State annuity protection

Tennessee Annuity Guaranty Protection: $250,000 Limit Explained

Tennessee currently provides up to $250,000 in present value for qualifying annuity benefits with respect to one life, subject to its $300,000 ordinary aggregate and statutory eligibility rules.

Tennessee annuity protection at a glance

Annuity benefit limit
$250,000
Present value of qualifying annuity benefits under the applicable proceeding schedule
Overall benefit cap
$300,000
The present schedule generally combines ordinary covered benefit categories under a $300,000 maximum for one life.
Who provides protection
Tennessee Life and Health Insurance Guaranty Association
The Tennessee association may support covered contracts while a member insurer is impaired. After insolvency it must perform the duties assigned by title 56, chapter 12, part 2; ordinary consumer claims are commonly handled after liquidation.
Insurer requirement
Member insurer
The issuer and business line must qualify for membership under the schedule governing the proceeding.

How the $250,000 limit works

For the life measured under today’s schedule, Tennessee recognizes no more than $250,000 of eligible annuity present value, including covered surrender and withdrawal amounts.

Eligible contracts associated with the same life at one affected member insurer share the Tennessee annuity ceiling.

A different member-insurer proceeding receives its own eligibility and limit calculation.

The present schedule generally combines ordinary covered benefit categories under a $300,000 maximum for one life.

  • A qualifying Tennessee structured-settlement payee, or the beneficiary succeeding that payee, receives a distinct $250,000 ceiling on annuity present value.

A $300,000 annuity example

Suppose one Tennessee life has a $300,000 covered fixed-contract value at a single insolvent member carrier governed by today’s schedule.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

The association portion can reach $250,000. A claimant may file the other $50,000 in the receivership’s policyholder class, but the estate may not pay it in full.

This example uses the current schedule, one life and one member insurer, with no competing covered benefit.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity can qualify when its guarantees and the claimant satisfy the current Tennessee act.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA can enter coverage, but Tennessee omits nonguaranteed performance, value above its benchmark, and credits that remain revocable. For a cycle longer than one year, the failure date becomes the scheduled credit date and the resulting amount is treated as vested.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA follows the fixed-deferred contract rules; its promised interest is still screened against Tennessee’s Moody’s-based statutory rate thresholds.

  • Variable annuity

    Guaranteed portions may be covered

    Separate-account value stays outside protection when the contract owner bears the investment risk.

  • Registered index-linked annuity (RILA)

    Contract-specific

    Only a RILA obligation guaranteed by the insurer may qualify; the owner’s market or investment risk is generally excluded.

  • Unallocated annuity contract

    Limited situations

    An unallocated annuity is generally excluded, but a benefit specifically guaranteed to an individual falls outside that definition to the extent of the guarantee.

Who may qualify?

  • Current law uses the claimant’s residence on the date of the court order determining the member insurer impaired or insolvent; liquidation is the ordinary consumer scenario.
  • The legal ceiling is stated with respect to one life. The association FAQ’s contract-owner example is useful shorthand but does not replace that statutory unit.
  • A nonresident can use only Tennessee’s limited coordination route for a Tennessee-domiciled member insurer when home-state protection is unavailable.
  • The residence-state association is considered before Tennessee responds based on insurer domicile.
  • The issuer and business line must qualify for membership under the schedule governing the proceeding.

What is not covered?

  • A historical limit cannot be replaced with the current schedule; see the separate older-insolvencies note.
  • Nonguaranteed benefits, excess or uncredited index amounts, and market risk borne by the owner remain outside coverage.
  • Marketing claims, unapproved side letters or riders, and misrepresentations cannot enlarge the statutory obligation.
  • The association does not answer for theories beyond the contract, statutory fines, or indirect and incidental loss.
  • An amount above the applicable annuity or aggregate ceiling may be asserted only through the receivership estate.

What happens after an insurer fails?

  1. 1

    The relevant guaranty proceeding selects the schedule

    The statutory schedule depends on when the insurer enters the applicable Tennessee association proceeding; the July 1, 2009 cutoff controls the historical annuity amount.

  2. 2

    Impairment allows early support

    During impairment and before liquidation, Tennessee permits the association to back, take over, replace, reinsure, or finance the qualifying contracts.

  3. 3

    Insolvency creates mandatory duties

    After insolvency, the association must arrange one of the remedies authorized by the act.

  4. 4

    The protected and estate portions are resolved

    Covered value can be continued, transferred or paid; an allowable excess remains a claim in the receivership.

How the guaranty system is financed

Member-carrier calls supply Tennessee’s guaranty operations when needed. Class A pays administrative costs, while Class B addresses a particular impairment or insolvency.

Assessment allocation
Member insurers
Applicable Tennessee premium assigns each member’s share within the affected account or subaccount.
Annual assessment cap
Defined by state law
Tennessee limits a calendar-year call for any account or subaccount to 2% of the carrier’s mean covered in-state premium during the three-year lookback ending before the year of impairment or insolvency.
Premium-tax treatment
State-specific rule
A qualifying Tennessee assessment may reduce premium, franchise, excise, or income tax during each of ten years by the lesser of 10% of the assessment or 0.10% of the insurer’s Tennessee premiums for that year.
Assessment and tax-offset formulas
Tennessee pairs an account-level 2% assessment cap with a separate ten-year tax-offset formula.

What to know before buying

  • Use the current $250,000 figure for a current qualifying proceeding. Older Tennessee insolvencies belong in the separate historical-schedule callout, not in the ordinary buying analysis.
  • The guaranty association may not be invoked to induce an insurance purchase.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Tennessee insurance law at the failure date controls the association response.
    FDIC: Federal deposit law controls the bank-failure response.
  • What system stands behind it
    State protection: Member insurers fund covered obligations through statutory assessments.
    FDIC: Insured banks support the federal deposit fund.
  • Coverage-limit basis
    State protection: The annuity amount is tied to one life, one insurer and the governing schedule.
    FDIC: Deposit limits turn on depositor, bank and account ownership.
  • Whether it applies to annuities
    State protection: A qualifying Tennessee annuity may receive protection under its governing schedule.
    FDIC: The annuity receives no FDIC insurance.

Sources and last verified

Last verified: September 17, 2026