State annuity protection

Utah Annuity Guaranty Protection: $250,000 Covered-Portion Threshold and $500,000 Aggregate

Utah uses a covered-portion fraction rather than promising a flat $250,000 payment. The fraction’s numerator can reach $250,000, and a separate $500,000 aggregate applies to one life.

Utah annuity protection at a glance

Annuity benefit limit
$250,000
Covered percentage of each contractual benefit, using a numerator capped at $250,000
Overall benefit cap
$500,000
Utah’s $500,000 per-life aggregate does not turn the fraction’s $250,000 numerator into a flat annuity benefit.
Who provides protection
Utah Life and Health Insurance Guaranty Association
Before insolvency, the Utah association has discretionary tools for an impaired carrier. Once insolvency is established, section 31A-28-108 makes the authorized protection mandatory.
Insurer requirement
Member insurer
The carrier and obligation must fall within Utah association membership for the covered business.

How the $250,000 limit works

For an annuity with cash surrender value, Utah calculates the covered percentage of each contractual benefit with a numerator no greater than $250,000.

Contractual benefits for one life at the affected member insurer pass through the fraction before the broader aggregate is applied.

Another impaired or insolvent member starts a separate eligibility and covered-portion calculation.

Utah’s $500,000 per-life aggregate does not turn the fraction’s $250,000 numerator into a flat annuity benefit.

  • For governmental retirement plan coverage, Utah caps each qualifying participant at $250,000 in present value when a covered unallocated annuity funds the arrangement.
  • Certain other covered unallocated annuities have a separate $5 million aggregate for one eligible owner or sponsoring plan.

A $300,000 annuity example

Assume an eligible Utah fixed contract has $300,000 of cash-surrender value for one covered life, with no competing benefit under the aggregate.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

The simplified fraction produces $250,000 of potential association protection. The $50,000 difference is a policyholder claim in the receivership, which may not pay the amount in full.

The illustration simplifies Utah’s fraction and assumes all claimant, carrier, contract, and aggregate conditions are satisfied.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed contract can qualify only for the percentage produced by Utah’s covered-portion formula.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA separates owner-borne risk from protected insurer promises. Excess statutory crediting and any index amount that is uncredited or forfeitable are omitted. Utah supplies no less-than-annual crediting exception.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA enters Utah’s analysis as a fixed deferred contract, although interest above the Moody’s-based statutory benchmark may be removed before the fraction is calculated.

  • Variable annuity

    Guaranteed portions may be covered

    Separate-account investment exposure carried by the contract holder remains outside the covered portion.

  • Registered index-linked annuity (RILA)

    Contract-specific

    A RILA admits only insurer-guaranteed obligations into the covered portion; owner-borne market exposure and index value that remains uncredited or forfeitable do not enter the calculation.

  • Unallocated annuity contract

    Limited situations

    The governmental-plan participant ceiling is $250,000 in present value; another eligible owner or sponsoring plan may instead be subject to a distinct $5 million aggregate.

Who may qualify?

  • Utah fixes residence at the earlier date on which the insurer becomes impaired or insolvent. A hazardous-condition determination or rehabilitation or conservation order can establish impairment before liquidation.
  • The statute makes the ordinary fraction and aggregate life-based. ULHIGA’s $250,000-per-owner FAQ example is a simplified consumer summary, not a substitute for the statutory formula.
  • For an ordinary contract, a nonresident generally needs a Utah-domiciled insurer, a similar association at home, and ineligibility there because the insurer lacked the required license. Structured settlements and unallocated annuities use their own coordination rules.
  • The resident-state association is considered first before Utah applies its limited insurer-domicile backstop.
  • The carrier and obligation must fall within Utah association membership for the covered business.

What is not covered?

  • The $500,000 aggregate cannot replace the covered-portion numerator or its percentage calculation.
  • Utah removes investment exposure assigned to the owner. It also omits returns beyond statutory interest or index limits and any amount not irrevocably credited by the earlier impairment or insolvency date.
  • Marketing-material assertions, unauthorized side letters or riders, and misrepresentation claims do not enlarge protection.
  • Extra-contractual recovery and statutory penalties remain outside coverage; so do consequential and incidental damages.
  • Self-funded arrangements, certain PBGC-backed unallocated annuities, and book-value accounting guarantees are excluded.
  • Factored-away structured-settlement rights are excluded, while an eligible payee or beneficiary remains subject to Utah’s ordinary covered-portion method.

What happens after an insurer fails?

  1. 1

    The earlier impairment or insolvency date fixes residence

    A commissioner determination or rehabilitation, conservation, or insolvency order can select Utah before liquidation.

  2. 2

    Covered benefits and the fraction are determined

    Covered benefits are identified before the fraction produces the applicable covered portion.

  3. 3

    The association applies its statutory remedy

    Utah may act during impairment and must provide an authorized form of protection after insolvency.

  4. 4

    The per-life aggregate is checked

    Benefits produced by the covered-portion calculation are then tested against the $500,000 aggregate.

How the guaranty system is financed

Member-carrier assessments and estate recoveries support Utah’s covered obligations.

Assessment allocation
Member insurers
Each applicable class or subclass allocates a call using the member’s average annual assessable premium.
Annual assessment cap
Defined by state law
Utah caps annual Class B assessments for each applicable class or subclass at 2% of a member insurer’s average annual assessable premium.
Premium-tax treatment
State-specific rule
A qualifying Utah Class B assessment may offset premium, income, or franchise tax at 20% per year for five calendar years after the payment year, with unused amounts carried forward.
Covered-portion threshold and aggregate
The $250,000 amount caps the fraction’s numerator; the $500,000 figure is a later per-life aggregate, so neither number alone states the result.

What to know before buying

  • Utah’s result depends on its statutory fraction; the $250,000 threshold and $500,000 aggregate answer different questions.
  • Utah bars using association protection to advertise, sell, or solicit insurance.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Utah computes a covered percentage of insurer obligations.
    FDIC: FDIC rules insure eligible deposit balances.
  • What system stands behind it
    State protection: Member insurers support the state association.
    FDIC: Insured banks support the federal deposit system.
  • Coverage-limit basis
    State protection: A capped numerator and per-life aggregate shape the Utah result.
    FDIC: Depositor, bank and ownership category shape the federal result.
  • Whether it applies to annuities
    State protection: A qualifying Utah annuity may receive the state formula’s protection.
    FDIC: Utah annuity value cannot be FDIC-insured.

Sources and last verified

Last verified: September 17, 2026