Key Takeaways
- The NY Life Insurance Company Guaranty Corporation protects policyholders when insurers become insolvent
- Coverage limits are $500,000 for life insurance death benefits
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $500,000 in present value
- Producers cannot use guaranty corporation coverage as a selling point
New York Life Insurance Company Guaranty Corporation
The New York Life Insurance Company Guaranty Corporation protects New York residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The Guaranty Corporation 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:
- Superintendent takes over - Places insurer in liquidation
- Guaranty Corporation activates - Takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
The Guaranty Corporation provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $500,000 per life |
| Cash Surrender Value | $500,000 per policy |
| Present Value (total) | $500,000 per life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $500,000 per contract |
| Aggregate | $500,000 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
The Guaranty Corporation covers:
Covered Policies
- Individual life insurance
- Group life insurance (NY residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in New York
- Policies from insurers not members of the Corporation
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
Funding
The Guaranty Corporation 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 Corporation coverage as a selling point
- Advertise Guaranty Corporation protection
- Imply policies are "guaranteed" by the corporation
- Compare to FDIC insurance
Required Disclosures
- Cannot misrepresent guaranty corporation coverage
- Must provide accurate information if asked
- Cannot suggest coverage exceeds actual limits
Exam Tip: Remember that producers CANNOT use guaranty corporation coverage as a selling point. This is a frequently tested rule. The protection exists for consumer safety, not as a marketing tool.
Claim Process
When an insurer becomes insolvent:
- Policyholder notified by liquidator
- Coverage assessed - Guaranty Corporation reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
What is the maximum death benefit coverage provided by the NY Life Insurance Company Guaranty Corporation?
Can a New York insurance producer use Guaranty Corporation coverage as a selling point?
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