4.3 Indiana Life and Health Insurance Guaranty Association
Key Takeaways
- Indiana Life and Health Insurance Guaranty Association (ILHIGA) protects policyholders when insurers become insolvent
- Coverage limits include \$300,000 maximum for life insurance death benefits
- Annuity coverage is limited to \$250,000 in present value
- Health insurance benefits are covered up to \$500,000 for major medical
- Producers cannot use guaranty association coverage as a selling point
The Indiana Life and Health Insurance Guaranty Association (ILHIGA) protects Indiana residents when life and health insurance companies become insolvent.
Purpose and Function
ILHIGA is an association 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 - Insurance Commissioner places insurer in liquidation
- ILHIGA activates - Association takes responsibility for covered policies
- Coverage continues - Up to statutory limits
- Claims paid - Benefits paid to policyholders
Coverage Limits
ILHIGA provides coverage up to specific limits (for insolvencies on or after January 1, 2013):
Life Insurance
| Benefit Type | Maximum Coverage |
|---|---|
| Death Benefit | $300,000 per life |
| Cash Surrender Value | $100,000 per policy |
Annuities
| Benefit Type | Maximum Coverage |
|---|---|
| Present Value | $250,000 per contract |
| Unallocated Annuities | $5,000,000 per contract holder |
Health Insurance
| Coverage Type | Maximum Coverage |
|---|---|
| Major Medical | $500,000 per individual |
| Other Health | $100,000 per individual |
| Disability Income | $300,000 per individual |
What Is Covered
ILHIGA covers:
Covered Policies
- Individual life insurance
- Group life insurance (Indiana residents)
- Annuities
- Health insurance
- Disability income insurance
- Long-term care insurance
Not Covered
- Policies from insurers not licensed in Indiana
- Policies from insurers not members of ILHIGA
- Self-funded employer plans
- Government programs
- Surplus lines policies
- Amounts above coverage limits
- Medicare C & D policies
- PBGC-protected retirement plan annuities
Funding
ILHIGA 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 ILHIGA coverage as a selling point
- Advertise ILHIGA protection
- Imply policies are "guaranteed" by the association
- Compare ILHIGA 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 - ILHIGA reviews policies
- Benefits continued or transferred to healthy insurer
- Claims processed within coverage limits
What is the maximum death benefit coverage provided by ILHIGA for a life insurance policy?
Can an Indiana insurance producer use ILHIGA coverage as a selling point?
What is the maximum annuity coverage provided by ILHIGA?
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