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The following Frequently Asked Questions have not yet been amended to reflect the changes in Texas law that will take effect for insolvencies that occur on or after September 1, 2005. It is anticipated that a revised set of Frequently Asked Questions will be published by the end of September, 2005. Please use your browser Print button to print the entire list. | ||||||||||||||
Frequently Asked Questions | ||||||||||||||
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1. What is the Texas Life, Accident,
Health & Hospital
Service Insurance Guaranty Association? 2. What protection do I have if my life or health insurance company fails or is unable to fulfill its obligations to its policyholders? 3. What kinds of insurance policies are protected by the Texas Guaranty Association? 4. What is not protected by the Texas Guaranty Association? 5. Does it matter where I live? 6. When is Guaranty Association coverage determined? 7. Are all policies fully protected? 8. For example, if I own three annuities, each worth $100,000, if the insurance company fails, how much is protected? 9. My spouse and I each own an annuity contract worth $75,000 with the same insurance company. Does the $100,000 limit apply to us jointly? 10. I have a retirement plan with my employer. I have selected a fixed interest option funded by a guaranteed investment contract (GIC), issued by a life insurance company to my employer. Will my invested funds be protected by the Texas Guaranty Association? 11. How will I know if my life or health insurance company has failed or is unable to fulfill its obligations to its policyholders? 12. How long will I have to wait to receive the protection provided by the Texas Guaranty Association? 13. How is the protection provided? 14. Where does the Texas Guaranty Association get the money to provide this protection? 15. What if I move to another state after I buy insurance? 16. Are the policies of every insurance company protected by the Texas Guaranty Association? 17. How can I find out if my company is licensed in Texas? 18. How can I find out about the financial condition of an insurance company? 19. Why hasn’t my agent or company told me more about the Texas Guaranty Association? 20. Where can I go to get more information about the protection provided by the Texas Guaranty Association? |
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| 1. What is the Texas
Life, Accident, Health & Hospital Service Insurance Guaranty Association? The Texas Life, Accident, Health & Hospital Service Insurance Guaranty Association is an association of insurance companies that are licensed to sell life insurance, health insurance and annuities in this state. It was created by the Texas Legislature in 1973 to protect Texas policyholders, up to certain limits, from the repercussions of financial failure of an insurance company licensed to sell those types of policies in Texas. Return to Top 2. What protection do I have if my life or health insurance company falls or is unable to fulfill its obligations to its policyholders? The Texas Guaranty Association provides LIMITED PROTECTION of your life, health and annuity benefits. This limited protection is outlined in the questions and answers that follow. Return to Top 3. What kinds of insurance policies are protected by the Texas Guaranty Association? Life insurance policies, health insurance policies and annuity contracts are protected, subject to certain conditions and limitations. Return to Top 4. What is not protected by the Texas Guaranty Association? Policies with insurers not licensed to do business in Texas; Health Maintenance Organization (HMO) contracts; Policy benefits the insurer does not guarantee (such as the non-guaranteed portion of a variable life insurance or annuity contract) or for which the policyholder bears the risk; Self-insured employer plans; Interest rate yields that exceed an average rate; Fraternal benefit society insurance certificates. Certain, less commonly known insurance policies and arrangements not listed here are also not protected. If you are unsure about whether your policy is protected, you should contact the Texas Guaranty Association. Return to Top 5. Does It matter where I live? The Texas Guaranty Association only protects policyholders who are residents of Texas at the time the insurance company is impaired. It does not matter where the policyholder’s beneficiaries live. Return to Top 6. When is Guaranty Association coverage determined? Coverage is determined at the time the Texas Guaranty Association is activated to provide protection (when the member insurance company is found to be insolvent and designated as an impaired insurer by the Texas Commissioner of Insurance). This coverage is based on the policy and the Texas law at that time. Return to Top 7. Are all policies fully protected? No. If your insurance company fails, the maximum amount of protection provided by the Texas Guaranty Association for each type of policy, no matter how many of that type of policy you bought from your company is:
