State annuity protection

Vermont Annuity Guaranty Protection: $250,000 Limit Explained

Vermont’s ordinary annuity calculation can recognize no more than $250,000 for a single life. A separate $300,000 total governs the usual combination of covered benefit categories.

Vermont annuity protection at a glance

Annuity benefit limit
$250,000
Qualifying annuity value at the calculation date, including allowable surrender and withdrawal benefits
Overall benefit cap
$300,000
Across the usual benefit categories, Vermont imposes a distinct $300,000 total for the measured life.
Who provides protection
Vermont Life and Health Insurance Guaranty Association
During rehabilitation or conservation, Vermont’s Association has optional measures available for an impaired carrier. Liquidation and an insolvency finding turn the authorized response into a duty.
Insurer requirement
Member insurer
Both Association membership and Chapter 112 coverage of the written obligation are necessary.

How the $250,000 limit works

For the life being measured, Vermont stops the qualifying annuity calculation at $250,000 after including allowable cash-out values.

At the affected Vermont carrier, every eligible annuity associated with that life enters one shared $250,000 calculation.

Chapter 112 controls if the Association’s obligation first arose on or after July 1, 2023. An obligation arising earlier keeps the law applicable at that earlier point.

Across the usual benefit categories, Vermont imposes a distinct $300,000 total for the measured life.

  • Vermont assigns a $250,000 participant amount when a covered unallocated annuity funds an eligible governmental retirement plan.
  • For another qualifying unallocated arrangement, Vermont places a $5 million contract-level maximum on the eligible owner or sponsoring plan.
  • Vermont gives a covered structured-settlement recipient—and the successor after that recipient dies—a distinct $250,000 amount.

A $300,000 annuity example

Suppose a single Vermont life has a qualifying fixed contract worth $300,000 at one insolvent member carrier, with no competing covered benefit.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

The guaranty illustration reaches $250,000. A policyholder may lodge the $50,000 remainder with the insolvent carrier’s estate.

This illustration assumes the current chapter, one life and carrier, enforceable fixed value, and no other aggregate usage.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A Vermont fixed contract can receive up to the state’s $250,000 annuity amount once the claimant, issuer, contract, and exclusion tests are applied.

  • Fixed indexed annuity (FIA)

    Generally covered

    An FIA may enter the Vermont calculation, but nonbinding performance, value above the statutory benchmark, and index amounts still revocable can fall away. If its crediting cycle exceeds twelve months, Vermont moves the crediting calculation to the impairment or insolvency date and makes the resulting value nonforfeitable.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    Vermont analyzes a MYGA under its fixed-deferred rules and removes interest that exceeds the statute’s permitted rate.

  • Variable annuity

    Guaranteed portions may be covered

    Investment performance in a separate account stays with the holder instead of becoming an Association obligation.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a RILA, Vermont divides enforceable insurer promises from market exposure allocated to the holder; the guaranty calculation admits the promises rather than that exposure.

  • Unallocated annuity contract

    Limited situations

    A covered public-plan participant uses an individual $250,000 present-value amount. A different qualifying unallocated arrangement can instead use a $5 million contract-owner or sponsor amount.

Who may qualify?

  • The first judicial order finding impairment or insolvency supplies Vermont’s residence date.
  • Vermont expresses the ordinary ceiling by reference to one life. Because the FAQ illustrates a contract owner, a nonstandard split between owner and annuitant must be tested from the actual statute rather than that shorthand.
  • For Vermont’s domicile backstop, the claimant must live elsewhere, the failed company must be domiciled in Vermont, the home state must have a comparable association, and lack of the required home-state license must prevent coverage there.
  • Vermont looks to the claimant’s home association first and uses carrier domicile only through the narrow coordination exception.
  • Both Association membership and Chapter 112 coverage of the written obligation are necessary.

What is not covered?

  • Any amount beyond the governing Vermont annuity, combined-benefit, or special-plan ceiling remains outside the guaranty payment.
  • The Association does not assume investment exposure left with the holder, a benefit the carrier never guaranteed, or index value that remains revocable or exceeds the statutory benchmark.
  • Brochures, unauthorized side agreements, rider assertions, and misrepresentation theories cannot add to the written covered obligation.
  • Recovery outside the contract—including a penalty, indirect loss, or incidental loss—does not become a guaranty benefit.
  • PBGC-backed plan arrangements and specified guarantees of book-value accounting treatment fall outside Chapter 112.
  • A transferred structured-settlement right loses the special protection available to the original qualifying recipient or successor.

What happens after an insurer fails?

  1. 1

    A court establishes impairment or insolvency

    The first qualifying order fixes residence; rehabilitation or conservation can establish impairment before liquidation.

  2. 2

    The Association’s role depends on status

    It may use statutory tools during impairment and must perform the authorized duties after insolvency.

  3. 3

    Coverage and limits are calculated

    The contract, covered life, guarantees, exclusions, special categories, and applicable aggregate are reviewed.

  4. 4

    The covered remedy is arranged

    The Association may continue, transfer, reinsure, or pay covered obligations, while uncovered value remains an estate claim.

How the guaranty system is financed

Vermont finances the Association by calling on member carriers under the assessment structure in section 4179.

Assessment allocation
Member insurers
For the affected account or subaccount, allocation uses the carrier’s mean Vermont premium for covered business across the three calendar years that end before the failure year.
Annual assessment cap
Defined by state law
Vermont limits yearly assessment authorizations in every applicable life-and-annuity subaccount and in the health account to 2% of the carrier’s mean covered Vermont premium over the three-year period ending before its impairment or insolvency year.
Premium-tax treatment
State-specific rule
A qualifying Vermont assessment described in §4179(h) may offset premium-tax liability at 20% per year for each of the five calendar years after payment.
July 2023 applicability boundary
The decisive fact is when the Association first incurred its obligation: July 1, 2023 or later invokes today’s chapter, while an earlier obligation retains its former rules.

What to know before buying

  • Evaluate the insurer and written guarantees first; Vermont’s failure backstop depends on the life, residence, membership, and contract facts.
  • Vermont forbids invoking the Association as a reason to advertise, solicit, sell, or induce the purchase of insurance.

How state protection differs from FDIC insurance

  • What it covers
    State protection: Chapter 112 governs failed-insurer obligations.
    FDIC: Federal law governs insured bank deposits.
  • What system stands behind it
    State protection: Vermont member insurers finance the association.
    FDIC: Insured banks finance the FDIC fund.
  • Coverage-limit basis
    State protection: A per-person annuity-specific limit and aggregate constrain the state result.
    FDIC: Depositor, bank and ownership category constrain the federal result.
  • Whether it applies to annuities
    State protection: A qualifying Vermont annuity may receive chapter 112 protection.
    FDIC: The annuity remains outside FDIC insurance.

Sources and last verified

Last verified: September 17, 2026