Key Takeaways
- The Washington Life and Disability Insurance Guaranty Association protects policyholders when insurers become insolvent
- Life insurance death benefit coverage is limited to $500,000 per insured
- Cash surrender value coverage is limited to $100,000 per policy
- Health insurance coverage is limited to $500,000 per individual
- Producers cannot use guaranty association coverage as a selling point
Washington Life and Disability Insurance Guaranty Association
The Washington Life and Disability Insurance Guaranty Association protects Washington residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The 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 RCW 48.32A
How It Works
When an insurer becomes insolvent:
- State takes over - Insurance Commissioner places insurer in receivership
- 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 | $500,000 per insured |
| Cash Surrender Value | $100,000 per policy |
| Present Value (total) | $500,000 per insured |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract |
| Multiple Annuities | $250,000 total per owner |
Health/Disability 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 Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (Washington residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in Washington
- Policies from insurers not members of the Association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Variable products investment portion
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 Association coverage as a selling point
- Advertise guaranty association protection
- Imply policies are "guaranteed" by the association
- Compare 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.
Claim Process
When an insurer becomes insolvent:
- Policyholder notified by receiver
- Coverage assessed - 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 Washington Guaranty Association for a life insurance policy?
Can a Washington insurance producer use guaranty association coverage as a selling point?
What is the maximum cash surrender value coverage under the Washington Guaranty Association?
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