State RegulationsMI specificDifficulty 3/5
A producer in Sterling Heights explains the Michigan Life and Health Insurance Guaranty Association to a client. Which statement could the producer accurately make?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under the Michigan Life and Health Insurance Guaranty Association Act, M.C.L. 500.7702, MLHIGA exists to protect Michigan resident policyholders when a member insurer becomes insolvent, and it is funded by assessments levied on the member insurers rather than by tax dollars. It provides bounded protection under the caps of M.C.L. 500.7704, so overstating it is unlawful: misrepresenting guaranty coverage in sales material violates M.C.L. 500.2005(i) of the Michigan Insurance Code.
Why the other options are wrong
- B) Guaranty protection is capped by benefit class and aggregate, so it is not a promise against every loss.
- C) MLHIGA is a Michigan-created association of member insurers, not a federal supervisory agency.
- D) Bounded guaranty protection is not a substitute for evaluating carrier financial strength before the sale.
Memory hook
Member insurers fund the safety net; it is not a no-risk promise.