Key Takeaways
- Montana Life and Health Insurance Guaranty Association protects policyholders when insurers become insolvent
- Coverage limits are \$300,000 for life insurance death benefits and \$100,000 for cash values
- Health insurance coverage is limited to \$500,000 for hospital/medical/surgical
- Annuity coverage is limited to \$250,000 per contract owner
- Producers cannot use guaranty association coverage as a selling point
Montana Life and Health Insurance Guaranty Association
The Montana Life and Health Insurance Guaranty Association protects Montana residents when life and health insurance companies become insolvent.
Purpose and Function
The Association was established under Montana law to:
- Protect policyholders of insolvent insurers
- Continue coverage or pay claims up to limits
- Funded by assessments on member insurers
- Operates under state law supervision
How It Works
When an insurer becomes insolvent:
- State takes over - Commissioner places insurer in liquidation
- Association activates - Takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
The Association provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per insured life |
| Cash Surrender Value | $100,000 per insured life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract owner |
| Disability Income | $300,000 per insured |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Hospital/Medical/Surgical | $500,000 per individual |
Aggregate Limits
The basic limit is $300,000 in protection in the aggregate for all types of contracts. However, that limit is increased to a maximum of $500,000 when covered health insurance claims exceed $300,000.
Unallocated Annuities
For unallocated annuity contracts, the Association will pay up to $5 million in benefits.
What Is Covered
The Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (Montana residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Supplemental contracts
Not Covered
- Policies from insurers not licensed in Montana
- Non-guaranteed portions of variable contracts
- Self-insured employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Fraternal benefit society insurance certificates
- Interest rate yields exceeding specified average rates
Funding
The Association 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 guaranty association coverage as a selling point
- Advertise guaranty association protection
- Imply policies are "guaranteed" by the association
- Compare guaranty association 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.
What is the maximum death benefit coverage provided by the Montana Guaranty Association for a life insurance policy?
Can a Montana insurance producer use guaranty association coverage as a selling point?
What is the maximum annuity coverage provided by the Montana Guaranty Association per contract owner?
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