State annuity protection

Arizona Annuity Guaranty Fund: $250,000 Coverage Limit Explained

Arizona’s guaranty fund generally provides up to $250,000 in protection for the present value of covered annuity benefits when a member insurer becomes impaired or insolvent, subject to eligibility requirements and statutory exclusions.

Arizona annuity protection at a glance

Annuity benefit limit
$250,000
Present value of covered annuity benefits with respect to one life.
Overall benefit cap
$300,000
General aggregate across covered benefit types for one individual.The $300,000 aggregate does not increase the separate $250,000 annuity benefit limit.
Who provides protection
Arizona Life and Disability Insurance Guaranty Fund
Called the Fund below; it is financed through assessments of member insurers and is not a general obligation of the State of Arizona.
FDIC insurance
No
Annuities are insurance contracts, not bank deposits.

How the $250,000 limit works

Arizona generally covers the lesser of the eligible contractual benefit or $250,000 in the present value of annuity benefits with respect to one life, including eligible net cash surrender and withdrawal values.

Multiple annuity contracts covering the same life with the same failed member insurer generally share the $250,000 annuity limit. Coverage limits are generally applied separately to each impaired or insolvent member insurer, subject to Arizona’s eligibility rules.

The separate $300,000 aggregate applies across most covered benefit types for one individual. Other covered benefits from the same failed insurer may therefore affect the total amount payable under that aggregate. The aggregate does not increase the separate $250,000 annuity limit.

  • When qualifying health-benefit-plan benefits are involved, the applicable aggregate may increase to $500,000 with respect to one individual. This does not increase the separate $250,000 annuity limit.

A $300,000 annuity example

Annuity value

$300,000

Up to the Fund limit

$250,000

Possible receivership claim

$50,000

This example illustrates the statutory limit and does not guarantee the amount or timing of recovery.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    Qualifying immediate and deferred fixed annuities issued by member insurers are generally covered, subject to the statutory limit and exclusions.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA is generally treated as a fixed deferred annuity and may qualify for protection subject to Arizona’s $250,000 annuity limit, member-insurer requirement, eligibility rules, and statutory exclusions.

  • Fixed indexed annuity (FIA)

    Generally covered

    FIAs are generally covered to the extent of qualifying insurer-guaranteed benefits. Certain excess, uncredited, or forfeitable index-linked amounts may be excluded, but Arizona provides special treatment when index-linked value is credited less frequently than annually.

  • Variable annuity

    Guaranteed portions may be covered

    Insurer-guaranteed obligations may qualify. Separate-account or investment-risk portions borne by the contract owner are excluded.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a RILA, only qualifying insurer-guaranteed obligations may be covered. Portions where the contract owner bears market or index risk are generally excluded.

  • Unallocated annuity contract

    Generally excluded

    Unallocated annuity contracts are generally excluded, except to the extent specific annuity benefits are guaranteed to an individual under the contract or certificate.

Who may qualify?

Eligibility generally follows the qualifying owner or certificate holder, while residency is determined at the relevant court order finding the member insurer impaired or insolvent. The ordinary annuity dollar limit is separately stated with respect to one life.

  • Arizona residents generally qualify when the covered annuity was issued by a member insurer that was authorized to issue the contract in Arizona at the relevant time.
  • Nonresidents may qualify in limited circumstances when the insurer is domiciled in Arizona, their home state has a similar guaranty fund, and no other state fund covers the claim because of the insurer’s licensing status.
  • The law coordinates coverage with other states to prevent duplicate recovery from more than one guaranty fund.
  • Beneficiaries, assignees, and payees may also qualify when their rights arise through a person covered under Arizona’s guaranty law, subject to the applicable statutory requirements.

What is not covered?

  • Amounts above the applicable statutory limit.
  • Contract portions not guaranteed by the insurer or for which the policyholder or owner bears the risk.
  • Unallocated annuity contracts, subject to the statute's definition of individually guaranteed benefits.
  • Self-funded or uninsured portions of specified employer, association, or other benefit plans.
  • Interest or index-linked value above the statutory benchmark.
  • Certain uncredited or forfeitable index-linked amounts are excluded. If the contract credits index-linked value less frequently than annually, Arizona calculates the value as though the impairment or insolvency date were the contractual crediting date.
  • Marketing, misrepresentation, bad-faith, punitive-damage, attorney-fee, penalty, and other claims outside the express written contract.

What happens when an insurer becomes impaired or insolvent?

  1. 1

    A court enters an impairment or insolvency order

    A rehabilitation or conservation order defines an impaired insurer. A liquidation order with a finding of insolvency defines an insolvent insurer.

  2. 2

    The regulator and court direct the proceeding

    DIFI supervises the Fund, and the Fund can assist the director and participate in court proceedings involving a member insurer.

  3. 3

    The Fund determines how covered obligations will be handled

    For an impaired insurer, the Fund may act with the director's approval. For an insolvent insurer, it must use one of the statutory response paths.

  4. 4

    Covered policies and annuity benefits are continued or paid

    Depending on the circumstances, the Fund may continue covered obligations, arrange replacement or reinsurance, or provide covered payments, subject to Arizona’s eligibility rules and benefit limits.

How the Fund is financed

The Fund is financed through assessments of member insurers when funds are needed to meet covered obligations. Its costs and liabilities are not general obligations of the State of Arizona.

Assessment allocation
Member insurers
Assessments allocated to the annuity account are distributed among applicable member insurers based on their share of covered Arizona annuity premiums.
Annual assessment cap
Defined by state law
For each account, total assessments against a member insurer in a calendar year generally cannot exceed 2% of its average annual Arizona premiums on covered business during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Premium-tax offset
State-specific rule
A qualifying certificate of contribution may generally be offset against Arizona premium-tax liability at 20% of the assessment in the assessment year and 20% in each of the following four years, subject to statutory conditions.

Rules when buying an annuity

  • Guaranty fund protection is a statutory backstop and is not a substitute for reviewing an insurer’s financial strength or understanding the guarantees, terms, and risks of an annuity contract.
  • Arizona law generally prohibits referring to guaranty-fund coverage in connection with the sale or attempted sale of insurance, except for specifically authorized consumer notices.

How the Fund differs from FDIC insurance

The Fund provides statutory protection for eligible insurance obligations when the applicable impairment or insolvency conditions are met. FDIC insurance protects eligible deposits at insured banks; annuities are not FDIC-insured deposits.

  • What it covers
    Fund: Qualifying insurance-policy and annuity obligations
    FDIC: Deposits at an FDIC-insured bank
  • Who administers or provides the protection
    Fund: Arizona Life and Disability Insurance Guaranty Fund, financed through member-insurer assessments and supervised by DIFI
    FDIC: The Federal Deposit Insurance Corporation
  • Coverage-limit basis
    Fund: $250,000 in present value of annuity benefits with respect to one life, plus Arizona's other statutory limits and aggregates
    FDIC: $250,000 per depositor, per FDIC-insured bank, per ownership category
  • Whether it applies to annuities
    Fund: Yes, for eligible annuity obligations issued by a member insurer, subject to Arizona’s limits and exclusions
    FDIC: No. Annuities are not deposits and are not covered by FDIC deposit insurance.

Sources and last verified

Last verified: September 16, 2026