State annuity protection

Illinois Annuity Guaranty Protection: $250,000 Limit Explained

Illinois generally provides up to $250,000 in protection for the present value of covered annuity benefits with respect to one life, subject to eligibility requirements, statutory exclusions, and a separate $300,000 general aggregate.

Illinois annuity protection at a glance

Annuity benefit limit
$250,000
Illinois measures the covered annuity’s present value, including qualifying net cash surrender and withdrawal amounts
Overall benefit cap
$300,000
The $300,000 aggregate is Illinois's usual combined ceiling for one life. Certain health-plan benefits can increase the overall maximum to $500,000, while the $250,000 annuity-specific limit remains unchanged.
Who provides protection
Illinois Life and Health Insurance Guaranty Association
After an Illinois member carrier is impaired or insolvent, ILHIGA works with the receiver to administer contractual obligations that qualify under the Act.
Insurer requirement
Member insurer
The issuing carrier must meet Illinois’s statutory member-insurer definition.

How the $250,000 limit works

Illinois caps the covered present value of an annuity at $250,000, counting qualifying cash that can be taken through surrender or withdrawal.

For one life, Illinois applies a single $250,000 annuity ceiling regardless of the number of contracts held at the same impaired or insolvent carrier.

Another failed Illinois member carrier starts its own benefit calculation, although claimant eligibility and interstate coordination still apply.

The $300,000 aggregate is Illinois's usual combined ceiling for one life. Certain health-plan benefits can increase the overall maximum to $500,000, while the $250,000 annuity-specific limit remains unchanged.

  • For a participant in a qualifying Illinois governmental retirement plan described by IRC section 401, 403(b), or 457, protection under the unallocated annuity cannot exceed $250,000 in present value.
  • An eligible Illinois owner or plan sponsor can qualify for a separate $5 million ceiling on an unallocated contract. A sponsor generally must have its principal place of business in Illinois and meet the Act’s remaining conditions.
  • Illinois caps a qualifying payee’s structured-settlement annuity benefits at $250,000 of present value; the same maximum can apply to the beneficiary of a deceased payee.

A $300,000 annuity example

Assume an eligible annuity has a covered present value of $300,000 and there are no other covered benefits with the same impaired or insolvent member insurer.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

This example places $250,000 within the possible association benefit. The other $50,000 may continue as a receivership claim against the failed insurer.

This example assumes the claimant satisfies Illinois residency and other eligibility requirements at the relevant impairment or insolvency determination.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    After the Act’s exclusions are applied, Illinois caps the present value of a qualifying fixed annuity at $250,000.

  • Fixed indexed annuity (FIA)

    Generally covered

    An Illinois FIA qualifies only to the extent of a covered carrier guarantee. Amounts that have not vested may be excluded. When crediting occurs less frequently than annually, Illinois substitutes the carrier-failure day for the contractual crediting date.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    MYGAs are generally treated as fixed deferred annuities and may qualify for up to $250,000 in covered present-value benefits, subject to Illinois’s statutory interest-rate restrictions.

  • Variable annuity

    Guaranteed portions may be covered

    Illinois can protect an eligible variable-annuity promise made by the carrier, but not the separate-account investment result left with the owner.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA may receive protection only for the insurer’s qualifying guarantees; market or index risk retained by the owner normally falls outside coverage.

  • Unallocated annuity contract

    Limited situations

    Illinois covers an unallocated contract only in specified circumstances: an eligible government-plan participant can receive up to $250,000, while a qualifying owner or plan sponsor can receive up to $5 million if the statutory location and exclusion rules are met.

Who may qualify?

  • Illinois fixes residency on the date of entry of a court order that formally declares the member carrier impaired or insolvent.
  • An ordinary Illinois contract usually follows its eligible owner, certificate holder, or enrollee. The Act uses distinct payee, beneficiary, participant, owner, and sponsor tests for structured settlements and unallocated arrangements.
  • A nonresident has a narrow Illinois route when the failed carrier is domiciled in Illinois and the home-state association cannot cover the person because that state’s licensing condition was not met.
  • Illinois coordinates with other associations so one state bears the covered obligation and the claimant cannot collect twice.

