State annuity protection

Connecticut Annuity Guaranty Protection: $500,000 Limit Explained

Connecticut generally provides up to $500,000 in protection for the present value of covered annuity benefits, subject to eligibility requirements, aggregation, and statutory exclusions.

Connecticut annuity protection at a glance

Annuity benefit limit
$500,000
Present value of covered contractual annuity benefits, including qualifying net cash surrender and withdrawal values
Overall benefit cap
$500,000
The $500,000 aggregate applies with respect to one individual across life, health, annuity, governmental-plan, and structured-settlement benefits covered by the same impaired or insolvent insurer.
Who provides protection
Connecticut Life and Health Insurance Guaranty Association
The Connecticut Life and Health Insurance Guaranty Association is a private, industry-funded association created by state law. It works with the insurance receiver to continue or replace eligible coverage and pay covered claims.
Insurer requirement
Member insurer
The contract must have been issued by a Connecticut member insurer with authority to issue that coverage when the contract was issued.

How the $500,000 limit works

Connecticut law provides up to $500,000 in present-value annuity benefits with respect to one life, including qualifying net cash surrender and withdrawal values.

Ownership note: The statute measures the limit with respect to one life. The association FAQ describes ordinary annuity examples per contract owner. If the owner and annuitant are different people, confirm how the rule applies with the association.

All covered annuity contracts measured with respect to one life at the same impaired or insolvent member insurer share the $500,000 limit.

A separate member-insurer failure is handled in its own proceeding and does not increase the limit for the first insurer.

The $500,000 aggregate applies with respect to one individual across life, health, annuity, governmental-plan, and structured-settlement benefits covered by the same impaired or insolvent insurer.

  • Connecticut sets a separate $500,000 maximum for each eligible governmental-plan participant whose benefits are funded by an unallocated annuity.
  • For another covered unallocated arrangement, Connecticut limits the obligation to $5 million for its contract owner or plan sponsor.
  • A qualifying structured-settlement payee, or the beneficiary or beneficiaries of a deceased payee, may receive up to $500,000 in present-value annuity benefits. Rights acquired through a structured-settlement factoring transaction are excluded.

A $550,000 annuity example

Place $550,000 of qualifying contractual value on one Connecticut life at the failed company.

Annuity value

$550,000

Potential protection

$500,000

Possible receivership claim

$50,000

If all $550,000 qualifies and no other covered benefits use the aggregate, the association limit is $500,000. The remaining $50,000 may be filed as a claim in the insurer’s receivership.

This example assumes an eligible claimant, a covered contract issued by a member insurer, and qualifying contractual value. Actual coverage is determined under Connecticut law and the contract terms in effect when the association is activated.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity may qualify when it was issued by a member insurer and the owner or other protected person satisfies Connecticut’s eligibility rules. Only covered contractual benefits count toward the limit.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA may qualify, but nonguaranteed, uncredited, or forfeitable index-linked value is generally excluded. If the contract credits less often than annually, the statute treats the impairment or insolvency date as the scheduled crediting date when calculating credited, nonforfeitable value.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA is evaluated as a fixed deferred annuity. Covered value remains subject to the $500,000 limit and Connecticut’s statutory interest-rate restrictions.

  • Variable annuity

    Guaranteed portions may be covered

    A variable annuity may receive protection for eligible general-account guarantees. Investment results for which the contract holder bears the risk are not covered.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA must be reviewed under its written guarantees. Market-linked value that is not guaranteed, credited, or nonforfeitable does not become covered merely because it appears on a contract statement.

  • Unallocated annuity contract

    Limited situations

    An eligible governmental-plan participant may receive up to $500,000 under a covered unallocated annuity. Certain other covered unallocated arrangements have a $5 million limit per contract owner or plan sponsor.

Who may qualify?

  • Residence is generally determined on the date the member insurer becomes impaired or insolvent, as those terms are defined in Connecticut law.
  • For an individual annuity, coverage generally follows the eligible owner or certificate holder. Unallocated annuities, structured settlements, beneficiaries, payees, and governmental-plan participants have their own statutory rules.
  • A nonresident may qualify through Connecticut only when the issuing member insurer is domiciled there, the person’s home state has a similar association, and that association does not cover the claim because the insurer was not licensed there at the relevant time.
  • The act coordinates with other states so the same obligation is covered by only one guaranty association.

