Indiana Life and Health Insurance Guaranty Association

Frequently Asked Questions

1. What happens if my insurance company is found insolvent and is ordered liquidated?

   Assuming the insurance company is a member of the Indiana Association, in most cases, the Indiana Association will continue life, health, and annuity coverage (up to statutory limits) for Indiana residents as long as premiums are paid, cash value exists, and/or the Indiana Association has not terminated or non-renewed coverage in accordance with applicable policy provisions. The Indiana Association may provide coverage directly or it may transfer the policy to another, solvent insurance company.

2. How is policy coverage determined?

   Coverage is determined by applying Indiana law to the policy language at the time the Indiana Association is activated to provide protection (when the member insurer is found to be insolvent and ordered liquidated by a court). In light of the possibility of changes in the law and variations in policy language, the Indiana Association cannot make statements regarding coverage of a specific policy unless it is a policy with an insurance company for which the Indiana Association has been activated to provide protection.

3. What is the Indiana Life and Health Insurance Guaranty Association?

   The Indiana Life and Health Insurance Guaranty Association is an association of most types of insurance companies that are authorized to sell life insurance, health insurance and annuities in the state of Indiana. The Indiana Association was created by law to protect (subject to certain limitations) policy benefits of certain policyholders in the event of the financial failure of one of those insurance companies.

4. How can I find out whether an insurance company is authorized to sell life, health or annuity products in Indiana or is a member of the Indiana Association?

   To find out whether an insurance company is properly authorized to sell life, health or annuity products in Indiana, call the Indiana Department of Insurance at 317.232.2385. It maintains records of all insurance companies licensed in Indiana and what types of insurance products they are licensed to sell. To find out whether an insurance company is a member of the Indiana Association, call the Indiana Association at 317.636.8204.

5. What types of insurance policies are covered by the Indiana Association?

   Generally speaking, the Indiana Association provides limited coverage with respect to these types of policies: health insurance policies (including major medical, Medicare supplement, long-term care and disability policies), life insurance policies and annuity contracts issued by insurance companies authorized to sell those types of policies in Indiana. A different association provides limited coverage for certain types of property and casualty insurance policies.

6. What types of insurance products are NOT protected by the Indiana Association?

   The Indiana Association does not cover the following:

   Policies sold by insurers not authorized to sell such policies in Indiana

   Property, casualty and liability insurance

   That part of a certificate, policy or contract not guaranteed by an insurer or under which the risk is borne by the policyholder

   Certificate, policy and contract provisions providing for interest rates, crediting rates, etc. that are in excess of certain levels tied to the Moody’s Corporate Bond Yield Average

   Benefits provided by employee and similar benefit plans and programs, including multiple employer welfare arrangements

   Stop-loss and excess loss insurance policies and contracts

   That part of a certificate, policy or contract providing for dividends, experience rating credits, voting rights and/or payments of fees or allowances in connection with administrative services
   Medicare C & D policies

   Unallocated annuity contracts issued to or in connection with benefit plans protected by the federal Pension Benefit Guaranty Corporation

   Certain annuities not subject to regulation by the Indiana Department of Insurance by virtue of Ind. Code 27-1-12.4 (e.g., annuities established under a transaction that is treated in part as a charitable contribution)

   Policies, contracts, and benefits provided by any of the following:
   - health maintenance organizations

   - limited service health maintenance organizations

   - prepaid limited service health maintenance organizations

   - fraternal benefit societies

   - hospital and medical service organizations

   - insurance companies operated on the assessment plan

   - interinsurance and reciprocal exchanges

   - Lloyds companies

   - persons similar to those listed above

   Certain less commonly known insurance policies and arrangements not listed here are also not covered. If you are unsure about whether your policy is of a type that is covered, you should contact the Indiana Association.
   
   Please refer to IC 27-8-8-2.3 for exclusions and limitations of coverage.

7. Who is entitled to the Indiana Association's protection?

   Generally speaking, the Indiana Association provides protection only to policyholders (or, in the case of group contracts, certificate holders) who reside in the state of Indiana when the Indiana Association is activated. There are a few exceptions to this general rule. For example, under the Act, the Indiana Association provides protection with respect to structured settlement annuities to payees who reside in the state of Indiana when the Indiana Association is activated. Generally, it does not matter where an Indiana policyholder's beneficiary lives--if the policyholder resides in Indiana and is entitled to coverage, benefits payable to beneficiaries will be paid to the beneficiaries regardless of where they reside.

