Questions and Answers
Match the following accounts maintained by the association for its powers and duties:
Life Insurance and Annuity Account = 1 Health Insurance Account = 2
An insurer or producer can use the existence of the Guaranty Association to advertise, sell, or induce the purchase of insurance.
False
What types of coverage does the association provide?
Individual life, health, annuity, and supplement policies; certificates under group policies and contracts; unallocated annuity contracts issued by member insurers.
What happens if an insurer fails to perform its contractual obligations?
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All insurers are required to be members of the association.
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What is the association's liability limited to?
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Insurers and producers may use the existence of the Guaranty Association for selling insurance.
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Insurers or producers must give applicants a ______ _______ stating that the association may not cover the policy and that coverage may be limited.
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The association's liability for life insurance policies is limited to $__________ in benefits.
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What is the purpose of an Insurance Guaranty Association?
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What is the association's liability for health benefit plans?
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What is the association's liability for benefits for a payee or beneficiary of a structured settlement, annuity, including cash values?
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Which of the following statements regarding the North Carolina Life and Health Insurance Guaranty Association is NOT correct?
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Zelda, a producer selling health insurance, gives assurance that the insurance company is backed by the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this assurance?
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Jack's beneficiaries were unable to collect the $250,000 in proceeds under his life insurance policy due to the insurer's insolvency. What amount will his beneficiaries typically be able to collect if covered by the Life and Health Insurance Guaranty Association?
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Study Notes
Guaranty Association Overview
- Members pay annual fees to support the association's functions through two accounts: a life insurance and annuity account and a health insurance account.
- Coverage includes individual life, health, annuity, supplemental policies, group policy certificates, and unallocated annuity contracts from member insurers.
Protections and Limitations
- The association assists policyholders, insured individuals, and beneficiaries if an insurer becomes impaired or insolvent, failing to meet contractual obligations.
- All licensed insurers in North Carolina are required to be members of the Guaranty Association.
Liability and Coverage Limits
- The association's liability is limited to the lesser of the insurer's obligations or statutory limits.
- Coverage caps:
- $300,000 for life insurance policies
- $500,000 for health benefit plans
- $1 million for structured settlement annuities, including cash values.
Regulations on Advertising and Disclosure
- Insurers and producers cannot advertise or sell insurance based on the existence of the Guaranty Association.
- Applicants must receive a disclosure notice explaining potential coverage limitations and advising against reliance on the association's guarantees.
Prohibited Practices
- Agents are strictly prohibited from using the association's existence to reassure claimants about coverage during insurer insolvency scenarios.
- Any promises regarding the association's protections must not be conveyed during the sales process.
Claim Scenarios
- Benefits that claimants can recover depend on the coverage limits set by the Guaranty Association, which may vary with the type of insurance. For example, beneficiaries of a $250,000 life insurance policy would typically receive up to $250,000 based on association limits.
Additional Insights
- The Insurance Guaranty Association serves to protect policyholders against losses due to insolvency of their insurance companies.
- All communications regarding the Guaranty Association's protections must be carefully regulated to maintain compliance with legal standards.
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Description
Test your knowledge with flashcards focused on the Life and Health Insurance Guaranty Association. This quiz explores key concepts, such as the association's accounts and advertising regulations regarding insurance. Perfect for anyone studying insurance concepts and practices.
