State annuity protection

California Annuity Guaranty Protection: $250,000 Limit Explained

California applies an 80% formula before its $250,000 annuity ceiling, so a contract can sit below the headline limit and still be only partly protected.

California annuity protection at a glance

Annuity benefit limit
$250,000
Eighty percent of eligible contractual obligations, subject to the $250,000 present-value annuity ceiling
Overall benefit cap
$300,000
Life and annuity protection for one individual is also constrained by California’s $300,000 combined aggregate.
Who provides protection
California Life and Health Insurance Guarantee Association
The California Life & Health Insurance Guarantee Association acts after the statutory insolvency and liquidation trigger in coordination with the receiver.
Insurer requirement
Member insurer
The policy must have been issued by an insurer licensed in California and covered by the act.

How the $250,000 limit works

Protection is the lesser of 80% of covered contractual obligations or $250,000 in present-value annuity benefits. A $250,000 eligible obligation therefore produces a $200,000 association amount.

Multiple annuities from the same failed insurer do not receive separate $250,000 limits. CLHIGA’s example of three $250,000 contracts applies one $300,000 combined life-and-annuity maximum to the individual.

A second insurer has its own failure and guaranty calculation, which is why carrier diversification changes the exposure.

Life and annuity protection for one individual is also constrained by California’s $300,000 combined aggregate.

A $300,000 annuity example

Assume a $300,000 fixed deferred annuity whose full value is an eligible contractual obligation.

Annuity value

$300,000

Potential protection

$240,000

Possible receivership claim

$60,000

Eighty percent is $240,000, which is below the $250,000 ceiling; $60,000 remains outside the association amount.

Examples apply California’s formula to assumed eligible value before any separate exclusion or aggregate is considered.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity is subject to both the 80% formula and the dollar ceiling.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA’s guaranteed contractual value can qualify. For a crediting interval longer than one year, California accelerates the contract’s calculation to the impairment or insolvency date.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA receives no exemption from the statutory 20% reduction.

  • Variable annuity

    Guaranteed portions may be covered

    Variable-annuity separate-account assets are distinct from insurer guarantees; only the covered guarantee enters this calculation.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA needs a contract-level review of what the issuer guarantees and what market loss remains with the owner.

  • Unallocated annuity contract

    Generally excluded

    California excludes unallocated annuity contracts from this guaranty calculation.

Who may qualify?

  • California residence is tested when the member insurer becomes insolvent.
  • The owner’s residence generally controls, with beneficiary, assignee, and payee treatment following the covered owner under the stated rules.
  • A former resident generally looks to the association in the new state rather than California.
  • Fallback coverage requires the conditions governing the failed insurer’s domicile and the other jurisdiction’s association.
  • The policy must have been issued by an insurer licensed in California and covered by the act.

What is not covered?

  • The owner’s share of market risk is not an insurer-guaranteed obligation.
  • Crediting above California’s statutory interest benchmark is excluded.
  • Uncredited or forfeitable index-linked gains are generally excluded, although California pulls forward the crediting calculation when the contract uses an interval longer than one year.
  • Contracts issued by nonmember entities are outside CLHIGA.

What happens after an insurer fails?

  1. 1

    Regulatory control

    Conservation or rehabilitation can restrict transactions before guaranty coverage is activated.

  2. 2

    Liquidation trigger

    A court insolvency and liquidation order generally activates CLHIGA’s role.

  3. 3

    Contract review

    The receiver and association establish eligibility and the covered contractual obligation.

  4. 4

    Formula and estate claim

    CLHIGA applies 80% and the ceiling; the uncovered balance stays with the receivership.

How the guaranty system is financed

California member insurers are assessed to meet covered obligations; the association does not guarantee the insurer itself.

Assessment allocation
Member insurers
Assessments are allocated under California’s statutory account and premium rules.
Annual assessment cap
Defined by state law
For each California account or subaccount, yearly assessments cannot exceed 2% of the member insurer’s three-year average of covered in-state premiums.
Premium-tax treatment
No consumer rule stated
California’s public CLHIGA guidance does not describe a premium-tax offset for assessments.
Formula before funding
Assessment capacity finances only the obligation left after the 80% rule, exclusions, and statutory ceilings are applied.

What to know before buying

  • Do not plan merely to the $250,000 headline: calculate 80% of eligible value and compare that result with the ceiling.
  • California prohibits using CLHIGA in an agent’s pitch and instead requires the prescribed notice to explain the backstop.

How state protection differs from FDIC insurance

  • What it covers
    State protection: California protection reaches the covered guarantee in an eligible annuity contract.
    FDIC: FDIC protection reaches eligible deposit balances held by an insured bank.
  • What system stands behind it
    State protection: CLHIGA’s member insurers stand behind California’s statutory association duties.
    FDIC: Federal deposit insurance carries the U.S. government’s full-faith-and-credit guarantee.
  • Coverage-limit basis
    State protection: California pays the lesser of 80% of eligible obligations or $250,000 for one individual.
    FDIC: Federal aggregation uses depositor, bank, and account-ownership category rather than an 80% formula.
  • Whether it applies to annuities
    State protection: A qualifying California annuity may receive CLHIGA protection for its covered insurer promise.
    FDIC: No annuity contract receives FDIC insurance simply by being held as savings.

Sources and last verified

Last verified: August 24, 2026