Maryland Life and Health Insurance License Practice Exam

What is the primary purpose of the Life and Health Guaranty Corporation?

1. To provide life insurance against accidents

2. To protect policyholders from insolvency of member insurers

3. To regulate health insurance premiums

4. To sell life insurance products

The correct answer is: To protect policyholders from insolvency of member insurers

The Life and Health Guaranty Corporation serves a crucial function in protecting policyholders. Its primary purpose is to safeguard consumers from the risk of losing their insurance benefits in the event that a member insurance company becomes insolvent. This organization provides a financial safety net, ensuring that individuals with life and health insurance policies will still receive at least a portion of their benefits even if the insurer fails. This protection is particularly important because policyholders rely on their insurance coverage for essential life events, such as medical expenses, income replacement, and family security. By offering this layer of protection, the Guaranty Corporation helps to maintain public confidence in the insurance industry and encourages consumers to purchase and maintain necessary insurance coverage. In contrast, the other options do not accurately depict the organization's purpose. Providing life insurance against accidents, regulating health insurance premiums, and selling life insurance products are functions associated with insurance companies and regulatory agencies, rather than the protective role that the Life and Health Guaranty Corporation fulfills.