State annuity protection

North Dakota Annuity Guaranty Protection: $250,000 Limit and Special Contract Rules

North Dakota generally protects up to $250,000 in the present value of covered annuity benefits for one life at one failed member insurer.

North Dakota annuity protection at a glance

Annuity benefit limit
$250,000
North Dakota converts the covered annuity obligation to present value and includes qualifying net surrender and withdrawal amounts.
Overall benefit cap
$300,000
A $300,000 general per-life aggregate can limit the combined covered benefits owed for one member-insurer failure.
Who provides protection
North Dakota Life and Health Insurance Guaranty Association
The association may assist an impaired member insurer when statutory conditions are met. After a member insurer is declared insolvent, the chapter assigns stronger duties to guarantee, assume, reissue, reinsure, or pay covered obligations within its limits.
Insurer requirement
Member insurer
The obligation must come from an insurer that was a North Dakota member for the relevant line of business when the covered contract was issued.

How the $250,000 limit works

The $250,000 ceiling is measured with respect to one life across covered contracts issued by the same failed member insurer. A separate overall aggregate may also limit combined benefits.

Covered annuities tied to the same life and the same failed member insurer share one $250,000 annuity limit; multiple contracts do not create multiple limits.

A contract issued by another member insurer is measured separately if that insurer also fails, using the eligibility facts that apply to that failure.

A $300,000 general per-life aggregate can limit the combined covered benefits owed for one member-insurer failure.

  • For a qualifying North Dakota structured settlement, the payee or beneficiary is limited to $250,000 of present-value annuity protection.
  • North Dakota assigns a $250,000 present-value maximum to an eligible participant in a governmental retirement plan under section 401(k), 403(b), or 457.
  • North Dakota limits an eligible owner or plan sponsor to $5 million across the covered unallocated arrangements attributed to that party.

A $300,000 annuity example

Assume a member company owes $300,000 in qualifying fixed-annuity value for one covered North Dakota life, with no other benefit using the aggregate.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

Potential association protection stops at $250,000. The remaining $50,000 may be filed as a policyholder claim in the receivership, but recovery is not guaranteed.

The illustration uses one qualifying North Dakota claimant, one eligible contract, and no competing covered benefit at the same failed insurer.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity can qualify when the issuing company was a member insurer and the owner and obligation meet the chapter’s coverage rules.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA’s insurer-backed guarantees can qualify, but nonguaranteed value and owner-borne investment risk do not. The statute also supplies a separate calculation rule for an index-based crediting period shorter than one year.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA is a fixed deferred annuity for this analysis; the product label does not create a separate limit.

  • Variable annuity

    Guaranteed portions may be covered

    Separate-account value borne by the contract owner is excluded, while an enforceable insurer-backed guarantee must be tested separately.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA can expose the owner to market losses. Only an enforceable insurer-backed guarantee is considered for guaranty coverage.

  • Unallocated annuity contract

    Limited situations

    Participants in qualifying governmental plans under sections 401(k), 403(b), and 457 may receive up to $250,000 each. A separate $5 million ceiling applies to an eligible holder or sponsoring plan for other covered unallocated arrangements.

Who may qualify?

  • Residence is measured when the first impairment or insolvency order is entered, not necessarily at liquidation.
  • The contract owner ordinarily controls eligibility. The association’s FAQ notes limited circumstances in which another person, such as a beneficiary or qualifying plan participant, is the covered person.
  • Someone who lives outside North Dakota can use the domicile backstop only when the failed carrier was based in North Dakota, the claimant’s home jurisdiction maintains comparable guaranty protection, and that home-state association cannot cover the claim.
  • North Dakota’s domicile exception prevents a qualifying claimant from falling between state associations; it does not create duplicate recovery.
  • The obligation must come from an insurer that was a North Dakota member for the relevant line of business when the covered contract was issued.

What is not covered?

  • Benefits above the statutory annuity and combined-benefit limits are not association protection.
  • Nonguaranteed contract value and investment risk borne by the owner are excluded.
  • Interest or index credits above the chapter’s statutory benchmark can be excluded, subject to its separate short-crediting-period rule.
  • Unallocated arrangements are excluded unless they fit an express governmental-plan participant rule or another covered category.
  • The association does not cover marketing promises, misrepresentation theories, punitive or extra-contractual awards, statutory penalties, or indirect damages.

What happens after an insurer fails?

  1. 1

    Impairment

    The commissioner determines whether a member insurer is impaired. Association assistance at this stage is discretionary and subject to the chapter’s conditions.

  2. 2

    Insolvency

    A court order of insolvency activates the association’s stronger statutory duties for covered policies and contracts.

  3. 3

    Coverage review

    The association checks membership, residence, the controlling covered person, contract guarantees, exclusions, and applicable limits.

  4. 4

    Continuation or payment

    Within its authority, the association may continue, assume, reissue, reinsure, or pay a covered obligation. Amounts outside coverage may remain claims in the receivership.

How the guaranty system is financed

Class A assessments pay administrative and legal costs. Class B calls fund covered obligations arising from a carrier impairment or insolvency.

Assessment allocation
Member insurers
North Dakota allocates Class B calls by account and assessable in-state premium; Class A may use a different basis. The Association can keep an appropriate reserve for ongoing costs and later covered losses.
Annual assessment cap
Defined by state law
North Dakota limits the yearly call for every life-and-annuity subaccount and for the health account to 2% of the member’s mean in-state premiums for the applicable business over the preceding three-year calendar period.
Premium-tax treatment
State-specific rule
North Dakota lets a member apply one-fifth of a qualifying assessment against its premium-tax liability in every one of the next five calendar years.
Class A, Class B, and retained funds
North Dakota separates administrative Class A assessments from impairment-and-insolvency Class B assessments and permits the association to retain reasonable funds for related continuing expenses and future losses.

What to know before buying

  • Confirm the issuing company’s membership, the contract owner, any beneficiary or plan-participant exception, and the guarantees actually stated in the contract.
  • Guaranty protection cannot be used to induce a purchase. The statute instead provides for an approved summary document to accompany covered contracts.

How state protection differs from FDIC insurance

  • What it covers
    State protection: The state association addresses covered life-and-health insurer obligations.
    FDIC: FDIC insurance protects eligible deposits at insured banks.
  • What system stands behind it
    State protection: North Dakota member insurers finance the guaranty mechanism.
    FDIC: The FDIC is a federal agency supported through the banking insurance system.
  • Coverage-limit basis
    State protection: Annuity protection is measured per life and per failed member insurer, with a separate aggregate.
    FDIC: Deposit limits are organized by depositor, insured bank and ownership category.
  • Whether it applies to annuities
    State protection: Qualifying annuities may enter the state guaranty process.
    FDIC: An annuity is not an FDIC-insured deposit, even when purchased at a bank.

Sources and last verified

Last verified: September 17, 2026