The Louisiana Insurance Guaranty Association (LIGA) is a private, nonprofit safety net that pays eligible homeowners and other property and casualty claims, when a licensed insurer in the state becomes insolvent. LIGA generally covers qualifying claims up to $500,000, subject to a $100 deductible, and unearned premiums up to $10,000. LIGA is primarily funded through assessments on member insurers in Louisiana, but it can also recover funds through the liquidation of insurers’ assets.
LIGA does not cover every insurer, policy, or claim. Life and health insurance, surplus lines coverage, and policies issued by unauthorized insurers are generally excluded. If your insurer is placed into liquidation, you must submit the required proof-of-claim documents before LIGA can pay your claim.
How LIGA protects Louisiana homeowners
LIGA was established by the Louisiana legislature in 1970, but it’s becoming increasingly relevant amid a growing number of insurance insolvencies related to large hurricane losses. When an insurer can’t pay out all its claims, it becomes insolvent, and that’s where LIGA comes in.
In some cases, a court may place an insurer in rehabilitation — a plan to help get the company back to solvency. During this time, any claims in process could be prorated, postponed, or suspended. But if the court instead orders liquidation of the insurance company, the policyholder will receive a proof of claim form, which they can file to have their claims paid out via LIGA. LIGA may also step in to pay out claims for an insurer while the insurer is in rehabilitation.
A crucial distinction for Louisiana homeowners: Your insurer becomes insolvent when it doesn’t have the assets (money) to pay its debts (claims). This is not the same as an insurer issuing an insurance nonrenewal or cancellation, which is specific to you — not all policyholders.
A Louisiana homeowners insurance company may not renew your policy — or cancel it midterm — if your home's risks grow and it no longer qualifies for coverage, or if you've filed several claims in recent years. Insurers also issue nonrenewals when they stop offering coverage in your area and cancellations when you miss payments.
Coverage limits and what LIGA pays
LIGA pays out under two scenarios: covered claims and unearned premiums — the portion of what you paid for coverage that you haven't used yet, since your policy ended early.
Covered claims: Up to $500,000
LIGA helps pay qualifying covered claims when an insurer becomes insolvent, but its protection is subject to strict limits: $500,000 per accident or occurrence, regardless of the type of damage. As a result, LIGA might not pay the full amount your policy would have covered.
For example, say a standard home insurance policy includes $500,000 in dwelling coverage, plus $50,000 in other structures coverage, $250,000 in personal property coverage and up to $100,000 for additional living expenses. If a covered event results in losses across all four categories, the amount payable under your policy could exceed $500,000. If your insurer is insolvent and LIGA steps in, however, the organization generally won’t pay more than $500,000 toward the claim.
Louisiana law also stipulates that LIGA can’t pay more than the amount the failed insurer would have owed under the policy. For instance, if you incur $500,000 in covered losses but the applicable policy limit is $400,000, LIGA’s max obligation for the claim would be $400,000, not $500,000.
Unearned premiums: Up to $10,000
Separately, LIGA also has a max $10,000 limit for unearned premiums, sometimes referred to as unused premiums. If you paid $3,000 upfront for a 12-month home insurance policy and your insurer becomes insolvent after four months, you’re eligible to be compensated for the eight months of coverage for which you prepaid ($2,000 in this scenario).
How the Louisiana Insurance Guaranty Association is funded
LIGA is primarily funded through assessments on insurance companies licensed to do business in Louisiana, not with taxpayer money. That means, when LIGA needs funds to pay covered claims and other expenses related to an insolvent insurer, it charges member insurers based on their market share.
Louisiana law currently allows LIGA to charge member insurers up to 2% of their net direct written premiums in the previous calendar year. These assessments have become especially important following Louisiana’s recent wave of insurer insolvencies.
LIGA is further funded by the liquidated assets of an insolvent insurer.
What the Louisiana Insurance Guaranty Association does not cover
LIGA only covers eligible claims involving insolvent (financially failed) property and casualty insurers that are members of the association. It does not cover:
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Life insurance
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Health insurance
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Title insurance
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Surplus lines insurance
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Coverage issued by unauthorized insurers
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Certain other policies excluded under Louisiana law
That said, some policies may instead be protected by the Louisiana Life and Health Guaranty Association.
It's important to act promptly if your insurer becomes insolvent and you receive a proof of claim notice. A proof of claim is the form you file to document what you're owed and formally request payment from the insolvent insurer's estate. The notice should indicate a deadline for filing it. Louisiana law may permit a late claim, but it generally cannot receive a distribution from the estate until eligible claims filed on time have been paid in full, including interest.
How to file a claim with LIGA
The Louisiana Department of Insurance maintains a list of insurers in receivership — insolvent insurers that will either be rehabilitated or liquidated. If you believe yours may be insolvent, you can review that list online.
Once a court orders an insolvent insurer into liquidation, a court-appointed receiver should send you and all affected claimants a proof of claim form. Simply complete this form and return it to the receiver by the stated deadline, along with any documentation requested to complete the claim.
Once your claim is referred to LIGA, an adjuster will take over the process. Contact that adjustor if you have questions during the process.
Frequently asked questions
What is the purpose of an insurance guaranty association?
An insurance guaranty association serves as a financial safety net for consumers when an insurance company fails financially (becomes insolvent) and can no longer pay covered claims. In Louisiana, the Louisiana Insurance Guarantee Association, known as LIGA, pays eligible claims involving insolvent property and casualty insurers.
What is the maximum LIGA will pay on a claim?
The maximum per-occurrence cap on claims through LIGA is $500,000. If your claim exceeds that amount, the organization won’t cover the excess.
What is the Louisiana Life & Health Insurance Guaranty Association, and how is it different from LIGA?
The Louisiana Life & Health Insurance Guaranty Association (LLHIGA) operates similarly to LIGA, providing a safety net for insurance policyholders. However, LIGA is for property and casualty insurance (like home insurance and car insurance) while LLHIGA is for life, health, and annuity policies.
