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Michigan Life & Health Insurance Guaranty Association
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1640 Haslett Road, Suite 160 / Haslett, MI 48840-8683 |
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Frequently Asked Questions  |
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Are all policies fully protected?
Not always. The MLHIGA Act limits the amount MLHIGA is obligated to pay out: MLHIGA cannot pay more than what the insurance company would owe under a policy or contract. Also, for any one insured life, regardless of the number of policies or contracts held with the same company, MLHIGA will pay a maximum of $300,000 in aggregate for the following benefits: $300,000 in life insurance death benefits, $100,000 in cash surrender values, $300,000 in disability income insurance benefits, $300,000 in long term care insurance benefits, $100,000 in health insurance benefits besides basic hospital, medical, and surgical benefits, $250,000 in the present value of individual qualified retirement annuities (issued under section 403(b), 408, or 408A of the Internal Revenue Code), and $100,000 in the present value of all other annuities (including structured settlement annuities). As an exception to this maximum aggregate of $300,000, for any one insured life, MLHIGA will pay a maximum of $500,000 in aggregate for basic hospital, medical, and surgical insurance benefits.
For example, if you own three annuities (non “individual qualified retirement annuities”), each worth $100,000, from a company that is declared insolvent and ordered liquidated, only $100,000 may be protected because that is the maximum amount protected under the MLHIGA Act for all annuities you purchased 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 $100,000 in present value of annuity benefits per participating individual; for covered unallocated annuities that fund nongovernmental retirement plans, other benefit plans and government lotteries a special limit of $5,000,000 applies to each contractholder, regardless of the number of contracts held with the same company or number of persons covered by the plan. In all cases, of course, the contract limits also apply.
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, such as a variable contract sold by prospectus;
- 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;
- dividends;
-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 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); or
- 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.
Although licensed in Michigan, policies issued by the following entities are not covered by MLHIGA: a nonprofit health care corporation (e.g., Blue Cross/Blue Shield), 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 asessments, an insurance exchange, or an organization limited to the issuance of charitable gift annuities. |
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| NOTE: This information is not intended as legal advice, and no liability is assumed in connection with its use. The applicable state guaranty association statute is the controlling authority, regardless of any information presented on this site. Users should seek advice from a qualified attorney and should not rely on this compilation when considering any questions relating to guaranty association coverage. |
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