Which of the following is NOT true regarding the Life and Health Guaranty Association?

Which of the following is NOT true regarding the Life and Health Guaranty Association?

• A. The association is comprised of representatives from the DOIs of every state
• B. The association's liability is generally limited to that of the impaired insurance company
• C. The maximum coverage is $500,000
• D. The association was created to protect policy owners financially if their insurers become insolvent

Answer: (A)

The statement that the association is comprised of representatives from the DOIs of every state is not true. The Life and Health Guaranty Association typically consists of member insurance companies rather than direct representatives from the Departments of Insurance (DOIs). These associations are formed within each state to protect policyholders by providing a safety net when an insurance company fails, ensuring that consumers maintain access to their benefits up to a certain limit. The other aspects are accurate; for instance, the association's liability indeed mirrors that of the impaired company, meaning they cover claims only up to the limits of the failed insurer's obligations. The association is also designed to protect policyholders financially if their insurers become insolvent, which highlights its primary purpose. Additionally, while the maximum coverage may vary by state, it is commonly set at significant amounts like $500,000, aligning with the intent to provide substantial protection for policyholders.

The statement that the association is comprised of representatives from the DOIs of every state is not true. The Life and Health Guaranty Association typically consists of member insurance companies rather than direct representatives from the Departments of Insurance (DOIs). These associations are formed within each state to protect policyholders by providing a safety net when an insurance company fails, ensuring that consumers maintain access to their benefits up to a certain limit.

The other aspects are accurate; for instance, the association's liability indeed mirrors that of the impaired company, meaning they cover claims only up to the limits of the failed insurer's obligations. The association is also designed to protect policyholders financially if their insurers become insolvent, which highlights its primary purpose. Additionally, while the maximum coverage may vary by state, it is commonly set at significant amounts like $500,000, aligning with the intent to provide substantial protection for policyholders.