Key Takeaways
- The NJ Life and Health Insurance Guaranty Association protects policyholders when insurers become insolvent
- Coverage limits are $500,000 for life insurance death benefits and $100,000 for cash values
- Health insurance coverage is limited to $500,000 per individual
- Annuity coverage is limited to $500,000 in present value per contract owner
- Producers cannot use guaranty association coverage as a selling point
New Jersey Life and Health Insurance Guaranty Association
The New Jersey Life and Health Insurance Guaranty Association protects New Jersey residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The Guaranty Association 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 state law supervision
How It Works
When an insurer becomes insolvent:
- State takes over - Commissioner 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 New Jersey Guaranty Association provides coverage up to specific limits:
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $500,000 per life |
| Cash Surrender Value | $100,000 per policy |
| Present Value (total) | $500,000 per life |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $500,000 per contract owner |
| Multiple Annuities | $500,000 aggregate per owner |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Health Benefits | $500,000 per individual |
| Disability Income | $500,000 per individual |
| Long-Term Care | $500,000 per individual |
What Is Covered
The Guaranty Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (New Jersey residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in New Jersey
- Policies from insurers not members of the Association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Variable products (covered by separate mechanisms)
Funding
The Guaranty Association is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- May be passed through to policyholders
- Recouped through rate adjustments
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 Guaranty 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 a frequently tested rule.
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 New Jersey Life and Health Insurance Guaranty Association?
Can a New Jersey insurance producer use Guaranty Association coverage as a selling point?
What is the maximum cash surrender value coverage for life insurance under the New Jersey Guaranty Association?
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