What is the South Carolina Life and Accident and Health Insurance Guaranty Association (SCLAHIGA)?
SCLAHIGA is an association of insurance companies and Health Maintenance Organizations that are licensed to sell life insurance, health insurance and/or 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 policies and certificates issued by a fraternal benefit society; policy benefits not guaranteed by the insurer or policies for which the policyholders bear the risk (such as variable life or annuity contracts); unallocated annuity contracts (sometimes known as GICs); self-insured plans; reinsurance plans including stop-loss contracts; and certain other products that are less common. Additionally, using a formula based upon the Moody’s Corporate Bond Yield Average, SCLAHIGA can “roll back” an extremely high guaranteed interest rate or unrealistic promised rate of return under an equity index to something more reasonable.
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:
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.
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?
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 of the insolvent company 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 several 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.
What are the limits of the protection by SCLAHIGA?
State law limits protection to an aggregate of $300,000 for all policies except major medical health policies which are limited to $500,000. The Association will provide coverage for your policy or policies up to the limit.
How is the $300,000 in aggregate coverage applied for life and annuity policies?
It is per insured life per member company. Here is the actual language from the SC Code of Laws, 38-29-40(3):
(3) The benefits that the association may become obligated to cover may not exceed the lesser of:
(a) the contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
(b)(i) with respect to one life, regardless of the number of policies or contracts:
(A) $300,000 in life insurance death benefits, but not more than $300,000 in net cash surrender and net cash withdrawal values for life insurance;
(B) for health insurance benefits:
(1) $300,000 for coverages not defined as disability income insurance or health benefit plans or long term care insurance, including any net cash surrender and net cash withdrawal values;
(2) $300,000 for disability income insurance and $300,000 for long term care insurance;
(3) $500,000 for health benefit plans;
(C) $300,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;
This applies the limits for each member insurer that becomes insolvent. Each insured life has a limit of up to $300,000 in coverage in life and/or annuity policies for each member company that becomes insolvent. If you have 3 annuity contracts with one member company you would have a total limit of $300,000 in protection. If you have 1 annuity each in three different member companies the protection would be $300,000 for each annuity for a total of $900,000.
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 insurance companies and HMOs 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 review Title 38 Chapter 29 of the South Carolina Code of Laws which can be found at www.scstatehouse.gov/code.