Florida Life & Health Insurance Guaranty Association

Frequently Asked Questions

1. What happens when my insurance company goes out of business?

   In general, a court of competent jurisdiction will work with the department of insurance in determining when an insurance company requires special regulatory control. Some steps that might be taken are not publicly announced, but may include supervision of some kind. If early steps do not turn the company around, a period of public rehabilitation may follow. This means a receiver is appointed for purposes of operating the company more effectively. The receiver's power allows for strong actions to be taken, some of which might affect policies. In rare cases, the problems cannot be worked out and the court decides the company should be liquidated. This means that the receiver now becomes a liquidator who is charged with selling off the company assets for the benefit of policyholders and creditors. At the point of liquidation, FLAHIGA takes on the obligation of protecting Florida policyholders. We obtain the policy records and history from the liquidator, collect premiums that become due, administer the policies and pay all valid claims. FLAHIGA will normally continue coverage as long as premiums are paid or cash value exists. We may do this directly, or through service agents. Since FLAHIGA is a safety net but not an insurance company, we will seek to transfer policies to a sound insurer as soon as it is practical to do so. When possible under the terms of the policy, FLAHIGA may also elect to cancel policies after notice is given to you and after all valid claims have been paid.

2. How is policy coverage determined?

   Coverage is determined by Florida law, policy language and other circumstances at the time FLAHIGA is activated (when the member insurer is found to be insolvent and ordered liquidated by a court). Any coverage is subject to the legal limits set forth in the FLAHIGA Act.

3. What is the Florida Life & Health Insurance Guaranty Association and what does it do?

   In the 1970s many state legislatures worked with the insurance industry to form guaranty associations to protect life, health and annuity policyholders. In Florida, this happened in 1979 with the creation of FLAHIGA. All insurance companies (with limited exceptions) licensed to write life and health insurance or annuities in Florida were required, as a condition of doing business in the state, to be members of FLAHIGA. Eleven insurance companies make up the FLAHIGA Board of Directors. FLAHIGA's office is located in Tallahassee.

   If a member company becomes insolvent, a receiver is appointed by a state court to wind up the company and the policy obligations pass over to FLAHIGA. We collect the records and files of the company where possible and as soon as we can identify valid claims, we pay them. We also collect premiums and administer the policies, including providing payments if a policyholder surrenders a policy. We may select servicing agents to help with these functions. Generally we also work to find another sound insurance company to take over the policies; when this happens, we also transfer enough money to the new company to keep the policies on a firm footing. Sometimes, if the insolvent insurer had the power to cancel policies, we may also do that, provided that we pay all valid claims first. Whatever we do, it will be with full notice to you and you will be given a reasonable time to seek insurance elsewhere if you desire. All 50 states, the District of Columbia, and Puerto Rico have life and health insurance guaranty associations. We all work together to provide a nationwide system for policyholder protection.

4. Who is protected?

   Life and health insurance guaranty associations cover individual policyholders and their beneficiaries; typically, persons protected by certificates of insurance issued under policies of group life or group health insurance are also covered. Annuities that are directly issued to and owned by individuals, or annuities that directly guarantee benefits to individuals by the insurer are generally covered. What are known as "unallocated" annuities are not covered. Limits on benefits and coverage are established by the FLAHIGA Act. For more information about coverage, see the questions below.

5. If I move to another state after purchasing a policy, will I still have guaranty association coverage? If so, who will provide it?

   If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

6. What contracts are covered?

   Generally, direct individual or direct group life and health insurance policies as well as individual and allocated annuity contracts issued by FLAHIGA's member insurers are covered by the association. Such coverage is limited by the terms of the FLAHIGA Act.

7. Are all policies fully protected?

   There are limits to FLAHIGA coverage set by the Florida Legislature through the FLAHIGA Act. A policy must meet coverage requirements, and there are limits to the amounts FLAHIGA pays as a maximum. If your insurance company fails, the maximum amount of protection provided by FLAHIGA for any one person is:

   
   

   Life Insurance Net Cash Surrender	$100,000 per insured life
   Life Insurance Death Benefit	$300,000 per insured life
   Deferred Annuity Net Cash Surrender	$250,000 per contract owner
   Annuity in Benefit	$300,000 per contract owner
   Major Medical Expense; Basic Hospital and Medical-Surgical Health Insurance	$500,000 per insured life
   Long-Term Care Policies	$300,000 per insured life

   
   (All the above limits assume the policy or contract is covered)

8. For example, if I own three deferred annuities and each has a cash surrender value of $100,000, and my insurance company fails, how much will FLAHIGA pay if I want to cash surrender my deferred annuities?

   The total annuity cash surrender protection per owner per member company is $250,000. That per person limit is a maximum that applies without regard to the number of annuity contracts. As a result, if an individual owned three deferred $100,000 annuities with the same insolvent insurance company, FLAHIGA would pay a maximum total of $250,000 in cash surrender values. The value in excess of this statutory coverage limit can be submitted as a claim by you for $50,000 against the estate of the failed insurer. The receiver will furnish claim forms and set a bar date for filing during the course of the receiver's administration of the estate.

