Key Takeaways
- Indiana Life and Health Insurance Guaranty Association (ILHIGA) protects policyholders when insurers become insolvent
- Coverage limits include \$300,000 maximum for life insurance death benefits
- Annuity coverage is limited to \$250,000 in present value
- Health insurance benefits are covered up to \$500,000 for major medical
- Producers cannot use guaranty association coverage as a selling point
Indiana Life and Health Insurance Guaranty Association
The Indiana Life and Health Insurance Guaranty Association (ILHIGA) protects Indiana residents when life and health insurance companies become insolvent.
Purpose and Function
ILHIGA is an 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
- ILHIGA activates - Association takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
ILHIGA provides coverage up to specific limits (for insolvencies on or after January 1, 2013):
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per life |
| Cash Surrender Value | $100,000 per policy |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract |
| Unallocated Annuities | $5,000,000 per contract holder |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Major Medical | $500,000 per individual |
| Other Health | $100,000 per individual |
| Disability Income | $300,000 per individual |
What Is Covered
ILHIGA covers:
Covered Policies
- Individual life insurance
- Group life insurance (Indiana residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
Not Covered
- Policies from insurers not licensed in Indiana
- Policies from insurers not members of ILHIGA
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Medicare C & D policies
- PBGC-protected retirement plan annuities
Funding
ILHIGA is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- May be passed through to policyholders
- Recouped through rate adjustments
Producer Restrictions
Advertising Prohibition
Producers cannot:
- Use ILHIGA coverage as a selling point
- Advertise ILHIGA protection
- Imply policies are "guaranteed" by the association
- Compare ILHIGA 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 - ILHIGA reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
What is the maximum death benefit coverage provided by ILHIGA for a life insurance policy?
Can an Indiana insurance producer use ILHIGA coverage as a selling point?
What is the maximum annuity coverage provided by ILHIGA?
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