Which statement is FALSE regarding the Life and Health Insurance Guaranty Association?

Which statement is FALSE regarding the Life and Health Insurance Guaranty Association?

• A. An insurer has the option of becoming a member of the Association.
• B. The Association provides protection when a company fails.
• C. Membership in the Association is mandatory.
• D. The Association is designed to protect policyholders during insurer insolvency.

Answer: (A)

Membership in the Life and Health Insurance Guaranty Association is mandatory for every insurer licensed to issue life or health insurance in the state. The association is funded by assessments on its member companies, creating a pool that pays covered claims if an insurer becomes insolvent. This design ensures policyholders are protected during insurer insolvency. Therefore, claiming that an insurer has the option to become a member is false—the membership isn’t optional. The other statements align with how the guaranty association works: it provides protection when a company fails, and it is intended to protect policyholders during insurer insolvency.

Membership in the Life and Health Insurance Guaranty Association is mandatory for every insurer licensed to issue life or health insurance in the state. The association is funded by assessments on its member companies, creating a pool that pays covered claims if an insurer becomes insolvent. This design ensures policyholders are protected during insurer insolvency. Therefore, claiming that an insurer has the option to become a member is false—the membership isn’t optional. The other statements align with how the guaranty association works: it provides protection when a company fails, and it is intended to protect policyholders during insurer insolvency.