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CA Department of Insurance

Bulletin 96-02

To: Member Insurers California Life and Health Insurance Guarantee Association and Other Interested Parties

Subject: 
Summary Document and Disclaimer and Notice of Non-Coverage Pursuant to CIC Sections 1067.17 and 1067.02(e)

This supersedes Bulletins No. 91-14, 91-15, 93-8 and 94-2 and their Exhibits.


Bulletin No. 96-2 updates requirements for the California Life and Health Insurance Guarantee Association ("CLHIGA") Summary Document and Disclaimer and Notice of Non-Coverage to include reference to contracts issued pursuant to CIC Section 10507.5(a). (See Bulletin No. 95-10.)

The attached Summary Document and Disclaimer (Exhibit A) describes the general purpose and current limitations of the California Life and Health Insurance Guarantee Association Act. It has been adopted by the Guarantee Association and approved by the Insurance Commissioner as prescribed by CIC Section 1067.17(b) and (c). Prior to or at the time of delivery of policies or contracts, insurers and agents must deliver the Summary Document and Disclaimer to insureds. In addition, the Document should be available upon request to any existing policyholder.

The attached Notice of Non-Coverage (Exhibit B) must be provided immediately to policyholders as required by California law. Prior to or at the time of delivery of a policy excluded from Guarantee Fund coverage, the insurer or agent must give the policyholder or contract holder clear notice that the policy or contract is not covered by the California life and Health Insurance Guarantee Association (CIC Section 1067.17(d)). In addition, prior to offering an unallocated annuity contract to an employer, or the participation by an employee, the insurer or agent must disclose to the employer and employee in conspicuous writing that the contract is not covered by the Guarantee Association (CIC Section 1067.02(e)).

Determination as to whether products are covered under the Guarantee Association or whether annuity contracts are allocated or unallocated, must be initially made by insurers based on their knowledge of specific contracts offered.

Pursuant to CIC Section 1067.17(a), the existence of the California Life and Health Insurance Guarantee Association may not be used in any manner to induce the purchase of insurance covered by the Guarantee Association Act.

Inquiries as to this Bulletin may be directed to:

Note: These addresses were updated on this page in May, 2002

Consumer Service Division
California Department of Insurance
300 South Spring Street
Los Angeles, California 90013
Phone: (800) 927-4357 or (213) 897-8921

or

Executive Director
California Life and Health Insurance
Guarantee Association
P.O.16860
Beverly Hills, CA 90209
Phone: (323) 782-0182

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EXHIBIT A (to Bulletin 96-2):

Exhibit A
California Life and Health Insurance
Guarantee Association Act
Summary Document and Disclaimer

Residents of California who purchase life and health insurance and annuities should know that the insurance companies licensed in this state to write these types of insurance are members of the California Life and Health Insurance Guarantee Association ("CLHIGA"). The purpose of this Association is to assure that policyholders will be protected, within limits, in the unlikely event that a member insurer becomes financially unable to meet its obligations. If this should happen, the Guarantee Association will assess its other member insurance companies for the money to pay the claims of insured persons who live in this state and, in some cases, to keep coverage in force. The valuable extra protection provided through the Association is not unlimited, as noted in the box below, and is not a substitute for consumers' care in selecting insurers.

[Note: For purposes of displaying this document on the internet certain text, that was displayed in a box in the original bulletin, appears below in small print.]


The California Life and Health Insurance Guarantee Association may not provide coverage for this policy. If coverage is provided, it may be subject to substantial limitations or exclusions, and require continued residency in California. You should not rely on coverage by the Association in selecting an insurance company or in selecting an insurance policy.

Coverage is NOT provided for your policy or any portion of it that is not guaranteed by the insurer or for which you have assumed the risk, such as a variable contract sold by prospectus.

Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the Guarantee Association to induce you to purchase any kind of insurance policy.

Policyholders with additional questions should first contact their insurer or agent or may then contact

Note: These addresses were updated on this Internet page in May, 2002

California Life and Health Insurance
Guarantee Association
P.O. Box 16860
Beverly Hills, CA 90209
(323) 782-0182

or

Consumer Service Division
California Department of Insurance
300 South Spring Street
Los Angeles, CA 90013
(800) 927-4357 or (213) 897-8921

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Below is a brief summary of this law's coverages, exclusions and limits. This summary does not cover all provisions of the law; nor does it in any way change anyone's rights or obligations under the Act or the rights or obligations of the Association.

