State annuity protection

Vermont Annuity Guaranty Protection: $250,000 Annuity Limit and $300,000 Aggregate

Vermont generally provides up to $250,000 in protection for the present value of covered annuity benefits with respect to one life. Most covered benefits are also subject to a $300,000 aggregate, while qualifying health-benefit-plan benefits may be subject to a $500,000 aggregate.

Vermont annuity protection at a glance

Annuity benefit limit
$250,000
Present value of covered annuity benefits, including eligible net cash surrender and withdrawal values.
Overall benefit cap
$300,000
Total covered benefits are generally subject to a $300,000 aggregate with respect to one life, subject to the higher $500,000 aggregate for qualifying health-benefit-plan benefits. The $300,000 aggregate does not increase the separate $250,000 ordinary annuity limit.
Who provides protection
Vermont Life and Health Insurance Guaranty Association
The Association may provide assistance when a member insurer is impaired. Once a court enters a liquidation order with a finding of insolvency, the Association has broader statutory duties for covered policies and contracts.
Insurer requirement
Member insurer
The issuing insurer must qualify as a Vermont member insurer, and the policy or contract must fall within a type of coverage protected by Chapter 112.

How the $250,000 limit works

Vermont generally limits covered annuity benefits to $250,000 in present value with respect to one life, including eligible net cash surrender and withdrawal values.

Multiple covered annuity contracts with the same impaired or insolvent member insurer generally share one $250,000 annuity limit with respect to the same life.

The current Chapter 112 applies when the Association first became obligated with respect to the impaired or insolvent insurer on or after July 1, 2023. If the Association first became obligated before that date, the law then in effect continues to govern those matters.

Total covered benefits are generally subject to a $300,000 aggregate with respect to one life, subject to the higher $500,000 aggregate for qualifying health-benefit-plan benefits. The $300,000 aggregate does not increase the separate $250,000 ordinary annuity limit.

  • An eligible participant in a qualifying governmental retirement plan funded through an unallocated annuity contract may receive up to $250,000 in present-value annuity benefits.
  • Certain other qualifying unallocated-annuity contract owners or plan sponsors may receive up to $5 million in aggregate protection, regardless of the number of covered contracts. Vermont also has separate coverage rules for certain government-lottery annuities.
  • A qualifying structured-settlement payee, or beneficiary of a deceased payee, may receive up to $250,000 in present-value annuity benefits.

A $300,000 annuity example

Assume a Vermont resident owns an eligible fixed annuity with a covered present value of $300,000 when the member insurer becomes insolvent, with no other covered benefits affecting the aggregate limit.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

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

This example assumes the current Chapter 112 applies, one covered life and one member insurer are involved, and no other covered benefits affect the aggregate limit.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    Fixed annuities are generally covered up to Vermont’s $250,000 present-value limit when the insurer, claimant, and contract satisfy the statutory eligibility requirements.

  • Fixed indexed annuity (FIA)

    Generally covered

    FIAs are generally covered, although certain nonguaranteed, excess, uncredited, or forfeitable index-linked amounts may be excluded. When index-linked value is credited less frequently than annually, Vermont treats the earlier impairment or insolvency date as the contractual crediting date for determining credited, nonforfeitable value.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    MYGAs are generally treated as fixed deferred annuities and are subject to Vermont’s $250,000 annuity limit and statutory interest-rate restrictions.

  • Variable annuity

    Guaranteed portions may be covered

    Only insurer-guaranteed benefits may qualify; 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, only insurer-guaranteed obligations may qualify; portions where the contract owner bears market or index risk are generally excluded.

  • Unallocated annuity contract

    Limited situations

    Eligible participants in qualifying governmental retirement plans may receive up to $250,000 each, while certain other qualifying unallocated-annuity contract owners or plan sponsors may receive up to $5 million in aggregate protection. Vermont also provides limited coverage for certain unallocated annuity contracts issued to or in connection with a government lottery, subject to separate residency and eligibility rules.

Who may qualify?

  • Residency is generally determined on the date of the first court order that determines the member insurer to be impaired or insolvent.
  • Vermont law states the annuity limit with respect to one life, while the Association FAQ summarizes annuity protection on a per-contract-owner basis. The statute controls, and unusual owner/annuitant arrangements may require case-specific review.
  • A nonresident may qualify in limited circumstances when the failed insurer is Vermont-domiciled, the person’s state of residence has a similar guaranty association, and the person is not eligible there because the insurer lacked the required license or authority.
  • Vermont’s interstate coordination rules generally look first to the guaranty association in the person’s state of residence and are designed to avoid duplicate coverage.
  • The issuing insurer must qualify as a Vermont member insurer, and the policy or contract must fall within a type of coverage protected by Chapter 112.

