State annuity protection

Colorado Annuity Guaranty Protection: $250,000 Limit Explained

Colorado generally provides protection of up to $250,000 for the present value of covered annuity benefits, subject to eligibility requirements and statutory exclusions.

Colorado annuity protection at a glance

Annuity benefit limit
$250,000
Present value of eligible annuity benefits, including covered surrender and withdrawal values
Overall benefit cap
$300,000
Life and annuity benefits for one life generally cannot exceed $300,000 in total from a single failure.
Who provides protection
Colorado Life & Health Protection Association
The Colorado Life and Health Insurance Protection Association performs the duties assigned by the Colorado guaranty act after a covered carrier failure.
Insurer requirement
Member insurer
Colorado protection begins only if the failed carrier belonged to the association for the contract involved.

How the $250,000 limit works

Eligible surrender, withdrawal, and income-stream value share the $250,000 annuity amount; the broader non-health aggregate remains $300,000 for one life.

Several contracts tied to one life at the failed carrier are counted together under the Colorado schedule.

Obligations issued by another member company are not folded into the first insurer’s insolvency limit.

Life and annuity benefits for one life generally cannot exceed $300,000 in total from a single failure.

  • Each qualifying Colorado structured-settlement payee has a separate $250,000 aggregate ceiling for present-value annuity benefits.

A $300,000 annuity example

Assume $300,000 of eligible MYGA present value on one life and no other benefit from the failed carrier.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

$250,000 is within the association line and $50,000 is left for the receivership.

The illustration assumes current Colorado law, member-insurer status, and fully eligible contractual value.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity can qualify for covered contractual value.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA can qualify, but Colorado removes some nonguaranteed value, above-benchmark interest, and index value that is neither credited nor nonforfeitable. A special calculation applies to contracts with crediting intervals longer than one year.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA can qualify as a fixed deferred contract. Colorado's $250,000 ceiling and its excess-interest rule still apply.

  • Variable annuity

    Guaranteed portions may be covered

    Variable-contract market risk remains with the owner; covered insurer guarantees are considered separately.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA requires review of the guarantee rather than treating the account value as wholly protected.

  • Unallocated annuity contract

    Generally excluded

    Colorado excludes unallocated annuity contracts, including them on the association’s consumer exclusion list.

Who may qualify?

  • Residence is tested at Colorado’s statutory impairment or insolvency date.
  • The owner ordinarily controls an individual annuity; a payee or participant can control under the act’s specialized categories.
  • A nonresident can use Colorado’s fallback only if the failed insurer is Colorado-domiciled, was never licensed in the person’s home state, that state has a similar guaranty association, and the person is ineligible for protection there.
  • The act prevents duplicate association recovery by coordinating with the claimant’s resident jurisdiction.
  • Colorado protection begins only if the failed carrier belonged to the association for the contract involved.

What is not covered?

  • Nonguaranteed promises are outside the covered obligation.
  • Crediting above the statutory benchmark is excluded.
  • Index-linked value that is uncredited or still forfeitable is generally excluded. When credits occur less often than annually, Colorado treats the insolvency date as the scheduled crediting date when calculating that value.
  • Contracts issued by entities excluded from member-insurer status do not qualify.
  • Claims based on marketing materials or misrepresentations are outside the express written contract.
  • The association does not cover extra-contractual recovery, statutory penalties, or related consequential and incidental damages.

What happens after an insurer fails?

  1. 1

    Regulator intervenes

    Colorado or the domiciliary regulator places the troubled insurer under formal supervision.

  2. 2

    Statutory trigger occurs

    The impairment or insolvency determination fixes the applicable eligibility facts.

  3. 3

    Association calculates

    Covered value is tested against the annuity line and the one-life aggregate.

  4. 4

    Uncovered amounts stay with the receivership

    Continuation or transfer is coordinated, while uncovered value remains an estate claim.

How the guaranty system is financed

Colorado member insurers finance covered association work through statutory assessments.

Assessment allocation
Member insurers
Class B assessments are allocated by account using each member insurer’s share of covered Colorado premiums over the applicable three-year period.
Annual assessment cap
Defined by state law
Colorado caps annual assessments at 2% for each account, based on the member insurer’s applicable three-year average of covered Colorado premiums.
Premium-tax treatment
State-specific rule
A member insurer may apply 20% of a qualifying life-and-annuity Class B assessment against Colorado premium tax during each of the first through fifth calendar years following payment, subject to the statutory conditions.
Colorado assessment accounts
Colorado caps each account’s annual assessment at 2% of the applicable three-year average premium base and provides a five-year premium-tax offset for qualifying life-and-annuity Class B assessments.

What to know before buying

  • Count all annuity value on the same life at one issuer before comparing the total with $250,000.
  • Colorado bars using the association’s existence to induce an insurance purchase and provides for a prescribed summary document.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Colorado guaranty law addresses qualifying benefits promised by a failed annuity issuer.
    FDIC: Federal deposit insurance addresses eligible balances owed by a failed bank.
  • What system stands behind it
    State protection: The Colorado Life & Health Protection Association is a private nonprofit made up of member insurers.
    FDIC: At an FDIC-insured bank, an eligible deposit has the United States government’s full faith and credit behind it.
  • Coverage-limit basis
    State protection: Colorado aggregates $250,000 of annuity present value on one life at one carrier.
    FDIC: FDIC aggregation follows each depositor’s bank and ownership category.
  • Whether it applies to annuities
    State protection: A qualifying Colorado annuity may receive state association protection after the statutory event.
    FDIC: An annuity remains outside FDIC deposit insurance regardless of its fixed rate.

Sources and last verified

Last verified: August 29, 2026