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Life Insurance Resource Center

Policyholder Protection and the LICGC

The Life Insurance Company Guaranty Corporation (LICGC) is a not-for-profit New York corporation that provides funds to New York resident policyholders in the event of the insolvency of a licensed life insurer.

More About the LICGC

With the creation of the Life Insurance Guaranty Corporation (LIGC) in 1941, New York became the first state in the country to provide consumers with a measure of protection against the insolvency of a domestic life insurer.

The LICGC was  created under a special statute enacted in 1985, to include licensed non-domestic insurance companies and to increase the amount of capital that the fund could assess.

LICGC is managed by a Board of Directors, consisting of representatives of member insurers and the Superintendent of Financial Services.  Every life insurance company licensed to do business in the State of New York must be a member of the LICGC as a condition of doing insurance business in the state.

The LICGC is funded through assessments against member insurers made after a member insurer is declared insolvent by a court of law. These funds are used to pay valid claims as well as administrative expenses.

What Happens When an Insurance company has Financial Difficulty?

The Superintendent may seek an order from the New York State Supreme Court allowing him or her to take over a domestic insurer's operations if certain circumstances exist that affect a company’s financial stability.

Once the Superintendent steps in to take over an insurer, official notice is sent to all policyholders explaining the circumstances that made the action necessary. In addition, notices are published in newspapers.

Rehabilitation vs. Liquidation

Supervision of a company may take one of two forms: rehabilitation or liquidation.

In rehabilitation, the Superintendent attempts to return the company to a financially stable condition.
In liquidation, steps are taken toward the eventual dissolution of the company. Both approaches are designed to enable the Superintendent to protect policyholders and creditors.

If a company is domiciled in another state and is placed in rehabilitation or liquidation in that state, the Superintendent may seek a court order allowing him or her to take control of the company's assets in New York.

Protections and limits on protection

The LICGC provides up to $500,000 of coverage to a life insurance policyholder/beneficiary, individual annuity (such as a Single Premium Deferred Annuity) contract holder or individual accident and health insurance policyholder.

In addition, the full benefits of group accident and health insurance policies issued by licensed life insurers are protected for a minimum of six months.  Insurance policies and annuity contracts issued by domestic life insurers prior to August 2, 1985 may also have protection provided by the LIGC.

funding agreements and group annuity contracts

LICGC also provides some limited coverage to funding agreements and group annuity contracts. > Group annuity contracts, including guaranteed interest contracts and funding agreements, are frequently used for the investment of the assets of pension, profit-sharing and salary reduction plans. Most often it is the plan trustee or sponsor who makes the investment. The extent of LICGC protection for an individual participant depends upon the insurer's obligation s as set forth in the contract.

If a contract does not guarantee annuity benefits with respect to any specific individual identified in the contract, the LICGC will provide coverage for the total invested with the insurer, up to $1 million. If the contract does guarantee annuity benefits with respect to specific individuals identified in the contract, the LICGC provides up to $500,000 coverage to such individuals who are New York residents.

With respect to agreements that do not fund benefits under employee benefit plans, LICGC provides aggregate coverage of up to $500,000. Specific information about the type of contract through which protection is provided should be obtained from the employer.

Shop Carefully Choose your insurance company carefully. Although the LICGC provides some protection, there are limitations on coverage, so don’t ignore a company’s financial condition and assume that you will be fully protected if the company fails to meet its obligations.

About DFS

One of the Department’s most important responsibilities is regulating the activities of life insurers doing business in the State to ensure that the promises made in insurance policies are fulfilled. To that end, each life insurer licensed in New York submits comprehensive annual and quarterly reports on its financial condition to the Department. In addition, the Department's insurance examiners conduct regular on-site examinations of all domestic life insurers (those insurers incorporated in New York) to evaluate their financial condition, and their underwriting and claims-handling practices. Out-of-state life insurers doing business in New York are subject to on-site examinations by their home state insurance departments.

If you have questions about the life insurance policyholder protection and your policy, check the FAQs About Life Insurance Policyholder protection and the LICGC to see if the answer is there. To determine if an insurer is licensed in New York, use our Insurance Company Search function. If you still need help, or have a question about a New York-licensed life insurance company, please contact the DFS.

Print a copy of the Life Insurance Policyholder Protection and the LICGC (PDF) brochure.

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