9. What will happen to my insurance coverage if the guaranty association becomes liable for my policy?

   In general, your policy will be continued under its terms and conditions while FLAHIGA determines its course of action. Valid claims will be paid, premiums will be collected and your policy will continue under FLAHIGA administration. However, since FLAHIGA is not an insurance company, efforts will be made to find another viable insurance company that wants to acquire the policies. If this happens, you will be notified in advance and FLAHIGA will fund the transfer process. If no viable market exists for the policies of the liquidated insurer, FLAHIGA may cancel the policies but only if that right was available to the insurer had a liquidation not occurred. Depending on the type of policy, state or federal law may impose extensions of the time for which you are covered even after a cancellation. FLAHIGA also has the authority under the FLAHIGA Act to offer substitute policies of substantially the same type.

   In most insolvency situations, FLAHIGA works with other state guaranty associations to develop an overall plan to provide protection for the failed insurer's policyholders. The amount of protection provided, and when you receive it, may depend on the particular arrangement worked out but you will be entitled to the benefits of FLAHIGA protection and coverage to its limits.

10. If my insurer just went under, when will FLAHIGA start providing benefits?

    Insurance company operations are very involved and many companies operate in different ways. Some companies handle everything from premium collection, policyholder record development, claims handling and policy administration and retention, and they do it all in one location. Other companies farm almost everything out so that work is done in multiple locations, sometimes dozens of locations, some of which may be thousands of miles from the home office. FLAHIGA may have to search across the country to piece together all the parts necessary to make sense out of what a liquidated company was doing with records and claims. Moreover, companies that fail tend to be poor at record keeping and lack modern methods of processing data. The process of putting everything back together right is sometimes very difficult.

    FLAHIGA has joined with the other guaranty associations throughout the country in an effort to work with departments of insurance and receivers on ways to improve insolvency administration. Our first priority is to identify policyholders and pay their valid claims as rapidly as possible.

11. What products are not protected by FLAHIGA?

    The FLAHIGA Act specifies that policies and contracts from non-licensed insurers are not covered. Beyond that, the FLAHIGA Act excludes all of the following:

    a) any portion or part of a variable life insurance contract or a variable annuity contract that is not guaranteed by a licensed insurer;

    b) any portion or part of any policy or contract under which the risk is borne by the policyholder;

    c) any policy or contract or part thereof assumed by the failed insurer under a contract of reinsurance, unless assumption certificates were issued;

    d) fraternal benefit society products;

    e) health maintenance insurance;

    f) dental service plan insurance;

    g) pharmaceutical service plan insurance;

    h) optometric service plan insurance;

    i) ambulance service association insurance;

    j) preneed funeral merchandise or service contract insurance;

    k) prepaid health clinic insurance;

    l) certain federal employees group policies;

    m)any annuity contract or group annuity contract that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed directly and not through an intermediary to an individual by an insurer under such contract or certificate.

12. How will I know if my life or health insurance company has failed or is unable to fulfill its obligations to its policyholders?

    You will receive a notification from the receiver and/or FLAHIGA if your insurance company is found to be insolvent and ordered liquidated.You will receive a notification from the receiver and/or the Florida Life & Health Insurance Guaranty Association if your insurance company is found to be insolvent and ordered liquidated.

13. How can I find out if my company is licensed in Florida?

    Call the Consumer Helpline provided by the Florida Department of Financial Services. The number is 1-877-MY-FL-CFO (1-877-693-5236) or 850-413-3089 for Out of State callers. The Department maintains complete and current records of all insurance companies licensed to do business in Florida. Additionally, you can use the Company Search page at the Office Insurance Regulation by clicking this link.

14. Why hasn't my agent or company told me more about the Florida Life & Health Insurance Guaranty Association?

    The law prohibits insurance agents and companies from using the existence of FLAHIGA for the purpose of sales, solicitation or inducement to purchase any form of insurance covered by FLAHIGA. The guaranty association is not and should not be a substitute for your prudent selection of an insurance company that is well managed and financially stable. Agents are prohibited by statute from using this Web site or the existence of the guaranty association as an inducement to purchase insurance.

15. Can FLAHIGA advise me what to do?

    The purpose of FLAHIGA is to provide underlying protection to policyholders in the event of a liquidation. We will do the best we can to help you understand your options, but we cannot give legal advice or advice on what course of action to follow. In important matters, you should seek professional assistance from legal counsel or your insurance agent. In many areas the public library system has a wealth of information on insurance matters and the library may be able to recommend other resources.

16. Where can I find a copy of the FLAHIGA Act?

    The FLAHIGA Act, known in legal circles as Florida Statutes Chapter 631 Part III, is contained in a multi-volume set of law books entitled "The Florida Statutes." A new set is published every year after the legislature ends. The volumes contain all state laws. Every public library will have a current set in its resource section. Ask for assistance in finding the FLAHIGA Act at Chapter 631 Part III.