Coverage

Generally, individuals will be protected by the California Life and Health Insurance Guarantee Association if they live in this state and hold a life or health insurance contract, or an annuity, or if they are insured under a group insurance contract, issued by a member insurer. The beneficiaries, payees or assignees of insured persons are protected as well, even if they live in another state.

Exclusions from Coverage

However, persons holding such policies are not protected by this Guarantee Association if:

  • Their insurer was not authorized to do business in this state when it issued the policy or contract;
  • Their policy was issued by a health care service plan (HMO), Blue Cross, Blue Shield, a charitable organization, a fraternal benefit society, a mandatory state pooling plan, a mutual assessment company, an insurance exchange, or a grants and annuities society;
  • They are eligible for protection under the laws of another state. This may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insureds who live outside that state.

The Guarantee Association also does not provide coverage for:

  • Unallocated annuity contracts; that is, contracts which are not issued to and owned by an individual and which guarantee rights to group contract holders, not individuals;
  • Employer and association plans, to the extent they are self-funded or uninsured;
  • Synthetic guaranteed interest contracts;
  • Any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has a variable contract sold by prospectus;
  • Any policy of reinsurance unless an assumption certificate was issued;
  • Interest rate yields that exceed an average rate;rating credits.

Limits on Amounts of Coverage

The Act limits the Association to pay benefits as follows:

Live and Annuity Benefits

* 80% of what the life insurance company would owe under a life policy or annuity contract up to * $100,000 in cash surrender values, * $100,000 in present value of annuities, or * $250,000 in life insurance death benefits. * A maximum of $250,000 for any one insured life no matter how many policies and contracts there were with the same company, even if the policies provided different types of coverages. HEALTH BENEFITS * A maximum of $200,000 of the contractual obligations that the health insurance company would owe were it not insolvent. The maximum may increase or decrease annually based upon changes in the health care cost component of the consumer price index.

Premium Surcharge

Member insurers are required to recoup assessments paid to the Association by way of a surcharge on premiums charged for health insurance policies to which the Act applies.

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Exhibit B: (to Bulletin 96-2) Exhibit B

Notice of Non-Coverage
California Life and Health Insurance
Guarantee Association Act

This policy is NOT covered by The California Life and Health Insurance Guarantee Association

Exclusions from Coverage

The following are not covered by the California Life and Health Insurance Guarantee Association:

  • Unallocated annuity contracts; that is, contracts which are not issued to and owned by individuals and which guarantee rights to group contract holders, not individuals;
  • Employer and association plans, to the extent they are self-funded or uninsured;
  • Synthetic guaranteed interest contracts;
  • Any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has assumed the risk, such as a variable contract sold by prospectus;
  • Any policy of reinsurance unless an assumption certificate was issued;
  • Interest rate yields that exceed an average rate;
  • Any portion of a contract that provides dividends or experience rating credits.

A determination as to whether an insurance contract is covered under the Guarantee Association or whether an annuity
contract is allocated or unallocated must initially be made by the insurer based on its knowledge of the specific contract offered.


Also, you are not protected by this Association if:

  • The insurer was not authorized to do business in this state when it issued the policy or contract;
  • The policy is issued by a health care service plan (HMO), Blue Cross, Blue Shield; a charitable organization, a fraternal benefit society, a mandatory state pooling plan, a mutual assessment company, an insurance exchange, or a grants and annuities society;
  • You are eligible for protection under the laws of another state. This may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insureds who live outside that state

Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the Guarantee Association to induce you to purchase any kind of insurance policy.

If you have questions concerning this Notice, you may contact

Note:  These addresses were updated on this Internet page in May, 2002:

California Life and Health Insurance Guarantee Association
P.O. Box 16860
Beverly Hills, CA 90209

(323) 782-0182

or

Consumer Service Division
California Department of Insurance
300 South Spring Street
Los Angeles, CA 90013

(800) 927-4357 or (213) 897-8921

Questions as to specific policies or annuities should be directed to the insurance company offering the product.

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