Key Takeaways
- The NC Life and Health Insurance Guaranty Association protects policyholders when insurers become insolvent
- Life insurance death benefit coverage is limited to $300,000 per life
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $300,000 in present value per contract owner
- Producers cannot use guaranty association coverage as a selling point
North Carolina Life and Health Insurance Guaranty Association
The North Carolina Life and Health Insurance Guaranty Association protects North Carolina residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The Guaranty Association is a nonprofit 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:
- State takes over - Insurance Commissioner places insurer in liquidation
- Guaranty Association activates - Association takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
The North Carolina Guaranty Association provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per life |
| Cash Surrender Value | $300,000 per policy |
| Present Value (total) | $300,000 per life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $300,000 per contract owner |
| Multiple Annuities | $300,000 total per owner |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Health Benefits | $500,000 per individual |
| Disability Income | $300,000 per individual |
| Long-Term Care | $300,000 per individual |
What Is Covered
The Guaranty Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (North Carolina residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in North Carolina
- Policies from insurers not members of Guaranty Association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Investment products that are not insurance
Funding
The Guaranty Association is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- May be passed through to policyholders
- Recouped through rate surcharges
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
- Make the protection sound like a government guarantee
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 or in advertising. This is a frequently tested rule.
Claim Process
When an insurer becomes insolvent:
- Policyholder notified by liquidator
- Coverage assessed - Guaranty Association reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
What is the maximum death benefit coverage provided by the North Carolina Guaranty Association for a life insurance policy?
Can a North Carolina insurance producer use Guaranty Association coverage as a selling point?
What is the maximum health insurance benefit coverage provided by the North Carolina Guaranty Association?
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