State annuity protection

Montana Annuity Guaranty Protection: $250,000 Limit Explained

For a qualifying Montana annuity, the life-and-health association can respond for as much as $250,000 of present-value benefits.

Montana annuity protection at a glance

Annuity benefit limit
$250,000
The calculation uses the present value of the covered obligation and counts qualifying net cash-surrender and withdrawal rights.
Overall benefit cap
$300,000
The usual all-benefit maximum is $300,000 for one life. That maximum leaves the annuity sublimit at $250,000; eligible health-insurance obligations use a different aggregate that can reach $500,000.
Who provides protection
Montana Life and Health Insurance Guaranty Association
Montana created a nonprofit association of life-and-health member companies to carry out the protections in Part 2 after a covered carrier becomes impaired or insolvent.
Insurer requirement
Member insurer
The carrier must come within Montana’s statutory definition of a member insurer.

How the $250,000 limit works

Annuity protection stops at $250,000. Montana also imposes a broader $300,000 ceiling for most Part 2 benefits tied to that life, but the broader ceiling does not enlarge the annuity amount.

Ownership note: The statute frames the standard cap by covered life, while the Association’s examples also discuss ownership. A contract with different owners, annuitants, payees, beneficiaries, or assignments therefore needs an individual eligibility review.

Montana combines the qualifying annuity obligations concerning one life when they arise from the same failed carrier.

A separate carrier failure is evaluated on its own record, with residence and interstate-association rules applied to that proceeding.

The usual all-benefit maximum is $300,000 for one life. That maximum leaves the annuity sublimit at $250,000; eligible health-insurance obligations use a different aggregate that can reach $500,000.

  • A protected structured-settlement payee has a $250,000 present-value cap. If that payee has died, the same cap applies to the beneficiary identified by Montana law.
  • When the specified government retirement arrangement uses an unallocated contract, Part 2 allows no more than $250,000 of present-value benefits for an eligible participant.
  • For a different unallocated annuity that remains eligible, Part 2 sets a $5 million maximum for the contract owner or sponsoring plan rather than a participant-by-participant amount.
  • Qualifying health-insurance benefits may be subject to a higher $500,000 aggregate with respect to one individual.

A $300,000 annuity example

Suppose the failed Montana member owes one person $300,000 of otherwise eligible present value under a fixed annuity.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

Only $250,000 enters guaranty protection because the annuity sublimit remains controlling beneath the broader per-life aggregate.

The illustration applies Montana’s life-and-health rules only.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A traditional fixed contract may enter Montana’s Part 2 calculation, but no more than its covered guaranteed present value is counted.

  • Fixed indexed annuity (FIA)

    Generally covered

    For an FIA, the protected amount can omit nonguaranteed value as well as excess, uncredited, or forfeitable index results. Section 33-10-224 gives separate treatment to an index period whose credit arrives at intervals longer than one year.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA is tested as a fixed deferred contract, and Montana’s statutory interest restrictions can reduce the amount admitted to the calculation.

  • Variable annuity

    Guaranteed portions may be covered

    Separate-account gains and losses carried by the owner are outside the insurer-backed obligation that Part 2 can protect.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA must be separated into any carrier guarantee and the market or index result allocated to the owner; only the former can enter the Montana claim.

  • Unallocated annuity contract

    Limited situations

    A participant in the specified government retirement arrangement can have an individual $250,000 ceiling. For another covered unallocated contract, the eligible owner or sponsoring plan can instead encounter a $5 million maximum.

Who may qualify?

  • Residence is fixed on the date of the court order that determines the carrier is impaired or insolvent, rather than the day a claim form is submitted.
  • The controlling claimant can be an owner, certificate holder, payee, beneficiary, or assignee, depending on the contract and the particular rule invoked.
  • A person living elsewhere has a narrow route when the failed company is domiciled in Montana and the home-state association cannot protect that person.
  • For a Montana-domiciled failure, Part 2 can fill the defined gap left by a residence-state association whose law does not cover the claim.
  • The carrier must come within Montana’s statutory definition of a member insurer.

What is not covered?

  • Part 2 omits nonguaranteed promises and can omit index amounts that have not vested or been credited; Montana separately addresses crediting intervals longer than a year.
  • A purchaser of factored structured-settlement payment rights cannot use Montana guaranty protection for those acquired payments.
  • Self-funded arrangements, returns assigned to the contract holder, above-benchmark interest, and promises absent from the written contract are outside the ordinary protection.

What happens after an insurer fails?

  1. 1

    Part 2 review opens

    The association first confirms that the annuity, claimant, and issuing carrier fit Montana’s life-and-health statute.

  2. 2

    Court status is established

    The impairment or insolvency order triggers the applicable association duties and fixes the statutory residence date.

  3. 3

    Protected value is calculated

    Eligible present value is measured, then reduced by the $250,000 annuity ceiling and any applicable aggregate.

  4. 4

    The estate handles the remainder

    Any admitted amount outside the guaranty payment continues through receivership and depends on the failed carrier’s available assets.

How the guaranty system is financed

When covered obligations require money, Montana obtains it mainly by assessing insurers that belong to the association.

Assessment allocation
Member insurers
The charge is assigned across the life-and-annuity subaccounts and the health account using the premium allocation prescribed in Part 2.
Annual assessment cap
Defined by state law
Montana sets the ceiling separately for every subaccount within its life-and-annuity business and for its health account: 2% of the member insurer’s average annual Montana premiums. The base uses covered policies and contracts from the three calendar years before the failure year.
Premium-tax treatment
State-specific rule
Qualifying Class B assessments may generally be offset against Montana premium-tax liability as the contribution certificate is written down from 100% by 20 percentage points each year over the following five-year schedule.
Montana assessment mechanics
For an applicable account or subaccount, the yearly charge ordinarily cannot exceed 2% of that insurer’s average Montana premiums over the relevant three preceding calendar years. A qualifying Class B certificate can reduce premium-tax liability while its allowed amount declines by 20 percentage points in each year of the five-year schedule.

What to know before buying

  • An annuity is evaluated under Montana’s life-and-health Part 2; the state’s property-and-casualty fund is not an alternative source of annuity payment.
  • A seller may not present association protection as a reason to buy. Montana also requires delivery of the commissioner-approved summary for a covered policy or contract.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Part 2 concerns qualifying contractual duties of a failed Montana life-or-health member company.
    FDIC: The federal deposit program covers eligible bank-account balances under a different protection system.
  • What system stands behind it
    State protection: Montana’s association is a nonprofit statutory body financed by its insurer members.
    FDIC: Banks in the federal program support a different insurance system for deposits.
  • Coverage-limit basis
    State protection: For an ordinary covered annuity, Montana uses a $250,000 present-value sublimit and a separate $300,000 all-benefit aggregate for the life.
    FDIC: Bank limits turn on the depositor, ownership category, and insured institution.
  • Whether it applies to annuities
    State protection: State guaranty eligibility does not turn an annuity contract into an insured bank account.
    FDIC: FDIC coverage attaches to eligible deposits; it does not insure the Montana annuity.

Sources and last verified

Last verified: September 17, 2026