Alabama Life and Disability Insurance Guaranty Association

The Alabama Life and Disability Insurance Guaranty Association (ALDIGA) protects Alabama residents when life and health insurance companies become insolvent (unable to pay claims).

Purpose and Function

ALDIGA is a statutory entity that:

• Protects policyholders of insolvent insurers
• Continues coverage or pays claims up to limits
• Is funded by assessments on member insurers
• Operates under state law supervision

How It Works

When an insurer becomes insolvent:

1. State takes over - Insurance Commissioner places insurer in liquidation
2. ALDIGA activates - Association takes responsibility for covered policies
3. Coverage continues - Up to statutory limits
4. Claims paid - Benefits paid to policyholders

Who Is Protected

Generally, an individual will be protected if:

• The individual lives in Alabama AND
• Holds a life or health insurance contract, annuity contract, or
• Is insured under a group insurance contract issued by a member insurer

The beneficiary, payee, or assignee of an insured person is protected as well, even if a non-resident of Alabama.

Membership

All insurance companies licensed to write life and health insurance or annuities in Alabama are required, as a condition of doing business in the state, to be members of the guaranty association.

Coverage Limits

ALDIGA provides coverage up to specific limits:

Life Insurance

Annuities

Health Insurance

What Is Covered

ALDIGA covers:

Covered Policies

• Individual life insurance
• Group life insurance (Alabama residents)
• Annuities
• Health insurance
• Disability income insurance
• Long-term care insurance

Not Covered

• Policies from insurers not licensed in Alabama
• Policies from insurers not members of ALDIGA
• Self-funded employer plans
• Government programs
• Surplus lines policies
• Amounts above coverage limits

Funding

ALDIGA is funded by assessments:

• Member insurers pay assessments when needed
• Assessments based on premium volume in Alabama
• May be passed through to policyholders in some cases
• Recouped through rate surcharges over time

Producer Restrictions

Advertising Prohibition

Producers cannot:

• Use ALDIGA coverage as a selling point
• Advertise ALDIGA protection
• Imply policies are "guaranteed" by the association
• Compare ALDIGA to FDIC insurance
• Use guaranty coverage to induce sales

Required Disclosures

• Cannot misrepresent guaranty association coverage
• Must provide accurate information if asked
• Cannot suggest coverage exceeds actual limits

Exam Tip: Remember that producers CANNOT use guaranty association coverage as a selling point. This is a frequently tested rule.

Claim Process

When an insurer becomes insolvent:

1. Policyholder notified by liquidator
2. Coverage assessed - ALDIGA reviews policies
3. Benefits continued or transferred to healthy insurer
4. Claims processed within coverage limits

For questions about ALDIGA coverage, contact:

• Alabama Life and Disability Insurance Guaranty Association
• Or visit the ALDOI website