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

• 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 exists to protect insureds in insolvency.

Answer: (A)

The key idea is that the Life and Health Insurance Guaranty Association is a safety net for policyholders when an insurer becomes insolvent, funded through mandatory assessments paid by all member insurers. Membership is not optional; insurers licensed in the state are required to join the association. That obligation means the statement about an insurer having the option to become a member is false. The association’s purpose is to protect insureds in insolvency, and it provides coverage up to set limits for life and health policies, with claims funded by the combined assessments of all member companies.