State annuity protection

California Annuity Guaranty Protection: 80% Coverage Up to $250,000

California generally protects 80% of covered annuity obligations, up to $250,000 in present value for one life. Eligibility, exclusions, and the $300,000 combined life-and-annuity aggregate can further limit the result.

California annuity protection at a glance

Annuity benefit limit
$250,000
Eighty percent of eligible contractual obligations, including eligible surrender and withdrawal values, subject to the $250,000 present-value annuity ceiling
Overall benefit cap
$300,000
California limits the association’s total life-insurance and annuity obligation for one life to $300,000, including ordinary annuity benefits and qualifying structured-settlement benefits.
Who provides protection
California Life and Health Insurance Guarantee Association
The California Life & Health Insurance Guarantee Association may act at its discretion when a member insurer is under a rehabilitation or conservation order. After a court finds a member insurer insolvent and orders liquidation, the association must perform its statutory duties using one of the methods allowed by law.
Insurer requirement
Member insurer
The contract must have been issued while the insurer was licensed or authorized to issue that contract in California; a contract issued here while the insurer lacked that authority is excluded.

How the $250,000 limit works

Protection is the lesser of 80% of covered contractual obligations or $250,000 in present-value annuity benefits. That present value includes eligible surrender and withdrawal amounts. The $250,000 ceiling is reached when the eligible obligation is $312,500, before exclusions or other adjustments.

Multiple annuities from the same failed insurer do not each receive a separate $250,000 ceiling. CLHIGA’s example of three $250,000 annuities from one insurer results in $300,000 of total protection because the combined life-and-annuity aggregate applies.

Obligations from a different failed insurer are evaluated in that insurer’s separate insolvency. This explains how the statute is applied after a failure; it is not a recommendation to divide purchases or select an insurer based on guaranty coverage.

California limits the association’s total life-insurance and annuity obligation for one life to $300,000, including ordinary annuity benefits and qualifying structured-settlement benefits.

  • A qualifying structured-settlement payee or beneficiary is generally protected for 80% of covered obligations up to $250,000 in present value, within the $300,000 aggregate for one life.

A $300,000 annuity example

Assume an eligible fixed deferred annuity has a $300,000 covered contractual obligation, with no separate exclusion or other adjustment.

Annuity value

$300,000

Potential protection

$240,000

Possible receivership claim

$60,000

Eighty percent of $300,000 is $240,000. Because that amount is below the $250,000 annuity ceiling, the potential association benefit is $240,000 and the remaining $60,000 may be a claim in the insurer’s receivership.

This simplified example assumes the entire obligation is otherwise eligible. Actual results depend on the contract, exclusions, residency, court orders, other covered benefits, and the receivership.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity’s covered contractual obligations are generally subject to the 80% formula, the $250,000 annuity ceiling, and the $300,000 combined aggregate.

  • Fixed indexed annuity (FIA)

    Generally covered

    For a fixed indexed annuity, only covered insurer-guaranteed obligations qualify. Index-linked changes not yet credited, or still subject to forfeiture, are generally excluded. If values update on an interval longer than a year, California calculates through the earlier judicial impairment or insolvency point as though it were the scheduled posting day.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA’s covered insurer-guaranteed obligations are generally subject to the same 80% formula, $250,000 annuity ceiling, and other statutory limits.

  • Variable annuity

    Guaranteed portions may be covered

    For a variable annuity, market-risk amounts borne by the owner are not covered. A covered insurer guarantee may qualify, subject to the statute’s formula, ceilings, and exclusions.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a RILA, market losses borne by the owner are not covered. Any insurer-guaranteed obligation requires contract-specific review under the statutory formula and exclusions.

  • Unallocated annuity contract

    Generally excluded

    Unallocated annuity contracts are generally excluded, but an individual guarantee certificate issued under a covered group annuity may qualify if it otherwise meets the statute.

Who may qualify?

  • A person is a California resident for this law if the covered obligation is owed to that person and the person lives in California when the court enters its impairment or insolvency order.
  • For an individual annuity other than a structured settlement, coverage generally follows the resident owner or certificate holder. Beneficiaries, assignees, and payees may qualify through that covered person under the statute’s conditions.
  • Someone living outside California may qualify only if the issuing insurer is California-domiciled, the person’s home state operates a comparable association, and that association cannot cover the person because of its insurer-licensing rule.
  • California coordinates with other state associations to prevent duplicate recovery. A person covered by another state’s association does not also receive California coverage for the same obligation.
  • The contract must have been issued while the insurer was licensed or authorized to issue that contract in California; a contract issued here while the insurer lacked that authority is excluded.

