Advanced Underwriting Consultants

Question of the Day – September 7

Ask the Experts!

Here’s the question of the day.

Question: If an insurance company fails, does the guaranty fund of the insurance company’s domicile or the guaranty fund of the policy owner’s state of residence kick in?


Answer: Each state has its own system for guaranteeing the life insurance products and annuity contracts of a failed life company.  In general, each state’s system will provide limited protection for the owner of a life or annuity contract issued by a carrier that is no longer able to meet its obligations.


Financial and insurance professionals may not tell their prospective clients about state guaranty funds (SGFs)—at least as any kind of solicitation to purchase insurance.  While each state has its own version of law prohibited using SGF information with clients, each of them does have such a law.  New York’s law is typical.

For policyowners of an insolvent company licensed to do business in the policyowner’s state of residence, the state of residence will provide the guaranty.  Policyholders who reside in states where the insolvent insurer was not licensed to do business are usually covered by the guaranty association of the company’s home state.

The National Organization of Life & Health Insurance Guaranty Associations is a gateway for additional information about state life and health guaranty rules.  Their website is at

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.