State RegulationsNC specificDifficulty 1/5
While selling an individual life policy in Durham, an agent tells the prospect that she does not need to worry about insurer insolvency because the Life and Health Insurance Guaranty Association stands behind the policy. Is this permitted?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under G.S. 58-62-86(a) and (b), no person — including a member insurer, its agents, or affiliates — may use the existence of the Association in any sales solicitation or inducement to purchase insurance. Instead of sales pitches, member insurers satisfy the statute by delivering the Commissioner-approved summary document about the Association before or at policy delivery. Using the Association as a selling point is itself a violation.
Why the other options are wrong
- A) The prohibition covers any use of the Association's existence to induce a sale under G.S. 58-62-86(a); making the statement orally does not cure the violation.
- B) Membership in the Association is required, but membership is not a defense to using the Association's existence as a sales inducement under G.S. 58-62-86(a).
- D) Promising the Association will pay a shortfall is still a prohibited sales use of the Association's existence under G.S. 58-62-86(a), not an authorized alternative.
Memory hook
Guaranty Association is a safety net, never a selling point.