Key Takeaways
- The Illinois Life and Health Insurance Guaranty Association protects policyholders when insurers become insolvent
- Life insurance death benefit coverage is limited to $300,000 per insured
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $250,000 in present value per contract owner
- Producers cannot use guaranty association coverage as a selling point
Illinois Life and Health Insurance Guaranty Association
The Illinois Life and Health Insurance Guaranty Association protects Illinois residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The Illinois Guaranty Association is a nonprofit organization that:
- Protects policyholders of insolvent insurers
- Continues coverage or pays claims up to limits
- Is funded by assessments on member insurers
- Operates under state law supervision
How It Works
When an insurer becomes insolvent:
- Court orders liquidation - Illinois court places insurer in liquidation
- Guaranty Association activates - Association takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
The Illinois Guaranty Association provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per insured |
| Cash Surrender Value | $100,000 per policy |
| Total per owner | Subject to aggregate limits |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract owner |
| Allocated Annuities | $250,000 per contract |
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: Illinois life death benefit limit is $300,000 (not $500,000 like some states). This is a frequently tested difference.
What Is Covered
The Illinois Guaranty Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (Illinois residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in Illinois
- Policies from insurers not members of the Association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Variable portions of variable life/annuities (covered by securities guaranty)
Funding
The Illinois Guaranty Association is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume in Illinois
- May be recouped through rate surcharges
- Assessed when insolvency occurs
Producer Restrictions
Advertising Prohibition
Producers cannot:
- Use Guaranty Association coverage as a selling point
- Advertise Guaranty Association protection
- Imply policies are "guaranteed" by the association
- Compare the Association to FDIC insurance
Required Conduct
- 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 prohibited by law.
Claim Process
When an insurer becomes insolvent:
- Policyholder notified by liquidator
- 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 Illinois Life and Health Insurance Guaranty Association?
Can an Illinois insurance producer use guaranty association coverage as a selling point?
What is the maximum annuity coverage provided by the Illinois Guaranty Association?
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