8. What if I move to another state after buying insurance and then the insurance company fails?

   You may be entitled to coverage from the guaranty association in the state to which you move if the insurance company is licensed to do business in that state. If the insurance company is not licensed to do business in that state, you may qualify for protection from the guaranty association in the state where the insurance company is domiciled. The scope and types of protection provided by the guaranty associations varies from state to state. If you move to another state, you should contact the guaranty association in that state to learn about the coverage it provides.

9. Are all covered policies fully protected?

   No. Generally speaking, if your insurance company is liquidated, the maximum amount of coverage provided for each type of policy, regardless of how many of that type of policy you own is as follows:

   Pre January 1, 2013 insolvencies and rehabilitations:

   (a) Life Insurance Death Benefit: $300,000 per insured
   (b) Life Insurance Cash Surrender: $100,000 per insured
   (c) Health Insurance: $300,000 per insured
   (d) Annuity Present Value of Benefits: $100,000 per annuitant
   (e) Structured Settlement Annuity Present Value of Benefits: $100,000 per payee
   (f) Certain Unallocated Group Annuity Benefits: $5,000,000 per contract owner

   There is an additional, overriding limitation of $300,000 in total benefits for any one person for all coverages of the types described in the categories (a) through (e) above. There is a final, additional overriding limitation of $5,000,000 in benefits (including net cash surrender and net cash withdrawal values) with respect to one owner of multiple non-group life insurance policies (regardless of the number of policies).

   Post January 1, 2013 insolvencies and rehabilitations:

   (a) Life Insurance Death Benefit: $300,000 per insured
   (b) Life Insurance Cash Surrender: $100,000 per insured
   © Annuity Present Value of Benefits: $250,000 per annuitant
   (d) Structured Settlement Annuity Present Value of Benefits: $250,000 per payee
   € Certain Unallocated Group Annuity Benefits: $5,000,000 per contract owner.
   (f) Health Insurance:
   

   
   
   • Long term care and disability insurance: $300,000 per insured
   • Basic Hospital, medical and surgical insurance or major medical insurance: $500,000 per insured.
   • Health insurance benefits other than those listed above: $100,000 per insured.
     

   
   There is an additional overriding limitation of $300,000 in total benefits for coverages of the type described in categories (a) through (d) above, except there is an overriding limitation of $500,000 for basic hospital, medical and surgical insurance or major medical insurance. There is a final, additional overriding limitation of $5,000,000 in benefits (including net cash surrender and net cash withdrawal values) with respect to one owner of multiple nongroup life insurance policies (regardless of the number of policies).

10. Can you give me some examples?

    Here are some examples (assuming, in each case, that the insurance company is a member of the Indiana Association and is authorized in Indiana to sell the insurance products mentioned in the example):

    Example 1: Jane Doe has three life insurance policies, each with a net cash surrender value of $50,000, issued by the same insurance company and that company fails. The maximum amount of net cash surrender value protection provided by the Indiana Association would be $100,000. That coverage would be allocated equally among the three policies. The amount in excess of that covered by the Indiana Association would be eligible for submission of a policy owner claim against the estate of the liquidated insurer. The receiver would provide the policy owner with claim forms and set a bar date for filing of the claim.

    Example 2: John Doe has two life insurance policies, with total death benefits of $500,000, issued by the same insurer. He dies and that company fails before the death benefit is paid. The maximum amount of death benefits covered by the Indiana Association would be $300,000 allocated equally among the two policies. The amount in excess of that covered by the Indiana Association would be eligible for submission of a policy owner claim against the estate of the liquidated insurer. The receiver would provide the policy owner with claim forms and set a bar date for filing of the claim.

    Example 3: Jane Doe has a long term care policy and a life insurance policy (with a $400,000 death benefit) issued by the same insurance company and it fails. During an illness and after the company fails, she receives $200,000 in long term care benefits under the long term care policy and then dies. The Indiana Association would cover $300,000. $200,000 in long term care benefits and $100,000 in life insurance because the overriding limitation is $300,000. The amount in excess of that covered by the Indiana Association would be eligible for submission of a policy owner claim against the estate of the liquidated insurer. The receiver would provide the policy owner with claim forms and set a bar date for filing of the claim.

    Example 4: John Doe is the annuitant under two annuity contracts issued by the same insurance company. The annuities are not structured settlement annuities. Each annuity contract has $200,000 in present value annuity benefits. The insurance company fails and was not in rehabilitation or liquidation prior to January 1, 2013. The Indiana Association would cover only a total of $250,000 of those annuity benefits and the coverage would be allocated equally between the two annuities. The amount in excess of that covered by the Indiana Association would be eligible for submission of a policy owner claim against the estate of the liquidated insurer. The receiver would provide the policy owner with claim forms and set a bar date for filing of the claim.

