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, a $300,000 overall aggregate, and statutory exclusions.

Texas annuity protection at a glance

Annuity benefit limit
$250,000
Present value of annuity benefits, including qualifying net cash values
Overall benefit cap
$300,000
For ordinary covered benefit categories, Texas applies a $300,000 aggregate with respect to one life. Separate statutory limits apply to specified health and unallocated-annuity categories.
Who provides protection
Texas Life and Health Insurance Guaranty Association
The Texas Life and Health Insurance Guaranty Association can support covered obligations of an impaired or insolvent member insurer. Chapter 463 permits certain action during impairment or rehabilitation and also governs the response after insolvency.
Insurer requirement
Member insurer
The company must have been licensed and a member for the covered line.

How the $250,000 limit works

The $250,000 limit applies to the present value of annuity benefits, including qualifying net cash surrender and withdrawal values, under one or more contracts with respect to one life.

One or more ordinary annuity contracts covering the same life at the same impaired or insolvent member insurer share the $250,000 limit.

A different impaired or insolvent member insurer starts a separate per-life calculation.

For ordinary covered benefit categories, Texas applies a $300,000 aggregate with respect to one life. Separate statutory limits apply to specified health and unallocated-annuity categories.

  • 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 $300,000 annuity example

One eligible Texas life has $300,000 of qualifying fixed-annuity present value with one impaired or insolvent member insurer and no other covered benefits counted against the aggregate.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

Potential association protection is $250,000 and $50,000 remains outside the annuity limit.

The example assumes a covered life, qualifying guarantees, one member insurer, and no competing claim against the aggregate.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed annuity may qualify when the contract, covered life, insurer membership, residence and guarantees meet Chapter 463.

  • Fixed indexed annuity (FIA)

    Generally covered

    Texas generally includes an FIA’s guaranteed obligations. Nonguaranteed index results, value above the statutory benchmark, and credits not yet earned can remain outside protection. A separate calculation applies when the contract credits index value less often than yearly.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA may qualify to the extent its fixed contractual guarantees and the covered life meet Chapter 463.

  • Variable annuity

    Guaranteed portions may be covered

    Variable separate-account value is outside coverage where the owner bears the investment risk.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA must be separated into insurer-guaranteed obligations and owner-borne market exposure before coverage is determined.

  • Unallocated annuity contract

    Limited situations

    Texas gives specified unallocated arrangements a narrow route to protection. A qualifying governmental-plan participant has a $250,000 ceiling, while certain other covered owners or sponsors have a $5 million ceiling.

Who may qualify?

  • Residence is tested when the member insurer is determined to be impaired or insolvent under Chapter 463.
  • For ordinary annuity benefits, the $250,000 calculation is made with respect to the covered life. Special contract-owner or participant rules govern specified unallocated and structured-settlement arrangements.
  • A nonresident has only coordinated protection tied to a Texas-domiciled insurer and lack of coverage in the residence state.
  • The covered person’s residence association is considered first, with Texas insurer domicile serving as a limited backstop.
  • The company must have been licensed and a member for the covered line.

What is not covered?

  • Amounts above the applicable annuity, aggregate or special-category limit remain outside association protection.
  • Owner-borne investment risk, nonguaranteed benefits, and certain excess or uncredited index-linked value are excluded.
  • Self-funded arrangements and unallocated contracts protected by the Pension Benefit Guaranty Corporation are excluded.
  • Certain financial guarantees, funding agreements, and contracts issued by an unlicensed or nonmember company are outside Chapter 463.
  • Punitive or exemplary damages are outside association protection.

What happens after an insurer fails?

  1. 1

    The insurer is found impaired or insolvent

    A regulatory or court determination sets the Chapter 463 status. The association may take specified action for an impaired insurer before liquidation.

  2. 2

    The obligation is classified

    The receiver and association identify the contract, covered life, guarantees, residence and any special plan category.

  3. 3

    The applicable limit is calculated

    Ordinary annuity benefits use the per-life limit, while unallocated and other special arrangements use their own statutory rules.

  4. 4

    A covered remedy is arranged

    Continuation, transfer, reinsurance or payment depends on the insurer’s status and the association’s authority; uncovered amounts remain claims against the estate.

How the guaranty system is financed

Chapter 463 assessments spread covered obligations of an impaired or insolvent member insurer among applicable Texas member insurers after recoveries are taken into account.

Assessment allocation
Member insurers
The relevant account uses covered Texas premium to allocate each member insurer’s share.
Annual assessment cap
Defined by state law
Texas caps a member insurer’s yearly assessment for each account at 2% of its relevant three-year average premiums in the state.
Premium-tax treatment
State-specific rule
For a qualifying Class B assessment, Texas generally allows one-fifth of the contribution certificate to be written off and credited against premium tax in each of five years.
Impairment and insolvency response
Chapter 463 permits or requires specified association action for an impaired insurer, including in some rehabilitation circumstances; ordinary consumer benefit determinations are therefore not described as liquidation-only.

What to know before buying

  • Keep the total covered annuity value for each life at each carrier in view, and remember that an association response depends on the insurer’s status and the contract facts.
  • Chapter 463 bars use of guaranty protection as a sales inducement.

How state protection differs from FDIC insurance

  • What it covers
    State protection: The Texas association addresses 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: Applicable member life-and-health insurers finance the Texas association through statutory assessments.
    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 benefits are generally calculated per life at the impaired or insolvent member insurer.
    FDIC: Deposit coverage is calculated per depositor, insured bank and ownership category.
  • Whether it applies to annuities
    State protection: A qualifying Texas annuity may receive state-association protection.
    FDIC: An annuity is not FDIC-insured.

Sources and last verified

Last verified: August 26, 2026