State RegulationsMI specificDifficulty 2/5
A Dearborn resident owns a deferred annuity whose present value, including cash values, substantially exceeds the statutory maximum when her insurer becomes insolvent. Under M.C.L. 500.7704, what is the maximum MLHIGA protection for her annuity?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.C.L. 500.7704 caps MLHIGA protection for annuity benefits at $250,000, measured by present value including cash values, per owner when a member insurer becomes insolvent. Any annuity value above that cap is unprotected, which is why consumers holding very large annuity contracts should understand that MLHIGA protection is limited and does not cover the entire contract value.
Why the other options are wrong
- A) $100,000 is the cap for life policy cash surrender values and for other non-basic health benefits, not for annuities.
- C) $300,000 is the cap for life insurance death benefits and for disability income and long-term care benefits, not for annuities.
- D) $500,000 is the cap for basic hospital, medical, and surgical benefits, which does not apply to annuity contracts.
Memory hook
Annuities top out at two-fifty, counted by present value including cash values.