State RegulationsMI specificDifficulty 3/5
A Grand Rapids investor owns several nongroup individual life insurance policies issued by one insolvent Michigan insurer. How does the aggregate protection of the Michigan Life and Health Insurance Guaranty Association work for the nongroup life benefits of this single owner?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.C.L. 500.7704 includes a special aggregate for a single owner of multiple nongroup life policies with one insolvent insurer: $5,000,000. This recognizes owners of large face-amount coverage, whose combined policies would otherwise collapse into the ordinary $300,000 per-life aggregate. The provision is narrow, however; it addresses nongroup life policies of one owner and does not raise the caps for annuities, health benefits, or cash values.
Why the other options are wrong
- A) The ordinary $300,000 aggregate does not control where the multiple nongroup life policy provision applies.
- B) $100,000 is the cash surrender value cap, and stacking per-policy amounts without limit contradicts the aggregate structure.
- C) $500,000 belongs to basic hospital, medical, and surgical benefits and has no application to multiple life policies.
Memory hook
Many nongroup policies, one owner: a five million ceiling.