Frequently Asked Questions About the South Carolina Life and Accident and Health Insurance Guaranty Association (SCLAHIGA)
What is the South Carolina Life and Accident and Health Insurance Guaranty Association (SCLAHIGA)?
SCLAHIGA is an association of insurance companies that are licensed to sell life insurance, health insurance and annuities in South Carolina. As a condition of doing business in this state, companies licensed to write life and/or health insurance or annuities must be a member. The Association was created by the state legislature in 1972 to protect the residents of this state, with certain limitations, from the financial failure of one of its member companies.
What kinds of policies are protected by SCLAHIGA if my company is determined to be insolvent?
Life insurance policies, health insurance policies and annuity contracts written by member companies are protected, with certain limitations and conditions.
What is not protected by SCLAHIGA?
Policies issued by companies not licensed to do business in South Carolina; all products of Health Maintenance Organizations (HMOs); all policies and certificates issued by a fraternal benefit society; policy benefits not guaranteed by the insurer or policies for which the policyholders bears the risk (such as variable life or annuity contracts); unallocated annuity contracts (sometimes knows as GICs); self-insured plans; reinsurance plans including stop-loss contracts; and certain other products that are less common. If you want more information, you should contact the Association. If you need further information on a particular product, you should obtain the opinion of your legal counsel.
Who is protected?
Generally, SCLAHIGA covers individual policyholders and their beneficiaries; insureds that hold certificates of insurance issued under policies of group life or group health insurance may also be covered. Please review the limits outlined below.
Does it matter where I live?
SCLAHIGA only protects policyholders who are residents of South Carolina on the date one of its member companies is declared insolvent. Residents of other states are protected only under the following conditions:
- The insolvent insurance company was a company based in South Carolina
- The insolvent insurance company was never licensed in the policyholder’s state of residence
- The policyholder is not eligible for coverage by the guaranty association in his state, and
- The guaranty association in his state would provide similar protection to residents of South Carolina if a company based in that state were declared insolvent.
What if I move to another state after I buy insurance?
In general the guaranty association of the state in which you live at the time your company is declared insolvent protects you. All 50 states, the District of Columbia and Puerto Rico have guaranty associations. The level of protection and type of covered products does vary somewhat. If you move to another state, you should contact that guaranty association for more information. Our web site includes a list of other life and health guaranty associations.
When will SCLAHIGA be called upon to provide benefits?
Generally, the Association must provide coverage when a member company has been declared insolvent and ordered liquidated by a court of law. Before benefits can be paid, SCLAHIGA must receive details on who is insured and the type of coverage issued. This information comes from the state insurance authorities that have taken control of the failed company.
How will I know my life or health insurance company has been declared insolvent?
You will receive notification from either the court appointed liquidator of the company or from SCLAHIGA. The notice will be sent to your address on file with the company.
What happens to my insurance coverage if my company fails?
- Life and Annuity Policies: In most cases the policies will be continued as long as premiums are paid. Unless notified differently, you should continue making premium payments in the same way you have been. Your policy will probably be transferred to another insurance company. This arrangement will be made by SCLAHIGA and may take 6 to 12 months.
- Health Insurance Policies: Contracts may be cancelled by the liquidation court. If allowed under the policy, SCLAHIGA may also cancel these contracts after the required notice to the policyholder. Or, the premium may be increased as allowed by the policy. You may continue the coverage in force by paying the premium until you are sent notice that the policy is being cancelled. If the policy cannot be cancelled, it may be transferred to another insurance company.
What should I do if I am notified that my life or health insurance company has been taken over?
If you receive notice that the court has ordered the state to take control of the company, you should not take action prematurely. The receiver will be working with the Association to make arrangements for continuation of coverage through a solvent insurance company. Claims will continue to be honored as long as the coverage remains in place and the premium is paid. However, if you are notified that a health insurance policy is being cancelled, you should act immediately to secure new coverage.
How long will I have to wait to receive payment of my claims and other benefits?
The courts may suspend payments due to you in order to sort out the affairs of the financially troubled company. It may take many months before the records are available to us. It is also possible that there may be little or no delay in getting benefit payments to policyholders.
I put $100,000 into an annuity and I have earned $25,000 in interest since my initial deposit. Would I get the interest I have earned on my policy?
Yes, the value of your policy would be the value as shown on the records of the failed company including any interest that was credited to you prior to the declaration of insolvency.
What are the limits of the protection by SCLAHIGA?
State law limits protection to an aggregate of $300,000. The Association will provide coverage for your policy or policies up to the $300,000 limit.
- As an example: You have a $250,000 annuity policy issued by a member company that has been declared insolvent. From the assets of the insolvent company you can get 60% of your $250,000 or $150,000. The Association will provide the other $100,000 make you whole and bring your policy back up to $250,000.
- Another example: You have two $200,000 annuity policies issued by a member company that has been declare insolvent. The two policies have a combined value of $400,000. From the assets of the company you can get 60% of your $400,000. We would divide this $400,000 total into two parts, a $300,000 covered part and a $100,000 uncovered part. On the $300,000 covered part you would receive $180,000 from the assets of the insolvent company. The Association would provide assets of $120,000 to make you whole on the first $300,000. On the $100,000 uncovered part you would receive $60,000 from the assets of the company. Your total recovery in this example would be $360,000.
In cases where the assets of the insolvent company cannot provide assets to you in a reasonable time, the Association may be called upon to pay your claim in full (subject to the $300,000 limitation). This is typical in health insurance company insolvencies. When the Association pays any part of your claim, they receive by statute an assignment of your claim against the insolvent company and will be entitled to receive any future funds that may be distributed. However, you will continue to have a claim against the failed company for any uncovered portion of your policy and also may receive distributions in the future on that portion of your claim.
Where does SCLAHIGA get the money to provide this protection?
SCLAHIGA is authorized to make assessments against all member companies by line of business to raise the funds needed.
How can I find out if my company is licensed in South Carolina and a member of the Association?
The South Carolina Department of Insurance can tell you if a company is licensed. You can call them at (803) 737-6221 or at 1-800-768-3467. Membership in the Association is required by law for all companies authorized to sell life, annuity and health products to the public. See the exceptions outlined above.
How can I find out about the financial condition of an insurance company?
There are several insurance company rating publications available at your local library. Or, you may call the SC Department of Insurance at the numbers listed above.
An agent is trying to sell me a policy and says he cannot discuss the Association with me. Why not?
When you are selecting an insurance company you should not rely on coverage by SCLAHIGA. State law prohibits agents and others from use of the Association in connection with a sale. Besides, every one of our member companies has the same protection. Make your decision to purchase from a particular company based on a review of their financial situation and other factors.
How can I get more information about the Association?
You may contact us at the telephone number or address listed on our home page or use the link on our home page to Title 38 Chapter 29 of the South Carolina Code of Laws.
PLEASE NOTE: The above is intended for information purposes only and is not to be considered legal advice. For a particular situation, please consult your legal counsel.