State annuity protection

Colorado Annuity Guaranty Protection: $250,000 Annuity Limit Explained

Colorado generally provides up to $250,000 in protection for the present value of covered annuity benefits with respect to one life, including eligible net cash surrender and withdrawal values, subject to eligibility requirements and statutory exclusions.

Colorado annuity protection at a glance

Annuity benefit limit
$250,000
Covered Colorado annuity benefits measured at present value, including qualifying net cash surrender and net cash withdrawal amounts
Overall benefit cap
$300,000
Most covered benefits are subject to a $300,000 aggregate with respect to one life. When qualifying health-benefit-plan benefits are involved, the applicable aggregate may increase to $500,000 with respect to one life. The general aggregate does not increase Colorado's separate $250,000 annuity-specific limit.
Who provides protection
Colorado Life & Health Protection Association
The Colorado Life and Health Insurance Protection Association may act for an impaired member insurer and has specified duties when a member insurer becomes insolvent, subject to Article 20.
Insurer requirement
Member insurer
The issuing insurer must qualify as a member insurer under Colorado law, and the policy or contract must otherwise be covered under Article 20. Member-insurer status may continue after a license or certificate of authority is suspended, revoked, not renewed, or voluntarily withdrawn.

How the $250,000 limit works

Colorado generally limits covered annuity benefits to $250,000 in present value with respect to one life, including eligible net cash surrender and withdrawal values. A separate $300,000 general aggregate also applies.

The $250,000 annuity limit applies with respect to one life regardless of the number of annuity policies or contracts with the same impaired or insolvent member insurer.

Coverage limits are generally applied separately to each impaired or insolvent member insurer, subject to Colorado's eligibility and interstate coordination rules.

Most covered benefits are subject to a $300,000 aggregate with respect to one life. When qualifying health-benefit-plan benefits are involved, the applicable aggregate may increase to $500,000 with respect to one life. The general aggregate does not increase Colorado's separate $250,000 annuity-specific limit.

  • A qualifying structured-settlement payee, or the beneficiary of a deceased payee, may receive up to $250,000 in present-value annuity benefits, subject to Colorado's eligibility and aggregate rules. Rights acquired through a structured-settlement factoring transaction are excluded.

A $300,000 annuity example

Assume an eligible MYGA has a covered present value of $300,000 with respect to one life at one impaired or insolvent member insurer and there are no other covered benefits affecting the aggregate.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

For this $300,000 example, as much as $250,000 could receive Association protection. The other $50,000 could remain a claim against the insurer's receivership estate.

This example assumes that the claimant, issuing insurer, and contract satisfy Colorado's eligibility requirements and that the stated amount represents covered contractual value.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    Fixed annuities are generally covered up to Colorado's $250,000 present-value annuity limit, subject to eligibility requirements 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; however, when value is credited less frequently than annually, Colorado determines the value as though the insolvency date were the contractual crediting date.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    MYGAs are generally treated as fixed deferred annuities and are subject to Colorado's $250,000 annuity limit and statutory interest-rate restrictions.

  • Variable annuity

    Guaranteed portions may be covered

    For a Colorado variable annuity, protection is limited to qualifying insurer-guaranteed benefits. Gains and losses allocated to a separate account remain the contract owner's investment risk.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A Colorado RILA may receive protection for qualifying insurer-guaranteed obligations, but not for the market or index risk that its owner accepts under the contract.

  • Unallocated annuity contract

    Generally excluded

    Unallocated annuity contracts are generally excluded. However, Colorado's statutory definition does not treat an annuity benefit as unallocated to the extent that the insurer specifically guarantees that benefit to an individual under the contract or certificate.

Who may qualify?

  • Residency is determined on the date a court enters an order determining the member insurer to be impaired or insolvent.
  • For ordinary annuities, eligibility generally follows the legal owner or certificate holder. Colorado defines the owner as the person holding legal title under the contract or through a valid assignment properly recorded on the insurer's books; a mere beneficial interest does not establish ownership. Structured settlements use separate payee and beneficiary rules.
  • A nonresident may qualify in limited circumstances when the issuing insurer is Colorado-domiciled, never held a license or certificate of authority in the person's state of residence, that state has a similar guaranty association, and the person is not eligible for coverage there.
  • Colorado's interstate coordination rules are designed to provide protection through only one state guaranty association and prevent duplicate guaranty coverage for the same obligation.
  • The issuing insurer must qualify as a member insurer under Colorado law, and the policy or contract must otherwise be covered under Article 20. Member-insurer status may continue after a license or certificate of authority is suspended, revoked, not renewed, or voluntarily withdrawn.

What is not covered?

