State RegulationsMI specificDifficulty 3/5
A policyholder owns several individual life and health policies with the same insolvent Michigan insurer. Under the Michigan Life and Health Insurance Guaranty Association Act, what aggregate protection applies to that person's covered benefits, and which benefit class is the exception?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.C.L. 500.7704 imposes a general aggregate cap of $300,000 per life per insurer insolvency on Michigan Life and Health Insurance Guaranty Association protection, with basic hospital, medical, and surgical benefits as the exception, carrying their own higher cap of $500,000. This means a policyholder with several policies at one failed insurer cannot stack unlimited guaranty protection; coverage converges on the aggregate unless the claims fall in the basic hospital, medical, and surgical class.
Why the other options are wrong
- A) Reverses the structure: $500,000 is not the general aggregate, and disability income fits within the general framework rather than being its exception.
- B) $100,000 is the cash surrender value cap, not an aggregate, and cash values never carry a $500,000 cap.
- D) $250,000 is the annuity cap, not the general aggregate, and annuities never carry a $500,000 guaranty cap.
Memory hook
Three hundred general, five hundred for hospital.