    Example 5: A husband and wife have two annuity contracts issued by the same insurance company. The annuities are not structured settlement annuities. Each annuity contract has $60,000 in present value annuity benefits. Husband is the annuitant under one contract and wife is the annuitant under the other contract. The insurance company fails. Because the contracts have different annuitants, they are not aggregated for purposes of applying the Indiana Association’s limits and the $60,000 in present value of annuity benefits under each annuity contract is fully covered.

    Example 6: ACME Inc. sponsors a 401(k) benefit plan that purchased two $4,000,000 unallocated annuity contracts from the same member insurer. That insurer fails. The Indiana Association’s total coverage obligation for the two unallocated annuities would be $5,000,000 and would be allocated equally between the two annuities.

    Example 7: Jane Doe is the payee of a structured settlement annuity, and has $500,000 in present value annuity benefits. The insurance company fails (and was not in liquidation or rehabilitation prior to January 1, 2013). The Indiana Association would cover only $250,000 of those annuity benefits and payments would be adjusted to reflect the coverage limit. The amount in excess of that covered by the Indiana Association would be eligible for submission of a policy owner claim against the estate of the liquidated insurer. The receiver would provide the policy owner with claim forms and set a bar date for filing of the claim.

11. How does the Indiana Association provide its coverage?

    This varies on a case by case basis. The Indiana Association may fulfill its coverage obligations by directly assuming the policies. Or, the Indiana Association may work with the receiver and other associations to arrange for another, solvent insurer to assume the insolvent company’s policy obligations, subject to statutory limits.

12. How can I find information on the financial strength of my insurance company?

    You can contact the Indiana Department of Insurance at 317-232-2385 or find rating information from one of the rating agencies which can be found on our Links page.

13. How will I know if my life, annuity or health insurance company has failed?

    If this happens, you will receive official notification from a court or the appropriate insurance regulator. Typically, such a notice will advise you about guaranty association protection.

14. If my insurance company fails and I am entitled to coverage from the Indiana Association, how long will I have to wait before I receive that coverage?

    The answer to that question depends on the specific situation. Generally, the Indiana Association works closely with the appropriate insurance regulators in an effort to process claims and provide benefits with as little delay as possible. However, delays can arise because of the need to sort out or stabilize the financial affairs of an insolvent insurance company or to deal with a claims backlog.

15. Where does the Indiana Association get the money to provide this protection?

    The Indiana Association collects money, through assessments, from each of its member insurance companies. The Indiana Association may also receive distributions from the estates of failed member insurance companies, to the extent funds are available and such distributions comply with all applicable laws.

16. Why hasn't my insurance agent or company told me about the Indiana Association?

    When the Indiana General Assembly created the Indiana Association, it was concerned that people purchasing insurance might be led to believe that the financial strength of their insurance company was irrelevant because of the existence of the Indiana Association. Because the scope and amount of protection provided by the Indiana Association is limited, that would be a dangerous belief to adopt and, therefore, the statute which created the Indiana Association includes a provision which prohibits insurance companies and agents from using the Indiana Association to sell insurance. You should not use the existence of the Indiana Association as a substitute for the exercise of prudence in selecting a financially sound and well-managed insurance company.

17. Where can I get more information about the Indiana Association and the coverage it provides?

    You can obtain more information about the Indiana Association, as well as the comparable associations in other states, at the website of the National Organization of Life and Health Insurance Guaranty Associations. You may also contact the Indiana Association or the Indiana Department of Insurance at the addresses or telephone numbers set forth below.

    Indiana Life and Health Insurance Guaranty Association
    3502 Woodview Trace, Suite 100
    Indianapolis, IN 46268
    (317) 636-8204
    www.inlifega.org

    Indiana Department of Insurance
    311 West Washington Street
    Indianapolis, IN 46204
    (317) 232-2385
    www.in.gov/idoi/

    The intent of this material is to explain briefly, in non-technical language, how the Indiana Life and Health Insurance Guaranty Association provides protection to policyholders in the event their insurance company becomes insolvent and is ordered to be liquidated by a court. For a definitive statement of the law governing the Indiana Life and Health Insurance Guaranty Association, you must refer to the Indiana Life and Health Insurance Guaranty Association Act itself (Indiana Code-27-8-8).