What is the Nebraska Life and Health Insurance Guaranty Association (“Guaranty Association”)?
The Guaranty Association is a non-profit association created by Nebraska statute to provide protection to Nebraska residents that own or are beneficiaries of covered life insurance, health insurance or annuity contracts. Should a Nebraska resident hold a covered life or health insurance policy or individual annuity issued by a Guaranty Association member insurer that has gone insolvent, the Guaranty Association will provide limited coverage for specific policies or contracts.
What contracts are covered by the Guaranty Association?
As a general rule, direct non-group life, health or annuity policies or contracts and supplemental contracts to any of these as well as certificates under direct group policies and contracts are covered, except as limited by the Nebraska Life and Health Insurance Guaranty Association Act (“Act”). Covered annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities and immediate or deferred annuity contracts.
What policies or insurance contracts are not covered?
Those policies or contracts that are not covered include, but are not limited to, policies issued by an insurer not licensed in the state of Nebraska; health maintenance organization contracts not controlled by an insurance company licensed by the state of Nebraska; nonprofit hospital or medical service organization contracts; policy benefits the insurer does not guarantee (such as the non-guaranteed portion of a variable life insurance contract) or for which the policyholder bears the risk; reinsurance contracts; self insured employer plans; unallocated annuity contracts; fraternal benefit society contracts, viatical settlement contracts, and Medicare Parts C and D.
Certain less commonly known insurance policies and arrangements not listed here are also not protected. A complete listing of what is not covered by the Guaranty Association is provided in the Guaranty Association Act, §44-2703.
Does it matter where I live?
Yes. The Guaranty Association only covers Nebraska residents. Residency is determined on the date that a member insurer is declared insolvent. Guaranty Association coverage is, however, currently provided to residents of all 50 states, Puerto Rico and the District of Columbia through other guaranty associations. If you are a resident of another state, please contact your Department of Insurance for contact information for the guaranty association in your state. You may also want to go to the Helpful Links section to determine if your particular guaranty association has a website. Note that guaranty association coverage varies by state. As a result, coverage provided by the Guaranty Association Act may not be the same coverage provided by another state’s law.
When is Guaranty Association coverage determined?
Guaranty Association coverage is determined as of the date that a member insurer is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
If I have a covered policy, is it fully protected?
The Guaranty Association Act provides the following limitations on policy coverage:
- life insurance death benefit $300,000
- life insurance cash value $100,000
- annuity contract $250,000
- structured settlement annuity $250,000
- basic hospital, medical or surgical insurance or major medical insurance $500,000
- long-term care or disability insurance $300,000
- other health insurance as defined by Neb. Rev. Stat. 44-2703(3)(b)(i)(B)(III) $100,000
Should an individual own both a life policy and an annuity contract with an insolvent member insurer, the maximum coverage provided by the Guaranty Association Act is $300,000. Should an individual own a health policy and a life policy or annuity contract with the same member insurer, the maximum liability of the Guaranty Association is $500,000.
Coverage limits are determined based upon each individual owner for each member insolvent insurance company.
What if I own several annuities with the same insurance company, each worth $250,000? How much is protected?
The total protection per owner per member company is $250,000 for all annuity contracts. As a result, if an individual owned three annuities with the same insolvent insurance company, each worth $250,000, the individual would have total Guaranty Association coverage of $250,000.
How will I know if my health or life insurance company has failed or is unable to fulfill its obligations to its policyholders?
When a court declares an insurance company insolvent, it appoints a receiver of the insolvent insurance company’s estate. The appointed receiver generally notifies all existing policyholders or contract owners of the insurance company’s insolvency. Notice is sent to the address on file with the insolvent insurer.
How are the obligations of the Guaranty Association funded?
All insurance companies licensed to do business in the state of Nebraska are required to be members of the Guaranty Association. When a member insurer becomes insolvent, all other member insurers writing the same business as the insolvent insurer (life, annuity or health) are assessed by the Guaranty Association to pay the Guaranty Association’s obligations for the insolvent insurance company’s liabilities.
What will happen to my insurance coverage if the Guaranty Association becomes liable for my policy?
If another financially sound insurance company is willing to assume the business of the insolvent insurer, the Guaranty Association may contract with the solvent insurer to assume the policies. In some cases, policies that can be cancelled pursuant to the terms of the policy will be cancelled. If no insurer is willing to assume the insolvent insurer’s policies, the Guaranty Association will continue the insurer’s policies pursuant to the coverage limitations provided by the Guaranty Association Act or issue replacement policies with the Guaranty Association pursuant to the provisions of the Guaranty Association Act.
What if my health coverage is cancelled, and I cannot obtain new health coverage?
Nebraska has a comprehensive health insurance pool (“CHIP”) for residents of Nebraska who cannot obtain insurance due to a pre-existing medical condition or whose policy includes a restrictive rider limiting coverage for a condition. For more information regarding the CHIP program, contact 800-356-3485, ext. 814.
How can I find out if my company is licensed in Nebraska, and as a result, a member of the Guaranty Association?
Information regarding whether a company is licensed in the state of Nebraska can be obtained by contacting the Licensing Division of the Nebraska Department of Insurance at 402/471-2201.
How can I obtain information regarding a particular insolvency?
Additional information regarding active insolvencies can be found at this website at the Insolvencies page. In addition, the receiver of every insolvent insurer can provide further information. If you do not know the contact information for a particular receiver, contact the Department of Insurance for the state in which the insolvent insurance company is domiciled. Please also feel free to contact the Guaranty Association for further information regarding a particular insolvency.