    The FLAHIGA Act is also available on line at a site sponsored by the Florida Senate. Go to www.flsenate.gov. On the Home Page, look for the section titled Laws. Find the Florida Statutes and scan down to Chapter 631 Part III.

17. Where can I get advice on purchasing life, health, or annuity products?

    The guaranty association does not provide financial advice or comment on the financial condition of any particular company. You can obtain advice from captive insurance agents, independent insurance brokers, and rating agencies. Generally, captive agents sell products from a single insurer. Brokers usually can sell the products of multiple insurers.

    Rating agencies assign comparative ratings to insurers based on various criteria. Most rating agencies are paid by the insurer to do an assessment examination and to issue a rating. This is the case with the largest and most well-known agencies, such as Standard and Poor’s, A. M. Best, Moodys, and Fitch Ratings. Since the companies pay to have themselves rated, those ratings are generally available to the public without charge. One rating agency does not accept payment from the insurer being rated—TheStreet.com. You must pay to obtain its rating results.

    You may also wish to contact your state insurance department regarding information on a particular company.

18. Are you a State agency?

    No. The guaranty association is a private entity, with its membership made up of all the life and health insurers licensed in the state (in fact, under state law an insurer must be a member of the association to be licensed to do business). The association was created by the legislature to serve as a safety net (subject to statutory limits) for residents should their life or health insurer fail. By creating the association, the legislature was able to ensure continued coverage to residents affected by their insurer’s failure. The association does work in cooperation with the Insurance Department in fulfilling its role of protecting residents whose insurance company is being liquidated.

19. How can I determine the financial soundness of my insurance company?

    Consumers can contact the Office of Insurance Regulation (850-413-3140) to determine if an insurance company is licensed to write business in Florida. Consumers can also check the financial strength ratings of the company, which are issued by various ratings agencies (see “Where can I get advice on purchasing life, health, or annuity products?” above).

20. If my company is in the process of rehabilitation/conservation and I have an emergency and need to withdraw monies from my annuity, what is the process?

    Surrenders and loans may be allowed on a case-by-case basis for genuine hardship situations upon written application to the Receiver. Hardship circumstances and procedures will differ from company to company and (after liquidation) from guaranty association to guaranty association. Examples of hardship cases may include (1) terminal illness or permanent disability; (2) substantial medical expenses not covered by medical insurance; (3) financial difficulties resulting in inability to pay for essential life support needs like food and shelter; (4) imminent removal from a hospital, nursing home, or other medical care facility due to inability to pay; (5) imminent bankruptcy; and (6) immediate need for college tuition payments for a dependent child.

21. Is long-term-care insurance covered by the guaranty association?

    Yes, long-term-care insurance is typically considered health insurance and covered by the guaranty association.

22. Are variable annuities covered by the guaranty association?

    Generally speaking, a variable annuity contract with general account guarantees will be eligible for guaranty association coverage, subject to applicable limits and exclusions on coverage. However, specific questions regarding coverage will be determined by the applicable guaranty association based on the terms of the contract, other relevant facts, and the guaranty association law in effect at the time of liquidation.

23. If my company is liquidated, do I have to file a claim with the association?

    If your insurance company is liquidated, you will receive a notice from the court-appointed Receiver (typically the Insurance Commissioner of the company’s state of domicile), who will oversee the liquidation of the company and inform you of any new claims procedures. There may be no change in the claims submission process—guaranty associations, working with the Receiver, sometimes continue processing claims using the liquidated company’s existing claims staff if that will maximize the speed and efficiency with which claims are processed. In other cases, the associations process the claims themselves or use an independent processing company, known as a third-party administrator, to process claims. In any event, you will be notified of the ongoing claims process. If you wish to continue coverage, you must continue to pay the premium required by your policy.

24. Should I continue to pay my premiums?

    Yes. If you are paying premiums to your company and wish to keep your coverage in place, you must continue to do so—those premiums go to the guaranty association providing you continuing coverage. If you stop paying premiums, your insurance coverage may be terminated.

25. Is my company covered by the guaranty association?

    The guaranty association provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in the state). To determine if a company is licensed to write business in Florida, you may call the Office of Insurance Regulation at 850-413-3140. The Office maintains complete and current records of all insurance companies licensed to do business in Florida. Information about companies licensed to write insurance in Florida may also be obtained from the Office’s Web site.

26. What happens if the benefits promised in my policy are greater than the coverage limits provided by the guaranty association?

    Guaranty associations, in conjunction with the Receiver, may be able to negotiate a transfer of a company’s policies, up to the amount of the guaranty association benefit limits, to a financially sound insurer. If an association administers claims against the policy and the benefit limits are reached, any claim in excess of that limit may be submitted as a policyholder-level claim against the estate of the failed insurance company, and the contract holder may receive distributions as the company’s assets are liquidated by the Receiver.