State annuity protection

Texas Annuity Guaranty Protection: $250,000 Limit Explained

Texas generally provides up to $250,000 in protection for the present value of covered annuity benefits with respect to one life, subject to eligibility requirements, statutory exclusions, and a separate $300,000 general aggregate.

Texas annuity protection at a glance

Annuity benefit limit
$250,000
Present value of covered annuity benefits, including eligible net cash surrender and net cash withdrawal values
Overall benefit cap
$300,000
Texas generally applies a $300,000 aggregate with respect to one life. A $500,000 aggregate applies to qualifying health-benefit-plan benefits, while specified unallocated-annuity categories have separate limits.
Who provides protection
Texas Life and Health Insurance Guaranty Association
The Texas Life and Health Insurance Guaranty Association provides statutory protection for covered obligations of impaired or insolvent member insurers. Depending on the insurer’s status, Chapter 463 may permit or require Association action before liquidation as well as after insolvency.
Insurer requirement
Member insurer
The issuing insurer must qualify as a member insurer under Texas law, and the policy or contract must otherwise be eligible under Chapter 463.

How the $250,000 limit works

The $250,000 limit applies to the present value of covered annuity benefits with respect to one life, regardless of the number of annuity contracts, including eligible net cash surrender and withdrawal values.

Multiple annuity contracts covering the same life with the same impaired or insolvent member insurer share the $250,000 limit.

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

Texas generally applies a $300,000 aggregate with respect to one life. A $500,000 aggregate applies to qualifying health-benefit-plan benefits, while specified unallocated-annuity categories have separate limits.

  • Texas sets a $250,000 present-value ceiling for each participant in a qualifying governmental retirement plan’s covered unallocated annuity contract.
  • For another qualifying unallocated arrangement, Texas applies a separate $5 million aggregate ceiling to the covered contract owner or plan sponsor.
  • A qualifying structured-settlement payee, or the beneficiaries of a deceased payee, may receive up to $250,000 in present-value annuity benefits. Rights acquired through a structured-settlement factoring transaction are excluded.

A $300,000 annuity example

Assume an eligible fixed annuity has a covered present value of $300,000 with respect to one life at one impaired or insolvent Texas member insurer, with no other covered benefits subject to the same aggregate.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

In this example, up to $250,000 may qualify for Association protection, while the remaining $50,000 may remain a claim against the insurer’s receivership estate.

This example assumes that the claimant, insurer, and contract satisfy Texas eligibility requirements and that there are no other covered benefits affecting the applicable aggregate.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    Fixed annuities are generally covered up to Texas’s $250,000 present-value annuity limit, subject to residency, member-insurer requirements, statutory exclusions, and other eligibility rules.

  • Fixed indexed annuity (FIA)

    Generally covered

    FIAs are generally covered to the extent of qualifying insurer-guaranteed benefits. Certain excess, uncredited, or forfeitable index-linked amounts may be excluded; however, when value is credited less frequently than annually, Texas 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 Texas’s $250,000 annuity limit and statutory interest-rate restrictions.

  • Variable annuity

    Guaranteed portions may be covered

    Only qualifying insurer-guaranteed benefits may receive protection; investment gains or losses borne by the contract owner through a separate account are generally excluded.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a RILA, qualifying insurer-guaranteed obligations may be covered, while portions where the contract owner bears market or index risk are generally excluded.

  • Unallocated annuity contract

    Limited situations

    Unallocated annuity contracts are covered only in specified circumstances. Eligible governmental-plan participants may receive up to $250,000 each, while certain other qualifying contract owners or plan sponsors may receive up to $5 million in aggregate benefits.

Who may qualify?

  • Residency is generally determined on the earliest applicable date on which the member insurer becomes impaired or is determined by court order to be impaired or insolvent under Chapter 463.
  • For ordinary annuities, the $250,000 limit is stated with respect to one life. Unallocated annuity contracts and structured settlements use separate contract-owner, participant, payee, or beneficiary rules.
  • A nonresident may qualify in limited circumstances when the issuing insurer is Texas-domiciled, the person’s state of residence has a similar guaranty association, and the person is not eligible for protection there because the insurer was not licensed as required by that state’s law.
  • Texas’s interstate coordination rules generally look first to the guaranty association in the person’s state of residence and provide Texas coverage only in specified circumstances, while preventing duplicate recovery.
  • The issuing insurer must qualify as a member insurer under Texas law, and the policy or contract must otherwise be eligible under Chapter 463.

What is not covered?