  • Colorado generally excludes policy or contract portions that the member insurer does not guarantee, including amounts for which the owner bears the investment risk.
  • Interest, crediting rates, or similar factors above Colorado's statutory limits based on Moody's Corporate Bond Yield Average may be excluded from guaranty protection.
  • Certain uncredited or forfeitable index-linked amounts may be excluded. If index-linked value is credited less frequently than annually, Colorado calculates the value as though the insolvency date were the contractual crediting date and treats the resulting amount as credited and nonforfeitable.
  • Policies or contracts issued by nonmember entities are generally excluded. A policy or contract issued in Colorado while the member insurer lacked the required license or certificate of authority to issue it is also excluded.
  • Reinsurance policies or contracts are generally excluded unless assumption certificates were issued.
  • Self-funded or uninsured employer or association benefit arrangements are generally excluded.
  • Dividends, experience-rating credits, voting rights, and fees or allowances connected with policy or contract administration are generally excluded.
  • Unallocated annuity contracts are generally excluded, subject to Colorado's definition for benefits specifically guaranteed to an individual.
  • Certain annuities used by nonprofit insurance companies exclusively to provide retirement benefits for nonprofit educational institutions and their employees are excluded.
  • Benefits provided under Medicare Part C or Part D and Medicaid are excluded.
  • Claims based on marketing materials, brochures, illustrations, advertisements, oral representations, misrepresentations, or unauthorized side letters or riders are generally excluded from guaranty protection.
  • Extra-contractual claims, including bad-faith claims, punitive or exemplary damages, attorneys' fees and costs, statutory penalties, and consequential or incidental damages, are generally excluded.
  • Structured-settlement payment rights acquired through a factoring transaction are excluded.

What happens when an insurer becomes impaired or insolvent?

  1. 1

    Rehabilitation or conservation may begin

    A member insurer becomes an impaired insurer when a court places it under an order of rehabilitation or conservation. At that stage, the Association may take specified discretionary actions to support covered contractual obligations.

  2. 2

    Impairment or insolvency status is established

    The relevant court order establishes whether the insurer is impaired or insolvent and determines the residency date used for guaranty-association eligibility.

  3. 3

    Covered benefits and limits are determined

    The Association determines the covered contractual obligation after applying statutory exclusions, then applies the $250,000 annuity-specific limit and any applicable aggregate limit.

  4. 4

    Amounts above guaranty protection may remain in receivership

    Depending on the circumstances, covered policies or contracts may be guaranteed, assumed, reissued, reinsured, continued, or paid. Amounts above guaranty protection may remain claims against the insurer's receivership estate.

How the guaranty system is financed

When funds are needed for obligations involving an impaired or insolvent member insurer, the Association obtains them primarily through statutory assessments on its member insurers.

Assessment allocation
Member insurers
Class B assessments are allocated among the statutory accounts based generally on each member insurer's share of covered Colorado premiums during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Annual assessment cap
Defined by state law
Annual assessment cap — 2%. For each account, total assessments against a member insurer generally cannot exceed 2% of its average annual Colorado premiums on covered business during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Premium-tax treatment
State-specific rule
Premium-tax treatment — 20% per year for five years. A member insurer may offset 20% of a qualifying life-and-annuity Class B assessment against Colorado premium-tax liability in each of the five calendar years following the year in which the assessment was paid. Unused offsets may generally be carried forward.
Funding rules and consumer limits
Funding mechanics do not change consumer coverage limits; eligible annuity benefits remain subject to Colorado's statutory exclusions and applicable dollar limits.

What to know before buying

  • Colorado's $250,000 annuity limit applies with respect to one life regardless of the number of annuity policies or contracts with the same impaired or insolvent member insurer.
  • Colorado prohibits using the existence of the Protection Association for sales, solicitation, or inducement to purchase covered insurance or annuity products. Member insurers must also provide the approved guaranty-association summary document with covered policies or contracts as required by law.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Colorado guaranty law may protect qualifying contractual annuity benefits when a member insurer becomes impaired or insolvent.
    FDIC: FDIC insurance covers eligible deposits at an insured bank; annuities are not FDIC-insured deposits.
  • What system stands behind it
    State protection: The Colorado Life and Health Insurance Protection Association is a statutory association of member insurers funded primarily through member-insurer assessments.
    FDIC: Bank deposits that qualify for FDIC insurance carry the full-faith-and-credit backing of the United States government.
  • Coverage-limit basis
    State protection: Colorado generally provides up to $250,000 in present-value annuity benefits with respect to one life, regardless of the number of policies or contracts with the same member insurer.
    FDIC: FDIC limits are generally applied per depositor, per insured bank, and per account-ownership category.
  • Whether it applies to annuities
    State protection: Eligible annuity benefits may receive Colorado guaranty association protection when the issuing member insurer becomes impaired or insolvent, subject to statutory eligibility requirements and exclusions. Annuities are not FDIC-insured deposits.
    FDIC: FDIC insurance covers eligible bank deposits, not annuity contracts.

Sources and last verified

Last verified: September 25, 2026