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Life Health > Life Insurance

New York Adds Guaranty Corp. Guide

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The New York State Insurance Department has published a new brochure: “Policyholder Protection – Life Insurance Company Guaranty Corporation Of New York.”

Here are some excerpts from the brochure, which was prepared by the New York department’s Life Insurance Bureau:

Q: What types of insurance policies are protected by the LICGC?

A: The LICGC protects life insurance policies as well as annuity contracts and accident and health insurance policies issued by licensed life insurers, subject to certain limitations. Limited protection is also available for other types of contracts as discussed below.

Q: Are there any limits on the protection afforded by the LICGC?

A: The LICGC will provide up to $500,000 of coverage to a life insurance policyholder/beneficiary, an individual annuity (such as a Single Premium Deferred Annuity) contract holder or an individual accident and health insurance policyholder. In addition, the full benefits of group accident and health insurance policies issued by licensed life insurers are protected for a minimum of six months.

Also, limited coverage is afforded to funding agreements and group annuity contracts….

Q: My insurance company’s home office is in another state, but the company is licensed in New York. Am I protected by the LICGC?

A: You are protected if you were a resident of New York State when you purchased the policy or are a resident at the time your insurance company becomes insolvent. Policies purchased from domestic life insurers prior to August 2, 1985 may have additional protection through the separate Life Insurance Guaranty Corporation, regardless of residency.

Q: I bought my life insurance policy when I lived in New York but now I live in Florida. Am I protected?

A: As long as you were a resident of this State at the time of purchase and your insurer was licensed here, you are protected. You may also have protection in your current state of residence.

Q: I have a separate account variable annuity contract, i.e., my funds are invested separately from those of the company and I bear all the risk of gains and losses. What kind of protection do I have?

A: The LICGC provides no protection under the contract described above. As noted, you bear the entire risk under the contract. However, there are some separate accounts in which individuals do not bear the full amount of the risk and some protection would be available for these kinds of contracts. Assets in such separate accounts would normally retain their separate status in the event of the insolvency of the issuing insurer and could not be used to pay that insurer’s other debts and obligations that do not arise out of the business of the separate account.

Q: My separate account annuity guarantees a minimum return. Am I protected by the LICGC?

A: You are protected, but only for the portion of the contract that is guaranteed. Presumably, most of this guaranteed amount would be payable from the assets of the separate account. The LICGC would come into play only in the event of a shortfall as to the guaranteed amount.

Q: My husband and I each have an annuity contract worth $300,000. Does the $500,000 cap apply to us jointly?

A: No, the LICGC puts the aggregate limit of $500,000 on any one life. Therefore, the limit would apply to you and your husband separately.

Q: Will I have to wait for payments once my insurer is taken over by the Superintendent?

A: When your insurer is initially taken over by the Superintendent, payments to you from your insurer may be suspended. Delays could be necessary to allow the Superintendent time to sort out the affairs of the financially troubled insurer. As a result, in some cases, you may have to wait many months before receiving payments; in other cases, benefits may not be delayed at all.


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