State annuity protection

Kentucky Annuity Guaranty Protection: $250,000 Limit Explained

Kentucky generally provides up to $250,000 in protection for the present value of covered annuity benefits. A separate $300,000 aggregate applies across certain health and annuity benefits.

Kentucky annuity protection at a glance

Annuity benefit limit
$250,000
Present value of covered annuity benefits, whether deferred or already being paid
Overall benefit cap
$300,000
Under KRS 304.42-030, Kentucky combines the named health and annuity categories under a $300,000 per-life ceiling. A qualifying health benefit plan has a $500,000 maximum.
Who provides protection
Kentucky Life and Health Insurance Guaranty Association
KLHIGA processes eligible claims under Subtitle 42 and works with the receiver on covered obligations.
Insurer requirement
Member insurer
The contract must have been issued by a Kentucky member insurer.

How the $250,000 limit works

Eligible deferred and payout annuities are generally subject to the same $250,000 annuity benefit limit in Kentucky.

Annuity contracts at one carrier share the statutory unit, and annuity plus health benefits share the stated $300,000 aggregate.

A contract with another failed member insurer belongs to a separate proceeding.

Under KRS 304.42-030, Kentucky combines the named health and annuity categories under a $300,000 per-life ceiling. A qualifying health benefit plan has a $500,000 maximum.

  • Kentucky raises the ceiling to $500,000 for benefits under a qualifying health benefit plan.
  • Kentucky separately limits covered structured-settlement benefits for one payee or beneficiary to $250,000 in present value.

A $300,000 annuity example

Assume $300,000 of eligible annuity value at one failed Kentucky insurer and no health claim in the structured scenario.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

In this Kentucky example, up to $250,000 could receive association protection. The unpaid $50,000 may continue as a claim in the insurer’s receivership.

The example addresses one annuity and does not estimate additional receivership recovery.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity can qualify to $250,000.

  • Fixed indexed annuity (FIA)

    Generally covered

    FIAs are generally covered to the extent the obligation is guaranteed by the insurer; nonguaranteed or owner-borne investment risk is excluded, and statutory interest-rate limits may apply.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    An eligible Kentucky MYGA generally falls within fixed-deferred-annuity protection. The $250,000 present-value ceiling and statutory interest restrictions still apply.

  • Variable annuity

    Guaranteed portions may be covered

    Variable market risk is not an insurer guarantee.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a Kentucky RILA, only enforceable insurer-backed obligations may qualify; investment or market risk borne by the owner is generally excluded.

  • Unallocated annuity contract

    Generally excluded

    Kentucky excludes unallocated annuity contracts without the plan exceptions found in some states.

Who may qualify?

  • Kentucky determines residence when the member insurer is first found impaired or insolvent, whichever occurs first.
  • The owner controls an individual annuity; structured-settlement protection follows the payee.
  • Kentucky’s domicile route can protect a nonresident when the home association exists but cannot act solely because the failed carrier lacked its required license.
  • The domicile fallback prevents a claimant from being left solely because of cross-state licensing.
  • The contract must have been issued by a Kentucky member insurer.

What is not covered?

  • Nonguaranteed benefits are excluded.
  • Interest above Kentucky’s benchmark is removed.
  • Owner-borne market or investment risk is excluded; Kentucky does not import another state’s special uncredited-index calculation.
  • Unallocated annuity contracts are excluded.
  • Kentucky excludes liabilities arising from sales representations or side promises, along with penalties and consequential or incidental damages.

What happens after an insurer fails?

  1. 1

    Insurer enters impairment or insolvency proceedings

    KLHIGA may act during impairment and has mandatory statutory duties after insolvency.

  2. 2

    Eligibility is determined

    Annuity, health, and life claims must be mapped to the numbered clauses.

  3. 3

    Covered benefits and limits are calculated

    The $250,000 annuity limit and the $300,000 health-and-annuity aggregate are applied as written.

  4. 4

    Amounts above protection remain with receivership

    The Kentucky receiver handles any covered-contract balance that exceeds association protection as part of the failed carrier’s estate.

How the guaranty system is financed

Kentucky member insurers fund association obligations through assessments.

Assessment allocation
Member insurers
Calls are allocated under Subtitle 42 using relevant premium accounts.
Annual assessment cap
Defined by state law
Kentucky measures a carrier’s per-account yearly maximum as 2% of its relevant in-state premiums averaged across the preceding three years.
Premium-tax treatment
State-specific rule
Kentucky provides five post-payment annual tax credits for an eligible assessment, with each credit equal to 20% of the assessment.
Kentucky assessment authority
The statute expressly applies the $300,000 aggregate to its named health and annuity benefit clauses; unusual combinations involving life benefits may require KLHIGA guidance.

What to know before buying

  • If annuity and health coverage share one carrier, count the $300,000 aggregate; qualifying health benefit plans have a separate $500,000 exception.
  • Kentucky prohibits use of the association’s existence to sell or solicit insurance.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Kentucky protection covers eligible present value promised under a qualifying annuity contract.
    FDIC: FDIC protection covers eligible deposits rather than insurance-product benefits.
  • What system stands behind it
    State protection: KLHIGA’s member companies stand behind Kentucky’s association obligations.
    FDIC: Federally insured banking companies stand behind the deposit fund through assessments.
  • Coverage-limit basis
    State protection: Kentucky caps eligible annuity present value at $250,000 for one covered life when a member insurer fails.
    FDIC: Federal deposit limits aggregate by depositor, insured bank, and ownership category.
  • Whether it applies to annuities
    State protection: A qualifying Kentucky annuity may receive KLHIGA protection for its covered promise.
    FDIC: Annuities remain insurance contracts and are not FDIC-insured deposits.

Sources and last verified

Last verified: September 2, 2026