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| What happens when my insurance company goes out of business? In most cases, the Association 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. |
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| How is policy coverage determined? Coverage is determined by Illinois 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 Illinois Life & Health Insurance Guaranty Association? The Illinois Life and Health Insurance Guaranty Association (the "Association") was established to provide protection in the unlikely event that your life, annuity or health insurance company becomes financially unable to meet its obligations and is taken over by its Insurance Department. If this should happen, the Association will typically arrange to continue coverage and pay claims, in accordance with Illinois law, with funding from assessments paid by other insurance companies. |
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| What protections are provided by the Association? The basic protections provided by the Association for the insured of a member insurer which is found to be insolvent on or after August 20, 2010 are: Life Insurance - $300,000 in death benefits - $100,000 in cash surrender or withdrawal values Health Insurance - $500,000 in hospital, medical and surgical insurance benefits* - $300,000 in disability insurance benefits - $300,000 in long-term care insurance benefits - $100,000 in other types of health insurance benefits Annuities - $250,000 in withdrawal and cash values *The maximum amount of protection for each individual, regardless of the number of policies or contracts, is $300,000 except special rules apply with regard to hospital, medical and surgical insurance benefits for which the maximum amount of protection is $500,000. HMO Certificates Not Covered Certificates under health maintenance organization plans are not covered by the Association. Other Exclusions Refer to the Act (215 ILCS 5/531.03) for other policies and contracts, or portions thereof, which are excluded from coverage. |
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| Who is covered by the Association? In general, the Association provides coverage to residents of Illinois. However, there are some circumstances in which a non-resident may be entitled to coverage and some circumstances in which a resident of Illinois will not be entitled to coverage. |
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| At what point in time is residency determined? Residency will be determined either on the date the insurer is determined to be impaired or insolvent. If a person satisfies the Illinois residency test as of that date, coverage will continue even if the person moves outside of Illinois. |
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| Are there limitations on the amount of interest the Association is obligated to pay or credit with respect to covered policies or contracts that provide for guaranteed minimum interest rates? Yes. There are a variety of limitations set forth in the Act. For example, some interest rates promised in their policy or contract may be rolled back, pursuant to Illinois law, when measured against Moody's Corporate Bond Yield Average. |
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| Are there other limitations on the Association's liability? Yes. For example, the Association's liability is never greater than the obligations for which the insolvent insurer would have been liable but for its insolvency. |
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| Are there conditions which a person must satisfy in order to receive payments from the Association? Yes. For example, the policy owner must continue to pay the premiums that are due under said policy, either to the Association or as otherwise instructed by the Association. |
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| Where can I get advice on purchasing life, health, or annuity products? 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. |
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Are you a State agency?
No. The guaranty association 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 association 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 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. |
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How can I determine the financial soundness of my insurance company?
Consumers can contact the Department of Insurance (877.527.9431 ) to determine if an insurance company is licensed to write business in Illinois. 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). |
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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. |
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Is long-term-care insurance covered by the guaranty association?
Yes, long-term-care insurance is typically considered health insurance and covered by the guaranty association. |
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Are variable annuities covered by the guaranty association?
Generally speaking, a variable annuity contract with general account guarantees will be eligible for guaranty association coverage, subject to applicable limits and exclusions on coverage. However, 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. |
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If my company is liquidated, do I have to file a claim with the association?
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. If you wish to continue coverage, you must continue to pay the premium required by your policy. |
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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 association providing you continuing coverage. If you stop paying premiums, your insurance coverage may be terminated. |
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Is my company covered by the guaranty association?
The guaranty association 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 Illinois, you may call the Department of Insurance at 877.527.9431 . The Department maintains complete and current records of all insurance companies licensed to do business in Illinois. Information about companies licensed to write insurance in Illinois may also be obtained from the Department’s Web site. |
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What happens if the benefits promised in my policy are greater than the coverage limits provided by the guaranty association?
Any balance of policy benefits due you in excess of the guaranty association coverage limit are eligible to be submitted as a claim to the court-appointed Liquidator. A Liquidator’s statutory obligations are to sell (for cash; i.e., liquidate) the assets of the insolvent insurer (stocks, bonds, buildings, equipment, etc.) and then to distribute that cash in accordance with a list of priorities set out in the domiciliary state’s liquidation statute. Policy benefits remaining due to you above the guaranty association coverage limit may be claimed at the policyholder level of priority against those estate assets. As an example, after you have received the maximum protection available from the guaranty association, if you were still entitled to another $10,000 under your policy, and the liquidator had, let us say, 75 cents in cash for every dollar of policyholder level claim, you should anticipate receiving $7,500. (Claimants at a priority level above the policyholder level would receive 100 cents on the dollar, and claimants at a priority level below the policyholder level would receive nothing.) |
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