Return to Top 8. For example, if I own three annuities, each worth $100,000, if the Insurance company fails, how much is protected? $100,000 - that’s the maximum amount protected by the Texas Guaranty Association for all annuities you own with a single insurer. Return to Top 9. My spouse and I each own an annuity contract worth $75,000 with the same insurance company. Does the $100,000 limit apply to us jointly? No. Since there are there are two separate owners, each owner would have a maximum protection of $100,000. Return to Top 10. I have a retirement plan with my employer. I have selected a fixed interest option funded by a guaranteed investment contract (GIC), issued by a life insurance company to my employer. Will my invested funds be protected by the Texas Guaranty Association? If the guaranteed interest contract guarantees annual benefits with respect to a specific individual identified in the contract, then such individual, if a Texas resident certificate holder, is protected by the Texas Guaranty Association up to a maximum of $100,000. If the guaranteed interest contract does not guarantee annuity benefits with respect to any specific individual identified in the contract, and the contract is owned by a Texas resident entity, the contract is protected up to a maximum of $5 million, in the aggregate. Return to Top 11. How will I know if my life or health insurance company has failed or is unable to fulfill its obligations to its policyholders? You will receive official notification from the Texas Guaranty Association if the Insurance Commissioner declares your insurance company to be an impaired insurer in the state of Texas. Return to Top 12. How long will I have to wait to receive the protection provided by the Texas Guaranty Association? If your insurer is no longer able to fulfill its obligations, 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 receiving payments. It is also possible that benefit payments may not be delayed at all. Return to Top 13. How is the protection provided? Protection can be provided in one of several different ways. For example, the Texas Guaranty Association may provide coverage directly by continuing the insurer’s policies or issuing replacement policies with the Guaranty Association. A financially sound Insurer may take over the troubled company's policies and assume the responsibility for continuing coverage and paying covered claims. In some situations, the Texas Guaranty Association 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. Return to Top 14. Where does the Texas Guaranty Association get the money to provide this protection? The Texas Guaranty Association is authorized to make assessments against all insurers licensed to issue life, health or annuity policies in Texas. Membership in the Association is mandatory. Return to Top 15. What if I move to another state after I buy insurance? Generally speaking, you are protected by the guaranty association of the state in which you live at the time your company fails. Although all 50 states plus the District of Columbia and Puerto Rico have guaranty associations, the level of protection varies. If you move to another state, you should contact the insurance department or guaranty association in that state for more information. Return to Top 16. Are the policies of every insurance company protected by the Texas Guaranty Association? Only a policy with an insurance company licensed to issue life, health or annuity policies in this state is protected by the Texas Guaranty Association with the exception of those types of companies and policies previously discussed which are not covered. Return to Top 17. How can I find out if my company is licensed in Texas? Call the Texas Insurance Department at 1-800-252-3439. It maintains complete and current records of all insurance companies licensed to do business in Texas. Return to Top 18. How can I find out about the financial condition of an insurance company? You can review insurance company rating publications at your local library, or you can contact the Texas Insurance Department at 1-800-252-3439. Return to Top 19. Why hasn’t my agent or company told me more about the Texas Guaranty Association? Because this protection is limited, the Legislature prohibited agents and companies from advertising the Texas Guaranty Association. The Guaranty Association 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 brochure, or the existence of the Guaranty Association, as an inducement to purchase insurance. Return to Top 20. Where can I go to get more information about the protection provided by the Texas Guaranty Association? The purpose of this material is to help you understand the general nature and conditions of life, health and annuity policy protection provided by the Texas Guaranty Association. It is only a summary, however, and if you have any questions that are not answered here, you should call or write the Texas Guaranty Association at Austin, Texas 78730 512-476-5101 800-982-6362 The intent of this material is to explain briefly, in clear and non-technical language, how the Texas Guaranty Association provides protection to policyholders in the event their insurance company becomes insolvent and is ordered liquidated by a court. For a definitive statement of the governing the Texas Guaranty Association, you must refer to the Guaranty Association law itself You may obtain a copy of the law by Texas Guaranty Association at the address above.
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