What is not covered?

  • Amounts not guaranteed by the insurer, including market risk borne by the owner, are not covered.
  • Interest, crediting rates, or similar factors above California’s statutory benchmark are excluded to the extent specified in the law.
  • Index-linked gains that have not yet posted to the contract, or can still be forfeited, ordinarily fall outside protection. When a contract posts changes less often than once a year, California instead calculates the change through the earlier impairment or insolvency date and treats it as nonforfeitable.
  • The Act generally leaves unallocated annuity contracts outside coverage, while preserving its separate rule for a qualifying individual guarantee certificate.
  • A contract issued in California while the insurer was not licensed or authorized to issue it is excluded.
  • Claims based on marketing materials are excluded.
  • Claims based on side letters, riders, or other documents issued without required form filing or approval are excluded.
  • Claims based on misrepresentations about policy benefits are excluded.
  • Bad-faith and other extra-contractual theories fall outside the Act, as do statutory penalties and claims for indirect or incidental loss.

What happens when an insurer becomes impaired or insolvent?

  1. 1

    Impairment stage

    A court order of rehabilitation or conservation makes a member insurer impaired. At this stage, the association may act at its discretion under commissioner-approved conditions.

  2. 2

    Insolvency and liquidation

    A court order of liquidation with a finding of insolvency makes the member insurer insolvent. The association must then carry out the duties prescribed by the statute.

  3. 3

    Coverage review

    The receiver and association determine whether the person, contract, and claimed obligation satisfy California’s eligibility rules, exclusions, percentage formula, and benefit ceilings.

  4. 4

    Association benefit and receivership claim

    The association provides the covered statutory benefit. Any remaining contractual amount may be asserted against the insurer’s receivership estate, subject to the receiver’s process and available assets.

How the guaranty system is financed

California funds the association’s statutory work through assessments on member insurers. The assessment system finances covered obligations; it does not guarantee the failed insurer or expand a policyholder’s coverage limit.

Assessment allocation
Member insurers
Each Class B call is apportioned within the relevant account according to an assessed insurer’s share of covered California premium over the latest three available calendar years preceding the failure year.
Annual assessment cap
Defined by state law
Within each applicable California account, the total authorized against a member insurer in one calendar year is generally capped at 2% of its average covered in-state premium across the three years preceding the failure year.
Premium-tax treatment
State-specific rule
No statutory premium-tax offset was identified for life-and-annuity assessments. Section 1067.08 allows a premium-surcharge recovery mechanism for the health insurance account, but not for the life-and-annuity account.
Assessment funding does not change coverage limits
The amount that member insurers may be assessed is a funding rule. A policyholder’s protection remains governed by eligibility, exclusions, the 80% formula, the $250,000 annuity ceiling, and the $300,000 combined aggregate.

What to know before buying

  • Guaranty-association protection is a post-failure backstop, not a reason to buy an annuity or choose an insurer. Review the insurer, contract terms, guarantees, and your own needs independently of this protection.
  • California prohibits insurers, agents, and insurer affiliates from using CLHIGA’s existence for sales, solicitation, or inducement to purchase covered insurance. The required notice also tells buyers not to rely on guaranty-association coverage when selecting an insurer.

How state protection differs from FDIC insurance

  • What it covers
    State protection: California’s association addresses covered obligations owed by impaired or insolvent member insurers.
    FDIC: Federal deposit insurance responds to qualifying bank-account balances when an insured depository institution fails; it does not insure annuity contracts.
  • What system stands behind it
    State protection: CLHIGA is a statutory association financed through assessments on member insurers, not a state agency or federal deposit insurer.
    FDIC: Eligible deposits at an FDIC-insured bank carry the full-faith-and-credit backing of the United States government.
  • Coverage-limit basis
    State protection: For one life, California generally applies 80% of covered annuity obligations up to $250,000, within a $300,000 combined life-and-annuity aggregate.
    FDIC: The federal calculation groups balances by the customer, the covered banking institution, and the capacity in which the account is owned; California’s percentage formula does not apply.
  • Whether it applies to annuities
    State protection: A qualifying annuity may receive association protection for covered insurer obligations after an impairment or insolvency.
    FDIC: Using an annuity for savings or retirement income does not turn it into an insured bank deposit.

Sources and last verified

Last verified: September 19, 2026