What is not covered?

  • Amounts above the applicable annuity-specific, aggregate, or special-category limits are not covered by the Association but may remain claims against the failed insurer’s receivership estate.
  • Nonguaranteed benefits, portions where the contract owner bears the investment risk, interest or crediting above Vermont’s statutory limits, and certain uncredited or forfeitable index-linked amounts may be excluded.
  • Claims based on marketing materials, misrepresentations, or side letters, riders, or other documents that did not satisfy applicable filing or approval requirements generally are not covered.
  • The Association generally does not cover extra-contractual claims, penalties, or consequential or incidental damages.
  • Unallocated annuity contracts connected with PBGC-protected plans and certain book-value accounting guarantees for defined-contribution plans are excluded from Vermont guaranty coverage.
  • Structured-settlement payment rights transferred through a qualifying factoring transaction are excluded from guaranty coverage.

What happens after an insurer fails?

  1. A rehabilitation or conservation order establishes impairment; a liquidation order with a finding of insolvency establishes insolvency

    The first applicable court order generally determines residency. A rehabilitation or conservation order may establish impairment before any liquidation order is entered.

  2. The Association’s duties differ for impairment and insolvency

    The Association may provide assistance while the insurer is impaired and has broader mandatory responsibilities once the insurer becomes insolvent.

  3. Eligibility and covered benefits are reviewed

    The Association reviews insurer membership, claimant eligibility, residency, contract guarantees, statutory exclusions, special coverage categories, and the applicable benefit limits.

  4. Covered obligations are continued, transferred, reinsured, or paid

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

How the guaranty system is financed

The Association is funded primarily through assessments of member insurers under §4179, together with assets and recoveries associated with covered policies and contracts.

Assessment allocation
Member insurers
Class B assessments are allocated among member insurers based on Vermont premiums for business covered by the applicable account or subaccount during the three most recent calendar years for which information is available preceding the impairment or insolvency year.
Annual assessment cap
Defined by state law
Annual assessment cap — 2%. For each applicable life-and-annuity subaccount and the health account, a member insurer generally cannot be assessed more than 2% in a calendar year of its average annual Vermont premiums on covered policies and contracts during the three calendar years preceding the year of impairment or insolvency.
Premium-tax treatment
State-specific rule
Premium-tax offset — 20% per year for five years. A qualifying non-Class-A assessment may generally offset Vermont premium-tax liability at 20% of the assessment in each of the five calendar years following the year of payment.
July 1, 2023 prospective-application rule
The current Chapter 112 applies when the Association first became obligated on or after July 1, 2023. Matters for which the Association first became obligated before that date remain governed by the law then in effect. The statutory limits state maximum covered benefits before coordination with receivership assets and the Association’s subrogation or assignment rights.

What to know before buying

  • Guaranty protection depends on the issuing insurer’s membership, the claimant’s eligibility and residency, and the guarantees contained in the contract. It should not be relied on as a reason to purchase an annuity.
  • Vermont prohibits using the existence of the Guaranty Association for sales, solicitation, or inducement to purchase covered insurance or annuity products. Member insurers must deliver the approved guaranty-association summary document with covered policies and contracts; the notice warns that coverage may be limited or unavailable and should not be relied on when selecting an insurer.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Vermont guaranty law governs covered contractual obligations of impaired or insolvent member insurers.
    FDIC: Federal law governs insured bank deposits.
  • What system stands behind it
    State protection: The Vermont Life and Health Insurance Guaranty Association is a nonprofit legal entity funded primarily through assessments of member insurers and supervised by the Commissioner of Financial Regulation.
    FDIC: FDIC deposit insurance is funded through assessments on insured depository institutions and is backed by the full faith and credit of the U.S. government.
  • Coverage-limit basis
    State protection: Annuity protection is generally limited to $250,000 in present value with respect to one life, subject to the separate aggregate limit and special-category rules.
    FDIC: Depositor, bank, and ownership category determine federal deposit-insurance coverage.
  • Whether it applies to annuities
    State protection: Eligible annuity benefits may receive Vermont guaranty association protection, subject to statutory limits and exclusions.
    FDIC: Annuities are not FDIC-insured deposits.

Sources and last verified

Last verified: October 6, 2026