Key Takeaways
- The South Carolina Life and Health Insurance Guaranty Association protects policyholders when insurers become insolvent
- Life insurance death benefits are covered up to \$300,000
- Annuity coverage is limited to \$250,000
- Health insurance coverage has separate limits
- Producers cannot use guaranty association coverage as a selling point
South Carolina Life and Health Insurance Guaranty Association
The South Carolina Life and Health Insurance Guaranty Association protects South Carolina residents when life and health insurance companies become insolvent.
Purpose and Function
The Guaranty Association:
- 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 - Insurance Commissioner places insurer in liquidation
- Association activates - Takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
South Carolina 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 |
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 |
What Is Covered
The Guaranty Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (South Carolina residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in South Carolina
- Policies from insurers not members of association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
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.
Funding
The Association is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- May be passed through to policyholders
- Recouped through rate adjustments
What is the maximum death benefit coverage provided by the South Carolina Guaranty Association for a life insurance policy?
Can a South Carolina insurance producer use guaranty association coverage as a selling point?
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