State annuity protection

North Carolina Annuity Guaranty Protection: $300,000 Limit Explained

North Carolina generally provides up to $300,000 in protection for covered annuity benefits with respect to one life. Separate rules provide up to $1 million per qualifying structured-settlement payee and up to $5 million for certain unallocated-annuity contract holders, while qualifying governmental-plan participant benefits remain subject to the applicable $300,000 per-life aggregate.

North Carolina annuity protection at a glance

Annuity benefit limit
$300,000
Up to $300,000 in covered annuity benefits, including eligible cash values, with respect to one life, regardless of the number of policies or contracts.
Overall benefit cap
$300,000
The standard aggregate is $300,000 with respect to one life. The separate $1 million structured-settlement-payee and $5 million qualifying unallocated-contract-holder limits are outside that ordinary per-life category, while the $300,000 governmental-plan participant limit remains subject to the statutory per-life aggregate.
Who provides protection
North Carolina Life & Health Insurance Guaranty Association
The North Carolina Life and Health Insurance Guaranty Association is a nonprofit legal entity created by statute that provides protection for covered obligations of impaired or insolvent member insurers.
Insurer requirement
Member insurer
The issuing insurer must qualify as a member insurer under North Carolina law.

How the $300,000 limit works

Ordinary covered annuity benefits may receive up to $300,000 with respect to one life, but other covered benefits subject to the same statutory aggregate can affect the total amount available.

The statute applies the ordinary $300,000 limit with respect to one life, regardless of the number of policies or contracts with the same delinquent insurer. The Association’s FAQ separately illustrates multiple annuities using a single owner.

Coverage limits are generally applied separately to each impaired or insolvent member insurer, subject to North Carolina’s eligibility and interstate coordination rules.

The standard aggregate is $300,000 with respect to one life. The separate $1 million structured-settlement-payee and $5 million qualifying unallocated-contract-holder limits are outside that ordinary per-life category, while the $300,000 governmental-plan participant limit remains subject to the statutory per-life aggregate.

  • An eligible participant in a governmental retirement plan established under IRC sections 401, 403(b), or 457 and covered by an unallocated annuity contract may receive up to $300,000 in present-value annuity benefits. This participant amount is also included in the applicable $300,000 aggregate with respect to one life.
  • A qualifying structured-settlement payee, or the beneficiaries of a deceased payee, may receive up to $1 million in covered benefits. Rights transferred through a structured-settlement factoring transaction are excluded.
  • Certain other qualifying unallocated-annuity contract holders may receive up to $5 million in benefits in the aggregate, regardless of the number of qualifying contracts held by that contract holder.

A $350,000 annuity example

Assume an individual has an eligible fixed annuity with $350,000 in covered benefits at one impaired or insolvent member insurer and no other covered benefits subject to the same aggregate.

Annuity value

$350,000

Potential protection

$300,000

Possible receivership claim

$50,000

In this example, up to $300,000 may qualify for guaranty association protection. The separate structured-settlement and unallocated-annuity limits do not apply to an ordinary individually owned fixed annuity.

This example illustrates only the ordinary annuity limit. Structured settlements and qualifying unallocated annuity arrangements are subject to separate statutory rules.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    Fixed annuities are generally covered up to North Carolina’s $300,000 limit with respect to one life, subject to eligibility requirements and statutory exclusions.

  • Fixed indexed annuity (FIA)

    Generally covered

    FIAs are generally covered to the extent of qualifying insurer-guaranteed benefits. Certain uncredited or forfeitable index-linked amounts may be excluded; however, when value is credited less frequently than annually, North Carolina determines the value as though the earlier impairment or insolvency date were the contractual crediting date.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    MYGAs are generally treated as fixed deferred annuities and are subject to North Carolina’s $300,000 limit and statutory interest-rate restrictions tied to the Moody’s Corporate Bond Yield Average.

  • Variable annuity

    Guaranteed portions may be covered

    Variable-annuity protection is generally limited to qualifying benefits guaranteed by the insurer; investment risk retained by the contract owner is excluded.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA may qualify only for its insurer-guaranteed obligations; owner-borne market or index exposure generally falls outside North Carolina protection.

  • Unallocated annuity contract

    Limited situations

    Unallocated annuity contracts are covered in specified circumstances. Eligible governmental-plan participants may receive up to $300,000 each, subject to the applicable per-life aggregate, while certain other qualifying contract holders may receive up to $5 million in the aggregate.

Who may qualify?

  • Residency is generally determined when the member insurer becomes a delinquent insurer under North Carolina law, meaning when it becomes impaired or insolvent.
  • For ordinary annuities, eligibility generally depends on the qualifying owner or certificate holder. Structured settlements and unallocated annuity arrangements have separate rules for payees, beneficiaries, participants, contract holders, and plan sponsors.
  • Guaranty protection is generally provided by the association in the person’s state of residence, subject to North Carolina’s interstate coordination rules.
  • North Carolina may provide protection in certain nonresident cases when the insurer is North Carolina-domiciled and the person is not eligible for coverage from the guaranty association in their state of residence.
  • The issuing insurer must qualify as a member insurer under North Carolina law.