What is not covered?

  • The fund generally does not cover contract value that the member insurer did not guarantee or investment risk retained by the owner.
  • Illinois removes interest and other crediting factors to the extent they exceed the rate permitted by the guaranty statute.
  • Unposted or forfeitable index amounts normally stay out. If the contract posts credits less often than yearly, Illinois treats the failure date as the contractual posting date and counts the resulting value as credited and nonforfeitable.
  • Policies or contracts issued by nonmember entities and contracts or portions of contracts expressly excluded by Illinois law are not covered.
  • Illinois excludes demands based on marketing materials, unauthorized side letters or riders, and misrepresentations, as well as extra-contractual relief, penalties, and consequential or incidental damages.

What happens when an insurer becomes impaired or insolvent?

  1. 1

    Rehabilitation or conservation may begin

    A member insurer may first enter rehabilitation or conservation. During this impaired-insurer stage, the Association may take specified discretionary actions to support covered contractual obligations.

  2. 2

    Residency is determined

    The relevant court order determining the insurer to be impaired or insolvent establishes the residency date used for guaranty-association eligibility.

  3. 3

    Coverage and benefit limits are determined

    The Association determines the covered present value and applies the $250,000 annuity-specific limit and any applicable aggregate limit.

  4. 4

    Amounts above guaranty protection remain with the receivership

    Amounts above the Association’s protection may remain claims against the insolvent insurer’s receivership estate, with any additional recovery depending on available estate assets.

How the guaranty system is financed

ILHIGA raises claim funding through calls on its member carriers when an eligible Illinois obligation requires support.

Assessment allocation
Member insurers
The Act assigns each Illinois carrier’s assessment among accounts and subaccounts using the relevant in-state premium base.
Annual assessment cap
2%
For each applicable account or subaccount, total annual assessments generally cannot exceed 2% of the member insurer’s average annual Illinois premiums on covered business during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Premium-tax treatment
No current statutory offset
Illinois’s former guaranty-association tax-offset provision expired and has no effect for tax periods beginning on or after January 1, 2003.
Funding does not change consumer limits
Member-carrier funding does not expand the consumer benefit; the exclusions, $250,000 annuity ceiling, and applicable combined-benefit cap still govern.

What to know before buying

  • Illinois’s $250,000 annuity limit is based on covered present value, while other covered benefits with the same insurer may also affect the applicable aggregate limit.
  • Illinois bars everyone—including a member insurer, agent, or affiliate—from invoking ILHIGA for sales, solicitation, or inducement to buy a covered policy or annuity.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Illinois guaranty protection may apply to covered contractual obligations under eligible annuity policies and contracts.
    FDIC: FDIC insurance covers eligible deposit obligations after a bank failure.
  • What system stands behind it
    State protection: Illinois created ILHIGA as a statutory nonprofit financed by assessments on member carriers. Neither Illinois nor the federal government guarantees its obligations.
    FDIC: Eligible bank deposits carry a federal FDIC guarantee; no comparable government backing applies to ILHIGA benefits.
  • Coverage-limit basis
    State protection: Illinois limits qualifying annuity value to $250,000 for one life. Its ordinary combined-benefit ceiling is $300,000, although eligible health-plan benefits can raise that overall ceiling to $500,000.
    FDIC: Federal deposit limits use depositor, bank, and ownership capacity.
  • Whether it applies to annuities
    State protection: A covered Illinois annuity obligation can qualify for ILHIGA protection after an insurer failure. Because the contract is not a bank account, FDIC insurance does not apply.
    FDIC: Annuity contracts are not deposits and are never insured by the FDIC.

Sources and last verified

Last verified: September 19, 2026