How can I reach the Guaranty Association?
If you should need to contact us, please refer to the contact us link.
Why hasn’t my agent or company told me about the Nebraska Guaranty Association?
Nebraska state law prohibits advertising the existence of the Guaranty Association for the purpose of sales, solicitation or inducement to purchase insurance covered by the Guaranty Association.
Is the Guaranty Association backed by the state of Nebraska?
The Guaranty Association is created by Nebraska state statute. Funding for the Guaranty Association is not, however, provided by the state of Nebraska. All funding of the Guaranty Association is provided by member insurers, i.e., insurance companies licensed to do business in the state of Nebraska.
My annuity is supposed to pay 10% interest. Will I be paid the same rate of interest if the company is liquidated?
No. Interest payments can be reduced pursuant to the terms of the Guaranty Association Act. Covered interest rates are based on a discounted market rate.
What if I bought my policy in Nebraska, but now live in another state?
Coverage by the Guaranty Association is based upon an individual’s residency at the time that an insurance company is declared insolvent. As a result, if you live in another state on the date your insurer is declared insolvent, you would not be covered by the Guaranty Association. You may, however, be protected by the state guaranty association in the state in which you live at the time the company is declared insolvent.
What is the difference between the receiver of an insolvent insurance company and the Guaranty Association?
When a court determines that an insurance company can no longer fulfill its contractual obligations, it is placed under an order of liquidation. For an insurance company, liquidation is similar to bankruptcy. The court then appoints a receiver to take over the insurer. As a general rule, this is the Director of the Department of Insurance in which the insolvent insurer is domiciled, which then acts through a special deputy receiver. The receiver takes possession of the assets of the insurer and administers them under the general supervision of the court. The receiver also takes title to all of the property, contracts and records of the insurer.
The Guaranty Association has the responsibility of paying all covered resident policyholders and covered contract owners pursuant to the terms of their contracts and the limitations provided by the Guaranty Association Act. Upon payment of policyholder liabilities, the Guaranty Association becomes one of the claimants against the estate of the insolvent insurance company and is reimbursed for the Guaranty Association’s statutory liabilities to the extent funds are available from the insolvent insurance company’s estate assets. To the extent that funds are not available from the estate of the insolvent insurance company, the Guaranty Association assesses all member insurance companies to collect the additional funds necessary to be reimbursed for payment of its statutory liabilities.
Who operates the Guaranty Association?
The Guaranty Association is governed by a nine-member board of directors. Any member insurance company is eligible to be a director of the Guaranty Association. Members of the board of directors are selected by member insurers and serve three-year terms. The Association is under the direct supervision of the Director of the Nebraska Department of Insurance. The board of directors has retained Pamela Epp Olsen of the Cline Williams Wright Johnson & Oldfather, L.L.P. law firm as Administrator of the Guaranty Association to administer the daily operations of the Guaranty Association.
What is NOLHGA?
NOLHGA is the National Organization of Life and Health Insurance Guaranty Associations. The Guaranty Association is a member of NOLHGA, as are all other state life and health insurance guaranty associations. Because most insurance companies are licensed in more than one state, NOLHGA provides assistance to guaranty association members to coordinate their actions and to cost effectively fulfill their statutory obligations to policyholders. NOLHGA is a voluntary association. More information is available about NOLHGA at its website.
Am I covered by the Guaranty Association if my property and casualty company becomes insolvent?
Policies written by a property and casualty company, such as automobile, homeowners or workers’ compensation insurance, are not covered by the Guaranty Association. They may, however, be covered by the Nebraska Property and Casualty Guaranty Association, which may be contacted at: 1610 South 70th Street, Suite 100, P.O. Box 57006, Station C, Lincoln, NE 68505, telephone: (402) 483-2202.
When will I receive my policy benefits?
The Guaranty Association uses its best efforts to pay policy benefits as soon as possible. There are, however, many variables that the Guaranty Association cannot control and that may cause a delay in benefit payments. For example, an insolvent insurer often has a backlog of claims or inadequate documentation. In addition, the Guaranty Association must receive information from outside sources regarding who is insured and what type of coverage is involved before claims may be paid.
Should I continue to pay my premiums if my insurer becomes insolvent?
Yes. In order for a policy to be covered by the Guaranty Association, the policy must be active and with no lapse in required premiums.
Are variable life insurance policies and variable annuity contracts covered by the Guaranty Association Act?
The terms and coverage of variable insurance products are very diverse and, as a result, it is difficult to make general statements about Guaranty Association coverage of variable insurance products without reviewing a specific policy or contract. The Guaranty Association Act provides that the Guaranty Association Act shall not apply to any portion of any policy or contract not guaranteed by the insurer or under which the risk is borne by the policy or contract holder. In addition, the Guaranty Association Act does not apply to the portion of a policy or contract that provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract that has not been credited to the policy or contract as of the date Guaranty Association coverage begins. Therefore, as a general rule, the Guaranty Association Act covers the portion of a variable life insurance policy or variable annuity contract that is guaranteed by the specific contract, subject to Guaranty Association Act coverage limitations.
If you should need to contact us, please refer to the contact us link.
NOTE: This information is not intended as legal advice, and no liability is assumed in connection with its use. The applicable state guaranty association statute is the controlling authority, regardless of any information presented on this site. Users should seek advice from a qualified attorney and should not rely on this compilation when considering any questions relating to guaranty association coverage.