insurer and could not be used to pay that insurer's other debts and obligations that do not arise out of the business of the separate account.
 
How will I know if my life insurance company has failed or is unable to fulfill its obligations to its policyholders?
You will receive a notification from the receiver and/or the Life Insurance Company Guaranty Corporation of New York if your insurance company is found to be insolvent and ordered liquidated.
 
How can I find out if my company is licensed in New York?
Please consult the Online Directory of Regulated Companies at the Web site of the New York State Department of Insurance. Please note that companies must be licensed as life insurance companies (indicated by "LF") in order for their policies to be covered by the Life Insurance Company Guaranty Corporation of New York.
 
Why hasn't my agent or company told me more about the Life Insurance Company Guaranty Corporation of New York?
The law prohibits insurance agents and companies from using the Life Insurance Company Guaranty Corporation of New York in any advertising. The guaranty corporation 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 corporation as an inducement to purchase insurance. For more information, see our Advertising Prohibition in the Additional Info section.
 
Where can I find more information?
The New York State Department of Insurance has prepared a brochure on Policyholder Protection Provided by the Life Insurance Company Guaranty Corporation of New York, available in the Additional Info section, which provides additional useful information about the guaranty corporation. Our Links page contains links to other useful sites. If you still have questions after reviewing the information on our Web site, please use the Contact Us section to let us know.
 
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 Department (800-342-3736) to determine if an insurance company is licensed to write business in New York. 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 corporation to guaranty corporation. 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.
 
Is my company covered by the guaranty corporation?
The guaranty corporation provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in the state). To determine if a company is licensed to write business in New York, you may call the Insurance Department at 800-342-3736. The Department maintains complete and current records of all insurance companies licensed to do business in New York. Information about companies licensed to write insurance in New York may also be obtained from the Department’s Web site.
 
What happens if the benefits promised in my policy are greater than the coverage limits provided by the guaranty association?
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 the contract holder may receive distributions as the company’s assets are liquidated by the Receiver.
 
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.