  • Amounts above the applicable guaranty limits are not paid by the Association but may remain claims against the impaired or insolvent insurer’s receivership estate.
  • Nonguaranteed benefits and portions where the contract owner bears the investment risk are generally excluded. Certain excess, uncredited, or forfeitable index-linked amounts may also be excluded, subject to Texas’s special rule for crediting periods longer than one year.
  • Self-funded or uninsured employer benefit arrangements and unallocated annuity contracts issued to or in connection with plans protected by the Pension Benefit Guaranty Corporation are excluded.
  • Certain financial guarantees, funding agreements, and guaranteed investment contracts are excluded when they lack the statutory mortality guarantee or qualifying plan connection. A policy or contract issued in Texas while the member insurer lacked authority to issue it is also excluded.
  • Punitive, exemplary, extracontractual, and bad-faith damages are excluded from Association protection.
  • Structured-settlement benefits transferred through a structured-settlement factoring transaction are excluded. Certain uncredited index-linked amounts are also excluded, subject to the special less-than-annual crediting rule.

What happens after an insurer fails?

  1. 1

    The insurer becomes impaired or insolvent

    A commissioner designation or regulatory or court order establishes the insurer’s Chapter 463 status. The Association may assist an impaired domestic insurer and, in specified circumstances involving an impaired insurer that is not timely paying claims, is required to take action even before liquidation.

  2. 2

    Coverage eligibility and benefit type are determined

    The Association and, where applicable, the receiver determine whether the claimant, insurer, and contract qualify and identify the covered contractual obligations and applicable statutory category.

  3. 3

    The applicable coverage limits are applied

    Ordinary annuity benefits are generally subject to the $250,000 per-life limit and applicable aggregate, while governmental-plan, structured-settlement, and qualifying unallocated-annuity benefits use their separately stated statutory limits.

  4. 4

    Covered obligations are continued, supported, or paid

    Depending on the insurer’s status, the Association may support, assume, reissue, reinsure, continue, or pay covered obligations. Amounts above guaranty protection may remain claims against the receivership estate.

How the guaranty system is financed

The Association is funded primarily through assessments of applicable Texas member insurers when funds are needed to meet covered obligations, with statutory provisions coordinating recoveries and refunds.

Assessment allocation
Member insurers
Class B assessments are allocated among member insurers based on their share of covered Texas premiums for the three most recent calendar years available before the year the affected insurer became impaired or insolvent, subject to the statutory account rules.
Annual assessment cap
Defined by state law
For each account, total assessments against a member insurer in one calendar year generally cannot exceed 2% of its average annual Texas 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
Beginning in the calendar year after issuance, a qualifying Class B certificate of contribution is generally written down by 20% annually, and the amount written off is allowed as a premium-tax credit, subject to the insurer’s tax liability and any longer period required by the Commissioner.
Impairment, insolvency, and ownership
Texas is not a liquidation-only system: Chapter 463 permits certain Association action for an impaired insurer and requires action in specified impaired-insurer circumstances, while separate mandatory duties apply to an insolvent insurer. For ownership-based provisions, the legal owner is the person identified in the contract or vested with title through a valid assignment recorded on the insurer’s books; a merely beneficial interest does not establish ownership.

What to know before buying

  • Texas’s $250,000 annuity limit applies with respect to one life at one impaired or insolvent member insurer, and actual protection depends on the claimant, insurer, contract, and applicable statutory exclusions.
  • Texas prohibits using the existence of the Guaranty Association to sell, solicit, or induce the purchase of covered insurance or annuity products. Texas also requires an approved guaranty-association summary and disclaimer to be delivered with covered policies or contracts.

How state protection differs from FDIC insurance

  • What it covers
    State protection: The Texas Life and Health Insurance Guaranty Association provides statutory protection for qualifying obligations of impaired or insolvent member insurers.
    FDIC: The FDIC insures qualifying deposits at failed insured banks.
  • What system stands behind it
    State protection: The Texas Life and Health Insurance Guaranty Association is a nonprofit legal entity supervised by the Commissioner and funded primarily through statutory assessments of member insurers.
    FDIC: The federal deposit-insurance system is backed by the full faith and credit of the United States.
  • Coverage-limit basis
    State protection: Ordinary annuity protection is generally limited to $250,000 with respect to one life at each impaired or insolvent member insurer, subject to the applicable aggregate and other statutory rules.
    FDIC: Deposit coverage is calculated per depositor, insured bank and ownership category.
  • Whether it applies to annuities
    State protection: Eligible annuity benefits may receive Texas guaranty association protection, but annuity contracts are not bank deposits and are not insured by the FDIC.
    FDIC: Annuities are not FDIC-insured; the FDIC applies only to eligible deposits at insured banks.

Sources and last verified

Last verified: September 23, 2026