What is not covered?

  • North Carolina generally excludes nonguaranteed policy or contract benefits and any portion for which the owner retains the investment risk.
  • Interest, crediting rates, or similar factors above North Carolina’s statutory limits based on the Moody’s Corporate Bond Yield Average may be excluded from guaranty protection.
  • Certain uncredited or forfeitable index-linked amounts may be excluded. If index-linked value is credited less frequently than annually, North Carolina calculates the value as though the earlier impairment or insolvency date were the contractual crediting date and treats that amount as credited and nonforfeitable.
  • Structured-settlement annuity benefits transferred by a payee or beneficiary through a structured-settlement factoring transaction are excluded from guaranty protection.
  • Other exclusions include reinsurance without an assumption certificate; self-funded or uninsured employer plans; dividends and experience-rating credits; unauthorized contracts, side letters, or riders; PBGC-protected unallocated plans; marketing or misrepresentation claims; extra-contractual claims; penalties; and consequential or incidental damages.

What happens when an insurer becomes impaired or insolvent?

  1. Rehabilitation, conservation, or liquidation may begin

    A financially troubled insurer may be placed into rehabilitation, conservation, or liquidation, and access to certain payments or withdrawals may be restricted. The Association may take specified actions for an impaired insurer before liquidation.

  2. Residency and coverage category are determined

    The relevant impairment or insolvency status, the claimant’s residence, and the type of policy or contract determine whether North Carolina is responsible and which coverage rules apply.

  3. Applicable coverage limit is applied

    Ordinary annuity benefits are generally subject to the $300,000 per-life limit. Qualifying structured-settlement payees may receive up to $1 million, while certain unallocated-annuity arrangements use the $300,000 participant or $5 million contract-holder rules.

  4. Amounts above guaranty protection remain in receivership

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

How the guaranty system is financed

The Association is funded primarily through assessments of member insurers when funds are needed to carry out its obligations for impaired or insolvent member insurers.

Assessment allocation
Member insurers
Member-insurer assessments are allocated through the statutory accounts and subaccounts based on applicable North Carolina premiums and the assessment rules in Article 62.
Annual assessment cap
2%
Annual assessment cap — 2%. For each applicable life-and-annuity subaccount and the health account, total assessments against a member insurer generally cannot exceed 2% of its average annual North Carolina premiums on covered business during the three calendar years preceding the year in which the affected insurer became a delinquent insurer.
Premium-tax treatment
State-specific rule
Premium-tax treatment — 20% per year for five years. A member insurer that pays a qualifying assessment may claim a credit against North Carolina gross premium tax equal to 20% of the assessment in each of the five taxable years following the year in which the assessment was paid, limited to its premium-tax liability for that year.
Article 62 assessment funding
The separate governmental-plan, structured-settlement, and unallocated-contract rules apply only to qualifying arrangements and do not increase the ordinary $300,000 annuity limit. The governmental-plan participant amount is also subject to the statutory $300,000 per-life aggregate.

What to know before buying

  • When the same impaired or insolvent insurer owes multiple covered benefits with respect to one life, those benefits may share North Carolina’s $300,000 aggregate.
  • North Carolina prohibits any person, including a member insurer, agent, or affiliate, from using the existence of the Guaranty Association for sales, solicitation, or inducement. Member insurers must also provide the Commissioner-approved guaranty-association summary document with covered policies or contracts.

How state protection differs from FDIC insurance

  • What it covers
    State protection: North Carolina guaranty protection may apply to ordinary covered annuity benefits, qualifying structured-settlement benefits, and specified unallocated annuity arrangements.
    FDIC: FDIC insurance protects eligible deposits and has no insurance-contract categories.
  • What system stands behind it
    State protection: The North Carolina Life and Health Insurance Guaranty Association is a nonprofit legal entity created by statute and funded through assessments of member insurers to carry out Article 62 for impaired and insolvent member insurers.
    FDIC: Federal deposit insurance carries the full faith and credit of the United States government. By contrast, the North Carolina Association is a private statutory entity funded by the insurance industry and is not a state agency.
  • Coverage-limit basis
    State protection: North Carolina generally uses a $300,000 limit with respect to one life. Qualifying governmental-plan participants have a separately stated $300,000 participant limit that remains subject to the applicable per-life aggregate; structured-settlement payees may receive up to $1 million; and certain qualifying unallocated-annuity contract holders may receive up to $5 million.
    FDIC: Federal deposit limits turn on the depositor, ownership capacity, and insured bank.
  • Whether it applies to annuities
    State protection: Qualifying annuity obligations may be protected through North Carolina’s guaranty system; an annuity is neither a bank deposit nor FDIC-insured.
    FDIC: FDIC coverage reaches an eligible bank account instead of an annuity.

Sources and last verified

Last verified: September 24, 2026