Key Takeaways
- The Virginia Life, Accident and Sickness Insurance Guaranty Association protects policyholders when insurers become insolvent
- Coverage limits are $300,000 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 $250,000 in present value
- Producers cannot use guaranty association coverage as a selling point
Virginia Life, Accident and Sickness Insurance Guaranty Association
The Virginia Life, Accident and Sickness Insurance Guaranty Association protects Virginia residents when life and health insurance companies become insolvent (unable to pay claims).
Purpose and Function
The 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 Virginia Code Title 38.2 Chapter 17
How It Works
When an insurer becomes insolvent:
- State takes over - Bureau 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
The Association 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 |
| Multiple Annuities | $250,000 total per owner |
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: Virginia's life insurance death benefit limit is $300,000, which differs from some states. Remember these specific Virginia limits.
What Is Covered
The Association covers:
Covered Policies
- Individual life insurance
- Group life insurance (Virginia residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
- Medicare Supplement insurance
Not Covered
- Policies from insurers not licensed in Virginia
- Policies from insurers not members of Association
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Investment portions of variable products (beyond guarantee)
Funding
The Association is funded by assessments:
- Member insurers pay assessments
- Assessments based on premium volume
- May be recouped through rate surcharges
- Limited annual assessment amounts
Producer Restrictions
Advertising Prohibition
Producers cannot:
- Use Association coverage as a selling point
- Advertise Association protection
- Imply policies are "guaranteed" by the association
- Compare Association to FDIC insurance
Required Disclosures
- 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 Virginia Guaranty Association for a life insurance policy?
What is the maximum coverage for annuity present value under the Virginia Guaranty Association?
Can a Virginia insurance producer use guaranty association coverage as a selling point?
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