State RegulationsTX specificDifficulty 1/5
A Texas insurer that issued a life insurance policy to a Houston resident is declared insolvent and placed into liquidation. Under the Texas Life and Health Guaranty Association law, what is the maximum amount the Association will pay on that insured's life death benefit?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under TIC Chapter 463 (the Texas Life and Health Guaranty Association Act), the Association's coverage for a life insurance death benefit of an insolvent member company is capped at $300,000 per insured life. Coverage is also conditioned on the policyholder being a Texas resident on the date of liquidation. Practically, an agent should never quote the Association's limits as a selling point, because using the existence of the Association to sell, solicit, or induce the purchase of insurance is illegal under the same chapter.
Why the other options are wrong
- B) $100,000 is the Association's cap for net cash surrender and withdrawal value, not for the death benefit.
- C) $250,000 is the cap for the present value of an individual annuity, not for a life insurance death benefit.
- D) $500,000 is the health benefit cap for basic hospital, medical-surgical and major medical coverage, not for life insurance.
Memory hook
Guaranty life: $300K death, $100K cash, $250K annuity.