State annuity protection

Virginia Annuity Guaranty Protection: $250,000 Limit Explained

Virginia generally recognizes no more than $250,000 of covered annuity value for one life. Its separate $350,000 ordinary aggregate can also encompass other qualifying benefit categories attached to that life.

Virginia annuity protection at a glance

Annuity benefit limit
$250,000
Eligible annuity present value, including allowable surrender and withdrawal benefits
Overall benefit cap
$350,000
Across multiple ordinary benefit categories, Virginia applies a distinct $350,000 total to one life.
Who provides protection
Virginia Life, Accident and Sickness Insurance Guaranty Association
Virginia’s Association can support an impaired carrier before liquidation and must perform the remedies assigned by chapter 17 once the carrier is insolvent.
Insurer requirement
Member insurer
The issuing company must be a member for the covered line, and the particular obligation must fall within chapter 17.

How the $250,000 limit works

The Virginia annuity computation stops at $250,000 of eligible present value for the life being measured.

Contracts associated with that life at the affected Virginia member company enter one shared annuity calculation.

A proceeding involving another member company is evaluated separately under the claimant facts then in force.

Across multiple ordinary benefit categories, Virginia applies a distinct $350,000 total to one life.

  • Virginia assigns a $250,000 participant limit when a covered unallocated annuity funds a qualifying §401, §403(b), or §457 plan.
  • For another covered unallocated arrangement, Virginia permits a $5 million maximum for the qualifying plan sponsor.
  • A covered Virginia structured-settlement recipient, or the beneficiary after that recipient dies, has a distinct $250,000 amount.

A $300,000 annuity example

Suppose one Virginia life has an eligible fixed contract worth $300,000 at an insolvent member company and no other covered benefit.

Annuity value

$300,000

Potential protection

$250,000

Possible receivership claim

$50,000

The annuity-specific calculation produces $250,000. A policyholder may submit the remaining $50,000 to the receivership estate, where payment depends on estate distributions.

The example assumes one life and company, eligible fixed guarantees, and no other use of the ordinary aggregate.

Which annuities are covered?

  • Fixed annuity

    Generally covered

    A fixed contract may qualify after Virginia applies its membership, residence, written-guarantee, and exclusion rules.

  • Fixed indexed annuity (FIA)

    Generally covered

    Virginia can cover an FIA, but nonguaranteed value, amounts over the statutory benchmark, or revocable credits may fall away. For an FIA whose index value under the contract is credited less frequently than annually, chapter 17 calculates the amount at the impairment or insolvency date and makes that calculated credit nonforfeitable.

  • Multi-year guaranteed annuity (MYGA)

    Generally covered

    A MYGA falls within Virginia’s deferred fixed-annuity category, but promised interest exceeding the statutory ceiling is not protected.

  • Variable annuity

    Guaranteed portions may be covered

    Separate-account performance remains with the holder when the holder carries the investment result.

  • Registered index-linked annuity (RILA)

    Contract-specific

    For a RILA, enforceable insurer promises can enter the calculation while market or investment exposure assigned to the owner remains outside it.

  • Unallocated annuity contract

    Limited situations

    A covered §401, §403(b), or §457 participant uses a $250,000 individual amount; another qualifying unallocated arrangement may use a $5 million plan-sponsor amount. Current statutory treatment, rather than a broader FAQ exclusion, controls GICs and deposit-administration contracts.

Who may qualify?

  • Virginia fixes residence when the Commission first determines the carrier impaired or a court first determines it insolvent; the impairment determination can precede liquidation.
  • The legal limit is expressed with respect to one life. The FAQ’s per-owner example is consumer shorthand, so an unusual owner-and-annuitant arrangement requires the statutory analysis.
  • For an ordinary nonresident claim, the failed company generally must be Virginia-domiciled, the home state must maintain a similar association, and missing home-state licensure must make the claimant ineligible there. Structured settlements and unallocated contracts use separate coordination provisions.
  • The residence-state system is considered first before Virginia can respond through its narrow insurer-domicile exception.
  • The issuing company must be a member for the covered line, and the particular obligation must fall within chapter 17.

What is not covered?

  • Value beyond the Virginia annuity, combined-benefit, or special-plan ceiling does not become an Association payment.
  • Owner-retained investment exposure, a benefit the insurer never guaranteed, and certain excess or revocable index value are excluded.
  • Advertising assertions, noncompliant side agreements or riders, and misrepresentation theories cannot enlarge the written covered obligation.
  • Extra-contractual recovery, penalties, and consequential or incidental losses fall outside protection.
  • Specified book-value guarantees, PBGC-covered arrangements, and unallocated contracts outside qualifying benefit plans are excluded.
  • A factored structured-settlement right is not protected, although the original qualifying recipient or successor has a distinct category.

What happens after an insurer fails?

  1. 1

    The company becomes impaired or insolvent

    The Commission’s impairment determination or a court’s insolvency determination establishes status and fixes the residence date used by Virginia.

  2. 2

    Residence and eligibility are determined

    The Association identifies the covered life, contract class, member status, guarantees, and any coordination rule.

  3. 3

    Benefits and both ceilings are calculated

    Virginia first applies the product-specific amount and then the $350,000 ordinary aggregate across qualifying categories.

  4. 4

    An authorized remedy follows

    Covered contracts may be continued, assumed, reinsured, or paid; an uncovered balance remains subject to the insurer’s receivership.

How the guaranty system is financed

Virginia finances the Association through statutory member assessments, recoveries, and—when the ordinary assessment ceiling is reached—its separate safety fund.

Assessment allocation
Member insurers
Within the relevant account or subaccount, a carrier’s share is based on its average Virginia covered premium over the three calendar years ending before the failure year.
Annual assessment cap
Defined by state law
Virginia caps a single calendar-year call within any account or subaccount at 2% of the member’s three-year mean for covered in-state premium; the lookback ends before the carrier’s impairment or insolvency year.
Premium-tax treatment
State-specific rule
Virginia amortizes a qualifying contribution certificate at 10% per year during the ten calendar years after the contribution year; the annual amortized amount may offset premium-tax liability subject to statutory adjustments.
Product limit, aggregate, and safety fund
Using the full $250,000 annuity amount can leave as much as $100,000 of the ordinary aggregate for another qualifying category. Separately, Virginia’s safety fund can help pay covered claims when the section 1705 assessment ceiling has been reached.

What to know before buying

  • When reviewing existing protection, remember that different covered benefit categories for one life can share Virginia’s $350,000 aggregate.
  • Virginia bars using Association protection to advertise, solicit, sell, or induce an insurance purchase.

How state protection differs from FDIC insurance

  • What it covers
    State protection: The Virginia association handles covered insurance obligations.
    FDIC: The FDIC handles covered bank deposits.
  • What system stands behind it
    State protection: Member insurers fund the association through assessments.
    FDIC: Insured banks bear federal assessment obligations.
  • Coverage-limit basis
    State protection: A $250,000 annuity-specific limit sits within a $350,000 combined-benefit aggregate.
    FDIC: Deposit limits use depositor, bank and ownership categories.
  • Whether it applies to annuities
    State protection: A qualifying Virginia annuity may receive chapter 17 protection.
    FDIC: Virginia annuity benefits are not FDIC-insured.

Sources and last verified

Last verified: September 17, 2026