Key Takeaways
- The Arizona Life and Disability Insurance Guaranty Fund protects Arizona policyholders when insurers become insolvent
- Coverage limits are $300,000 for life insurance death benefits and $100,000 for cash surrender values
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $250,000 in present value per contract
- Producers cannot use guaranty fund coverage as a selling point or in advertising
Arizona Life and Disability Insurance Guaranty Fund
The Arizona Life and Disability Insurance Guaranty Fund protects Arizona residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The Guaranty Fund 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 Arizona Revised Statutes Title 20
How It Works
When an insurer becomes insolvent:
- State takes over - Director places insurer in liquidation
- Fund activates - Guaranty Fund takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
The Arizona Guaranty Fund provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per life |
| Cash Surrender Value | $100,000 per policy |
| Present Value (total) | $300,000 per life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract |
| Aggregate per owner | $250,000 |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Health Benefits | $500,000 per individual |
| Disability Income | $300,000 per individual |
| Long-Term Care | $300,000 per individual |
Exam Tip: Arizona's life insurance death benefit coverage limit of $300,000 is lower than some other states like California ($500,000). Know these Arizona-specific limits.
What Is Covered
The Guaranty Fund covers:
Covered Policies
- Individual life insurance
- Group life insurance (Arizona residents)
- Individual and group annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
Not Covered
- Policies from insurers not licensed in Arizona
- Policies from insurers not members of Guaranty Fund
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Investment portions of variable products (covered by SIPC)
Funding
The Guaranty Fund is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume in Arizona
- May be passed through to policyholders
- Recouped through rate surcharges over time
Producer Restrictions
Advertising Prohibition
Producers cannot:
- Use Guaranty Fund coverage as a selling point
- Advertise Guaranty Fund protection
- Imply policies are "guaranteed" by the fund
- Compare Guaranty Fund to FDIC insurance
- Reference the fund in sales materials
Required Information
- Cannot misrepresent guaranty fund coverage
- Must provide accurate information if specifically asked
- Cannot suggest coverage exceeds actual limits
- Cannot imply fund makes insurers equally safe
Exam Tip: Remember that producers CANNOT use guaranty fund coverage as a selling point or in advertising. This is a frequently tested rule.
Claim Process
When an insurer becomes insolvent:
- Policyholder notified by liquidator
- Coverage assessed - Guaranty Fund reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
Policyholder Steps
If your insurer becomes insolvent:
- Continue paying premiums as directed
- File claims as instructed by the liquidator
- Keep all policy documents
- Contact the Guaranty Fund if needed
- Be patient - process can take time
Comparison with Other States
| State | Life Death Benefit Limit | Annuity Limit |
|---|---|---|
| Arizona | $300,000 | $250,000 |
| California | $500,000 | $250,000 |
| Texas | $300,000 | $250,000 |
Key Differences
- Arizona's $300,000 life insurance limit is standard among states
- Health coverage at $500,000 is consistent with many states
- Aggregate limits apply per individual across all policies
Prevention
The best protection is choosing financially strong insurers:
- Check insurer ratings (AM Best, S&P, Moody's)
- Review financial statements
- Consider insurer size and history
- The Guaranty Fund is a safety net, not a selling point
What is the maximum death benefit coverage provided by the Arizona Life and Disability Insurance Guaranty Fund?
Can an Arizona insurance producer use Guaranty Fund coverage as a selling point?
What is the Arizona Guaranty Fund coverage limit for annuity present value?
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