Insurance Guarantee Fund *****

We first introduced the Insurance Guarantee Fund at the end of chapter 2, where we told you it is meant to protect poicyowners and consumers in the event the insurer becomes insolvent. In this section we will dive in to a lot more detail regarding this important aspect of insurance. The Guarantee Fund is similar to the FDIC, but for insurance companies. All insurance companies doing business in Florida have to be members of the Insurance Guarantee fund, which means that all insurers in the state are paying assessments to the Guarantee Fund. Also, since insurers are required to be members of the Guarantee Fund, they are not allowed to use that point in their marketing to consumers. Let's get started.

First, you should know that the Florida Life and Health Insurance Guaranty Association is a non-profit legal entity. All life, health, and annuity insurers are members of the association as a condition of their authority to transact insurance in Florida. The association's purpose is to protect the public against impairment or insolvency of insurance companies.

Scope of provisions

Coverage from the association will be provided to policyowners, beneficiaries and assignees who are residents of Florida in the event that an insurer becomes insolvent. Residents of other states are covered, but only if:

• the insurers that issued such policies or contracts are domiciled in Florida;
• such other states have associations similar to the Florida association; and
• such persons are not eligible for coverage by such associations.

Coverage under the fund does not apply in many cases, including but not limited to:

• The portion of a variable life insurance contract or variable annuity contract not guaranteed by an insurer
• The portion of any policy under which the risk is borne by the policyholder (speaking of variable products, see bullet above)
• Fraternal benefit societies
• Health maintenance insurance
• Dental service plan insurance
• Pharmaceutical service plan insurance
• Ambulance service association insurance
• Pre-need funeral or service contract insurance
• Prepaid health clinic insurance
• The portion of a policy or contract that exceeds association limits
• A policy or contract providing Medicare Part C (managed care) or Part D (drugs) benefits

Definitions

Impaired insurer means a member insurer deemed by the department to be potentially unable to fulfill its contractual obligations and not an insolvent insurer. (Impaired insurers may be repaired.)

Insolvent insurer means a member insurer against which an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. (Insolvent insurers are being liquidated, or sold off. There's no coming back from this.)

Establishment of association; separate accounts

The association has a board of directors and maintains three separate accounts for each type of company it guarantees:

• The health insurance account
• The life insurance account
• The annuity account

Board of directors

The board of directors of the association must have at least five but not more than nine member insurers serving on the board. No matter what, at least one of the members of the board must be a domestic insurer. The members of the board will be elected by the member insurers and are subject to the approval of the Department, and the Department will consider whether all member insurers are fairly represented, among other things, in the approval process. Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors, but members of the board shall not otherwise be compensated by the association for their services.