4.3 South Carolina Life and Health Insurance Guaranty Association
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
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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