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 annuity benefits if a member insurer becomes 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.This does not increase the $250,000 annuity benefit limit.
Who provides protection
Arizona Life and Disability Insurance Guaranty Fund
Called the Fund below; it is supported by member insurers.
FDIC insurance
No
Annuities are insurance contracts, not bank deposits.

How the $250,000 limit works

Coverage is generally limited to the lesser of the insurer’s covered contractual obligation or $250,000 in present value of annuity benefits, including net cash surrender and withdrawal values, with respect to one life.

Multiple contracts tied to the same life and the same failed insurer share the $250,000 annuity limit. Guaranty association benefit limits generally apply separately to each insolvent member insurer, so one insurer’s failure does not reduce the limit available for another insurer’s failure. Arizona law controls each claim.

The separate $300,000 overall aggregate applies across most covered benefit types for one individual. In other words, other covered obligations from the same failed insurer can affect how much room remains under that broader cap.

  • Covered health benefit plans have a $500,000 aggregate limit with respect to one individual.

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 a fixed deferred annuity, so it is generally covered when the owner, insurer, and contract qualify under Arizona law.

  • Fixed indexed annuity (FIA)

    Generally covered

    Qualifying insurer guarantees are generally covered, but Arizona excludes some index-linked or interest benefits above its statutory benchmark, as well as certain uncredited or forfeitable amounts.

  • 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

    Coverage turns on the insurer-guaranteed obligations in the contract. Market-risk and excluded index-linked portions are not protected by the Fund.

  • Unallocated annuity contract

    Generally excluded

    Arizona law generally excludes unallocated annuity contracts, while preserving the treatment of benefits individually guaranteed under a contract or certificate.

Who may qualify?

For most individual annuities, coverage follows the owner or certificate holder and is determined when a court finds the member insurer impaired or insolvent.

  • Arizona residents generally qualify when the annuity was issued by a member insurer authorized to do business in the state.
  • 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 receive protection through a covered person, subject to the statutory rules.

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.
  • Index-linked value not yet credited or still subject to forfeiture at the relevant date, subject to the statutory timing rule.
  • Marketing, misrepresentation, bad-faith, punitive-damage, attorney-fee, penalty, and other claims outside the express written contract.

What happens after an insurer fails?

  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 acts under its statutory authority

    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 obligations are addressed

    The Fund may guarantee, assume, reissue, reinsure, continue, or pay covered obligations, subject to eligibility, exclusions, and limits.

How the Fund is financed

Member insurers are assessed as needed to finance covered obligations. The Fund maintains separate accounts, and its costs and liabilities are not general obligations of the State of Arizona.

How assessments work

Allocation
The annuity-account portion of an assessment is borne by applicable member insurers in proportion to their covered Arizona annuity premiums.
Annual assessment cap
For each account, annual assessments against a member insurer generally cannot exceed 2% of its average annual Arizona premiums on covered business during the three preceding calendar years.
Premium-tax credit
A.R.S. § 20-692 permits a certificate-of-contribution offset equal to 20% of the assessment in the assessment year and 20% in each of the next four years, subject to the statute's timing and total-offset conditions.

Rules when buying an annuity

  • Guaranty fund protection is a statutory backstop, not a substitute for evaluating an insurer’s financial strength, the guarantees in the contract, and whether the annuity is appropriate for your needs.
  • A.R.S. § 20-443(A)(6) prohibits references to guaranty-fund coverage or provisions in connection with selling or attempting to sell an insurance policy. The statute makes limited exceptions for specified consumer notices.

How the Fund differs from FDIC insurance

The Fund protects eligible insurance obligations after a member insurer fails. FDIC insurance protects deposits at insured banks. An annuity is not a bank deposit and is not FDIC-insured.

  • What it covers
    Fund: Qualifying insurance-policy and annuity obligations
    FDIC: Deposits at an FDIC-insured bank
  • What system stands behind it
    Fund: Arizona's member-insurer guaranty fund under DIFI supervision
    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: August 20, 2026