Key Takeaways
- CLIFHIGA protects California policyholders when insurers become insolvent
- Coverage limits are $500,000 for life insurance death benefits and $250,000 for cash values
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $250,000 in present value
- Producers cannot use guaranty association coverage as a selling point
California Life and Health Insurance Guarantee Association
The California Life and Health Insurance Guarantee Association (CLIFHIGA) protects California residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
CLIFHIGA is a nonprofit association 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:
- State takes over - Insurance Commissioner places insurer in liquidation
- CLIFHIGA activates - Association takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
CLIFHIGA provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $500,000 per life |
| Cash Surrender Value | $250,000 per policy |
| Present Value (total) | $500,000 per life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract |
| Multiple Annuities | $250,000 total per owner |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Health Benefits | $500,000 per individual |
| Disability Income | $500,000 per individual |
| Long-Term Care | $500,000 per individual |
What Is Covered
CLIFHIGA covers:
Covered Policies
- Individual life insurance
- Group life insurance (California residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in California
- Policies from insurers not members of CLIFHIGA
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
Funding
CLIFHIGA is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- Passed through to policyholders in some cases
- Recouped through rate surcharges
Producer Restrictions
Advertising Prohibition
Producers cannot:
- Use CLIFHIGA coverage as a selling point
- Advertise CLIFHIGA protection
- Imply policies are "guaranteed" by the association
- Compare CLIFHIGA to FDIC insurance
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:
- Policyholder notified by liquidator
- Coverage assessed - CLIFHIGA reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
What is the maximum death benefit coverage provided by CLIFHIGA for a life insurance policy?
Can a California insurance producer use CLIFHIGA coverage as a selling point?
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