The MLHIGA Act limits the amount MLHIGA is obligated to cover for each insolvent company as follows:
(1) MLHIGA cannot cover more than what the insurance company would owe under a policy or contract;
(2) for any one life, regardless of the number of policies or contracts held with the same company, MLHIGA will cover a maximum of:
(a) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(b) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;
© for health insurance: (i) $300,000 in disability income insurance benefits or long-term care benefits; (ii) $500,000 in basic hospital, medical, and surgical insurance benefits; (iii) $100,000 in all other health insurance benefits.
(d) In no event is the association obligated to cover more than an aggregate of $300,000 in all benefits (other than basic hospital, medical, and surgical benefits) for any one life.
The limits mentioned above are applied per any “one life” per insolvent company.
As an example of this “one life” limitation, if you own three annuities with the same annuitant from the same insurance company, each worth $100,000 and that company is declared insolvent and ordered liquidated, only $250,000, in total, may be protected because that is the maximum amount protected under the MLHIGA Act for all annuities from a single insurer.
Note to benefit plan trustees or other holders of unallocated annuities (GICs, DACs, etc.) covered by the act: for unallocated annuities that fund governmental retirement plans only under sections 401(k), 403(b) or 457 of the Internal Revenue Code, the limit is $250,000 in present value of annuity benefits per participating individual; for covered unallocated annuities that fund other plans, benefits are not available on an individual basis and a special limit of $5,000,000 applies to the contract holder, regardless of the number of contracts held with the same company or number of persons covered by the plan. Coverage is dependent on plan sponsor having its principal place of business in Michigan. In all cases, of course, the contract limits also apply.
Exclusions from Coverage
Persons holding policies otherwise covered are not protected by MLHIGA if:
• they are eligible for protection under the laws of another state (this may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insureds who live outside that state); or
• the insurer was not authorized to do business in Michigan.
The Association also does not provide coverage for:
• any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has assumed the risk;
• any policy of reinsurance (unless an assumption certificate was issued);
• interest rate yields that exceed an average rate set by formula in the MLHIGA Act;
• obligations not arising from the express written terms of the policy or contract;
• insurer’s obligation to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets owned by benefit plan;
• interest determined by external reference that has not been credited to the policy or is subject to forfeiture;
• employers' plans that are self-funded (that is, not fully insured by an insurance company, even if an insurance company administers them);
• unallocated annuity contracts, unless they fund a government lottery or a benefit plan of an employer, association or union, except that unallocated annuities issued to employee benefit plans protected by the federal Pension Benefit Guaranty Corporation are not covered. An unallocated annuity contract is an annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of an annuity benefit guaranteed to an individual by an insurer under the contract or certificate. The term shall also include, but not be limited to, guaranteed investment contracts and deposit administration contracts;
• policies issued by the following entities, even though licensed in Michigan: a nonprofit health care corporation, a health maintenance organization, a fraternal benefit society, a nonprofit dental care corporation (e.g. Delta Dental), a mandatory state pooling plan, a mutual assessment company or similar plan in which the policyholder is subject to future assessments, an insurance exchange, or an organization limited to the issuance of charitable gift annuities;
• a portion of a policy or contract to the extent that the assessments required by section 7709 of the MLHIGA Act for the policy or contract are preempted by federal or state law;
• a policy or contract providing any hospital, medical, prescription drug , or other health care benefits under Part C or Part D of Title XVIII of the Social Security Act, 42 USC 1395W-21 to 1395W-29 and 42 USC 1395W-101 to 1395W-152, or under regulations issued under Part C or Part D of Title XVIII of the Social Security Act, 42 USC 1395W-21 to 1395W-29 and 42 USC 1395W-101 to 1395W-152.
• MLHIGA will not provide duplicate coverage to any individual that is also covered by the laws of another state or another state’s guaranty association.