​Beware of using the state guaranty fund as an annuity selling point

By David Shields

WealthMark Advisors, Inc

Recently a fellow agent mentioned to me that the Florida Department of Insurance had repealed the provision that banned agents from using the Florida Life and Health Insurance Guaranty Association coverage limits in their advertising efforts. He was going to begin running a radio ad, mentioning that fixed indexed annuities were government insured. I knew that was a bad idea.

A quick trip to the Internet confirmed my suspicions. After spending only 10 minutes online, it was clear to me that nearly every state, including Florida, had specific statutes clearly defining what can and cannot be done as it pertains to marketing. Again, in nearly every state, any form of advertisement that used the guaranty association was explicitly prohibited.

Each state has a guarantee association whose job is to protect the consumer in the case that an insurance company becomes insolvent. What and how much they cover vary from state to state.

For example, according to Insurance Providers, an online quote service, New York covers up to $500,000 on annuity contracts and no state offers less than $100,000. Insurance companies pay fees into the guarantee association, but those fees may not cover losses in the event of a larger insurance company becoming insolvent.

The bottom line? While the coverage is there (unless there are inadequate funds), you can’t use it as a selling point.