State annuity protection

North Dakota Annuity Guaranty Protection: $250,000 Limit Explained

North Dakota generally provides up to $250,000 in protection for the present value of covered annuity benefits with respect to one life, including eligible net cash surrender and withdrawal values, subject to eligibility requirements and statutory exclusions.

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 North Dakota Life and Health Insurance Guaranty Association may assist a member insurer under a court order of rehabilitation or conservation. After a court orders liquidation with a finding of insolvency, the association must provide one of the remedies authorized by Chapter 26.1-38.1 for covered obligations.
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 impaired or insolvent member insurer. A separate $300,000 per-life aggregate may also limit combined covered benefits.

Covered annuities tied to the same life and the same impaired or insolvent member insurer share one $250,000 annuity limit; multiple contracts do not create multiple limits. The association FAQ describes the ordinary individual-annuity limit per contract owner, so unusual ownership arrangements require a contract-specific review.

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 structured-settlement annuity, each payee or beneficiary of a deceased payee may receive up to $250,000 in aggregate present-value annuity benefits, including any net cash surrender or withdrawal values.
  • Each eligible participant in a governmental retirement plan established under Internal Revenue Code section 401(k), 403(b), or 457, or the beneficiary of a deceased participant, may receive up to $250,000 in aggregate present-value annuity benefits under a covered unallocated annuity contract.
  • For other qualifying unallocated annuity arrangements, one covered contract owner or plan sponsor may receive no more than $5 million in aggregate benefits, irrespective of the number of contracts.

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 qualifying insurer-backed guarantees can be covered, but nonguaranteed value and owner-borne investment risk are excluded. When interest or index-linked value is credited less frequently than annually, North Dakota treats the earlier impairment or insolvency date as the contractual crediting date and treats the resulting amount as credited and nonforfeitable.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA is a fixed deferred annuity for this analysis. It remains subject to the ordinary annuity limit and the statute’s interest-rate and other exclusions; 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

    For a RILA, only a qualifying insurer-backed guarantee is considered for protection. Amounts for which the contract owner bears market or index risk are excluded.

  • Unallocated annuity contract

    Limited situations

    An eligible participant in a governmental retirement plan under Internal Revenue Code section 401(k), 403(b), or 457 may receive up to $250,000 in present-value annuity benefits. For other qualifying unallocated arrangements, a separate $5 million aggregate applies to one qualifying contract owner or plan sponsor, regardless of the number of contracts.

Who may qualify?

  • Residence is measured when the first impairment or insolvency order is entered, not necessarily at liquidation.
  • The statute measures the ordinary annuity limit with respect to one life, while the association FAQ describes individual-annuity protection per contract owner. The legal owner ordinarily controls eligibility, but the statute has separate rules for beneficiaries, structured-settlement payees, and qualifying plan participants. Unusual ownership arrangements require a contract-specific review.
  • 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-specific and combined-benefit limits are not association protection.
  • A portion of a policy or contract that is not guaranteed by the member insurer, or for which the policy or contract owner bears the risk, is excluded.
  • Interest or index-linked value above North Dakota’s statutory benchmarks may be excluded. Uncredited or forfeitable index-linked value is also excluded, subject to the rule for value credited less frequently than annually.
  • Reinsurance is excluded unless assumption certificates were issued under the reinsurance policy or contract.
  • Self-funded or uninsured employer, association, or other benefit arrangements are excluded, including specified multiple-employer, minimum-premium, stop-loss, and administrative-services-only arrangements.
  • Dividends, experience-rating credits, voting rights, and fees or allowances connected with servicing or administering a policy or contract are excluded.
  • A policy or contract issued in North Dakota while the member insurer lacked the required license or certificate of authority is excluded.
  • Unallocated annuity arrangements protected by the Pension Benefit Guaranty Corporation, and unallocated arrangements not connected with a qualifying natural-person benefit plan or government lottery, are excluded.
  • Obligations outside the express written contract are excluded, including claims based on marketing materials, unauthorized side letters or riders, misrepresentations, extra-contractual claims, penalties, and consequential or incidental damages.
  • Book-value accounting guarantees for certain defined-contribution plan portfolios, specified Medicare or Medicaid benefits, and structured-settlement rights transferred in a factoring transaction are excluded.

What happens after an insurer fails?

  1. Rehabilitation or conservation

    A member insurer is impaired when a court places it under an order of rehabilitation or conservation without a liquidation order and insolvency finding. At this stage, association assistance is discretionary and subject to the chapter’s conditions.

  2. Liquidation and insolvency

    A member insurer is insolvent when a court orders liquidation with a finding of insolvency. The association then must provide one of the remedies authorized by Chapter 26.1-38.1 for covered obligations.

  3. Coverage review

    The association reviews member-insurer status, residence, the controlling covered person, contract guarantees, exclusions, and applicable limits.

  4. Continuation, transfer, or payment

    Depending on the statutory remedy, the association may guarantee, assume, reissue, reinsure, continue, or pay covered obligations. Amounts outside guaranty 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 assessments by account and subaccount using each member insurer’s share of covered North Dakota premium for the three most recent available calendar years preceding the impairment or insolvency year. Class A assessments are set at the board’s discretion on a non-pro-rata basis. The association may retain a reasonable amount for continuing expenses and future claims.
Annual assessment cap
Defined by state law
Annual assessment cap — 2%. For each life-insurance-and-annuity subaccount and for the health account, total annual assessments generally cannot exceed 2% of the member insurer’s average annual North Dakota premiums on covered business during the three calendar years preceding the year in which the affected insurer became impaired or insolvent.
Premium-tax treatment
State-specific rule
Premium-tax treatment — 20% per year for five years. A member insurer may offset 20% of a qualifying assessment against North Dakota premium-tax liability in each of the five calendar years following the year in which the assessment was paid.
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 30, 2026