The information below contains general responses to questions which the Maine Bureau of Insurance is frequently asked regarding protections that insurance purchasers have in the event their insurer becomes insolvent. These responses are not intended to address either all or specific situations nor is it intended to provide specific legal advice.
Is there any protection provided to insurance buyers if their insurer becomes insolvent?
Yes. For many lines of insurance, policyholder protection is provided through either the Maine Insurance Guaranty Association or the Maine Health and Life Insurance Guaranty Association.
What are the Maine Insurance Guaranty Association and the Maine Life and Health Insurance Guaranty Association?
These are private associations to which all insurers authorized to transact insurance in Maine are required to belong as a condition of their licensure. In the event of the insolvency of a member insurer, the associations become responsible for covered claims to the extent required by Maine law. Generally, the Maine Insurance Guaranty Association responds in the case of insolvencies of insurers writing Maine property and casualty insurance business while the Maine Life and Health Insurance Guaranty Association responds to insolvencies of insurers having Maine life or health insurance or annuity business.
Are there any residency requirements?
Yes. Both associations have residency requirements. All 50 U.S. states and the District of Columbia have similar associations however, so if you do not meet Maine’s residency requirement, you may qualify for protection elsewhere.
What are the limits of the protection that the guaranty associations are responsible for?
The guaranty associations are responsible for policy obligations which the insolvent insurer would have been responsible for if it had not become insolvent subject to the limitations set forth in the following tables:
Maine Insurance Guaranty Association limits of protection
| Line1 2 | Maximum protection |
|
Workers’ Compensation benefit claims |
Covered in full |
|
All other covered benefit claims |
$300,000 |
|
Unearned premiums |
$25,000 subject to $50 deductible |
1 No coverage available for first party claims of insureds whose net worth exceeds $25 million.
2MIGA does not cover reinsurance, mortgage guaranty insurance, financial guaranty insurance or other forms of insurance covering protection against financial risk, credit insurance, title insurance, surplus lines coverage, workers compensation self-insurers excess coverage, life or health insurance, annuities, insurance of warranties or service contracts, transactions between persons and insurers that involve a transfer of investment risk unaccompanied by transfer of insurance risk and insurance provided by or guaranteed by a government entity.
Maine Health and Life Insurance Guaranty Association limits of protection
| Line 3 | |
|
Life Insurance |
$300,000 death benefits/$100,000 net cash value with respect to any one life |
|
Basic, Hospital, Surgical Insurance |
$300,000 |
|
Disability and Long Term Care Insurance |
$300,000 |
|
All Other Health Insurance |
$500,000 |
|
Annuities |
$250,000 present value including net cash value |
3 Maine law provides 13 exceptions to the definition of “covered claim”. Key exceptions that are the subject of many queries to the Bureau of Insurance are exceptions for portions of a policy or contract not guaranteed by an insurer and for elements of a policy or contract where risk is borne by the policy or contract holder. This means that there is no Association protection for non-guaranteed elements of variable annuities or for fixed annuity interest which had been projected by the insolvent insurer, but neither guaranteed nor credited prior to insolvency.
4 Protection subject to aggregate maximum of $300,000 for any one life exclusive of basic hospital, surgical or medical coverage or $500,000 for all benefits with respect to any person.
5 Protection subject to maximum of $5 million in all benefits regardless of the number of policies held by the owner with respect to one owner of multiple non-group policies of life insurance whether the policy owner is an individual, firm, corporation or other person and whether the persons insured are officers, managers, employees or other persons.
My insurer has just been declared insolvent. Do I need to contact the guaranty associations to seek their protection?
No. The Maine Insurance Guaranty Association will become possessed of your claim file directly from the insolvent insurer and promptly assume claims administration. With respect to life or health insurance or annuities, frequently blocks of business of financially troubled or insolvent insurers are sold to other insurers. If that should happen, that purchasing insurer will assume your coverage. In the event, that the Maine Health and Life Insurance Guaranty Association became directly involved for policy administration, it would gain access to the insurer’s records and it would not be necessary for you to initiate contact.
I am covered for health benefits through a multiple employer welfare arrangement. Am I protected by a guaranty association?
No.
I receive benefits through a self-funded or uninsured employee benefit plan. Am I protected by a guaranty association?
No.
I receive health benefits through a health maintenance organization (HMO). Am I protected by a guaranty association?
No, however your HMO’s provider agreements should contain “hold harmless” agreements that protect you from liability to participating providers for covered services should the HMO fail to pay them due to its insolvency.
I currently have life or health benefit coverage through a fraternal benefit society. Am I protected by a guaranty association if my society becomes insolvent?
No.
I have a policy of a kind excluded from guaranty association protection. What happens to my claim for benefits if my insurer becomes insolvent?
You will likely become a creditor in the receivership or liquidation proceeding of the insurer and will receive notices from the court-appointed receiver.
What resources do the guaranty associations have to pay my claim?
Both guaranty associations have access to short-term financing as well as the ability to levy assessments on their remaining solvent members in order to raise funds to meet their obligations.
How can I find out more information about the guaranty associations?
Information regarding the Maine Insurance Guaranty Association can be found on the website of its administrator, Guaranty Fund Management Services, at www.gfms.org. Information regarding the Maine Life and Health Insurance Guaranty Association can be found on its website, www.melifega.org.