4.3 Georgia Life and Health Insurance Guaranty Association
Key Takeaways
- The Georgia Life and Health Insurance Guaranty Association protects Georgia residents when a member insurer becomes insolvent, operating under O.C.G.A. Title 33, Chapter 38
- Life insurance death benefit coverage is capped at $300,000 per life; net cash surrender/withdrawal value is capped at $100,000
- Annuity coverage is $250,000 in net cash surrender value, while annuities in payout (no cash value) are covered up to $300,000 per annuitant
- Health insurance limits depend on type: $500,000 for basic hospital/medical/major medical, $300,000 for disability and long-term care, and there is an aggregate cap of $300,000 per life across most categories
- Producers and insurers are prohibited from using Association coverage to solicit or induce the purchase of insurance
Purpose of the Guaranty Association
The Georgia Life and Health Insurance Guaranty Association (GLHIGA) is a nonprofit entity created under O.C.G.A. Title 33, Chapter 38. Every insurer licensed to sell life, health, or annuity products in Georgia must be a member. When a member company becomes insolvent, the Association steps in to protect Georgia resident policyholders by continuing coverage or paying covered claims up to statutory limits.
How the process works
- A court declares the insurer insolvent and orders liquidation (receivership), naming the Commissioner or a receiver to wind down the estate.
- GLHIGA activates and assumes responsibility for covered Georgia policies.
- Covered benefits continue up to the statutory caps; policies may be transferred to a solvent insurer.
- Claims are paid from assessments levied on solvent member insurers.
Who is protected
Protection generally follows the residency of the policyholder, not where the policy was sold:
| Person | Covered by GLHIGA? |
|---|---|
| Georgia resident insured under a member insurer's policy | Yes — even if the policy was issued in another state |
| Non-resident whose insurer's home state is Georgia and whose own state has no like coverage | Yes, in limited residual circumstances |
| Person insured by a company never licensed in Georgia | No |
Coverage is for the person/owner, not for the producer who sold the policy or the insurer's stockholders. Beneficiaries, assignees, and payees of a Georgia resident generally inherit the same protection.
The order of resolution
Guaranty protection is a backstop, not a first resort. When an insurer fails, the receiver first marshals the insurer's own assets; the Association covers the shortfall up to the statutory caps. Amounts above the caps remain claims against the estate, paid only if liquidation assets allow. This is why the Association is not a substitute for buying from a financially strong, highly rated insurer in the first place.
Exam Tip: The Association is funded after the fact by assessments on surviving insurers — it is not a prepaid state fund and is not like FDIC bank insurance. It cannot be advertised or used as a selling point. Both points are heavily tested.
Coverage Limits
The limits below apply to insolvencies occurring on or after July 1, 2020. Memorize them — multiple exam questions come straight from this table.
Life insurance
| Benefit | Maximum Coverage |
|---|---|
| Death benefit | $300,000 per insured life |
| Net cash surrender / withdrawal value | $100,000 per insured life |
Annuities
| Benefit | Maximum Coverage |
|---|---|
| Net cash surrender / withdrawal value | $250,000 per owner |
| Annuity in payout (no cash value), present value | $300,000 per annuitant |
| Unallocated annuity (group) | $5,000,000 per contract owner |
Health insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Basic hospital, medical, surgical, or major medical | $500,000 per life |
| Disability income | $300,000 per life |
| Long-term care | $300,000 per life |
The aggregate cap
Regardless of how many policies one person holds with the insolvent insurer, GLHIGA's total liability is generally capped at $300,000 per life across most categories — except that the $500,000 basic-health benefit is the controlling cap when health coverage is involved.
Worked example
A Georgia resident dies holding a $500,000 life policy with an insolvent insurer. GLHIGA pays the death benefit up to $300,000; the remaining $200,000 becomes a claim against the insurer's estate in liquidation, payable only if estate assets allow.
Exam Tip: Don't confuse the $250,000 annuity cash-value limit with the $300,000 death-benefit and annuity-payout limits. The exam mixes these on purpose.
What Is and Is Not Covered
Covered
- Individual and group life insurance on Georgia residents
- Annuities (allocated and, within the $5,000,000 cap, unallocated group)
- Health insurance, including disability income, long-term care, and Medicare Supplement
- Structured-settlement annuity benefits for Georgia payees
Not covered
- Policies from insurers not licensed in Georgia or not GLHIGA members
- Self-funded employer (ERISA) plans — these are not "insurance"
- Variable contract amounts whose value is borne by the policyholder in a separate account
- Surplus lines and unauthorized-insurer coverage
- Amounts above the statutory limits
- Synthetic guarantees, dividends not yet declared, and pure investment products
Funding by Assessment
| Feature | Detail |
|---|---|
| Source | Post-insolvency assessments on surviving member insurers |
| Basis | Proportional to each insurer's Georgia premium in the relevant lines |
| Cap | An insurer's assessment is limited (commonly 2% of average annual premiums) per year |
| Recoupment | Insurers may recover assessments through tax offsets or future rates |
Producer and Insurer Restrictions
Georgia law (and the model act) prohibits using GLHIGA coverage in solicitation or advertising. A producer may not:
- Use the Association as an inducement or selling point
- State or imply a policy is "guaranteed" by the state or the Association
- Compare GLHIGA protection to FDIC or other government insurance
- Suggest an insurer's financial weakness "doesn't matter" because of the Association
The Association distributes a summary document describing coverage and exclusions, but it must be delivered with the policy by the insurer — it is not a sales tool. Violations are unfair trade practices subject to the penalties in Section 4.1 (administrative fines, suspension, or revocation).
Exam Tip: "Can a producer mention guaranty coverage to close a sale?" The answer is always no — using it as a selling point is expressly prohibited.
A Georgia resident dies owning a $500,000 individual life policy issued by an insurer now in liquidation. How much will the Georgia Life and Health Insurance Guaranty Association pay on the death benefit?
Which statement about using guaranty association coverage in a sales presentation is correct in Georgia?
Under the Georgia Life and Health Insurance Guaranty Association, what is the maximum net cash surrender value covered for an annuity contract owner?
Which of the following is NOT protected by the Georgia Life and Health Insurance Guaranty Association?