What is not covered?

  • Any part of a contract that the insurer did not guarantee, or for which the contract holder bears the investment risk, is excluded.
  • Interest, crediting rates, or similar returns above Connecticut’s statutory benchmark are excluded.
  • Uncredited or forfeitable index-linked value is generally excluded. For a contract that credits less often than annually, the statute applies its special contractual-crediting-date calculation.
  • Reinsurance is excluded unless assumption certificates were issued.
  • Self-funded employer arrangements, certain minimum-premium or administrative-services-only plans, and stop-loss or excess-loss contracts are excluded.
  • Unallocated annuities protected by the Pension Benefit Guaranty Corporation, and certain unallocated arrangements that do not meet the statute’s plan or lottery rules, are excluded.
  • Claims based on marketing materials, unapproved side documents, misrepresentation, penalties, consequential damages, incidental damages, or other obligations outside the written contract are excluded.
  • Structured-settlement payments transferred through a factoring transaction are excluded.
  • A policy or contract issued when the insurer lacked Connecticut authority for that coverage is excluded.

What happens when an insurer becomes impaired or insolvent?

  1. 1

    Impairment or insolvency is established

    Connecticut law distinguishes an impaired insurer from an insolvent insurer. The association’s available powers depend on that status and the governing court or regulatory proceeding.

  2. 2

    Eligibility is checked

    Residence, ownership, member-insurer status, contract type, and any possible coverage through another state association are reviewed.

  3. 3

    Covered benefits are calculated

    The written contractual obligation is reduced by statutory exclusions, then the remaining covered value is measured against the applicable limit and aggregate.

  4. 4

    Coverage is continued or replaced

    Depending on the proceeding, the association may guarantee, assume, reinsure, reissue, or continue covered obligations. Amounts above the association limit may remain claims against the insurer’s receivership estate.

How the guaranty system is financed

Connecticut’s guaranty association is funded through assessments on member insurers, not by a prefunded policyholder account or federal deposit insurance.

Assessment allocation
Member insurers
Assessments are allocated among the statutory accounts and subaccounts using covered Connecticut premiums and the rules in § 38a-866.
Annual assessment cap
2%
Annual assessment cap — 2%. For each applicable life-and-annuity subaccount and the health account, total annual assessments generally cannot exceed 2% of the member insurer’s average annual Connecticut premiums on covered business during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Premium-tax treatment
20% per year for five years
Premium-tax treatment — 20% per year for five years. A member insurer may offset 20% of a qualifying assessment against Connecticut premium-tax liability in each of the five tax years following the year in which the assessment was paid.
How insurer assessments work
The board authorizes assessments when funds are needed. The 2% cap is measured against the member insurer’s three-year average of covered Connecticut premiums for the applicable account or subaccount.

What to know before buying

  • Do not treat the $500,000 figure as a reason to choose an insurer. Coverage depends on the claimant, contract, member-insurer status, written guarantees, and law in effect when the association is activated.
  • Connecticut prohibits sellers from using guaranty protection as an inducement to buy insurance.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Connecticut’s guaranty act may cover eligible contractual annuity benefits after statutory exclusions and limits are applied.
    FDIC: FDIC insurance covers eligible deposit products at an insured bank.
  • What system stands behind it
    State protection: Connecticut protection comes through a private, industry-funded state guaranty association; it is not federal deposit insurance.
    FDIC: For insured bank deposits, federal backing includes the full faith and credit pledged by the United States government.
  • Coverage-limit basis
    State protection: Connecticut generally permits up to $500,000 in present-value annuity benefits with respect to one life at an impaired or insolvent member insurer.
    FDIC: Federal deposit coverage uses depositor, bank, and ownership-category calculations.
  • Whether it applies to annuities
    State protection: Annuities are insurance contracts, not bank deposits, and are not insured by the FDIC.
    FDIC: FDIC insurance applies to eligible bank deposits, not annuity contracts.

Sources and last verified

Last verified: September 25, 2026