State RegulationsTX specificDifficulty 2/5
A licensed Texas agent tells a prospect, Buy this annuity now, and if the company ever fails, the Texas Life and Health Guaranty Association will pay your claim up to its limits. Why is this statement a compliance problem?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under TIC Chapter 463, it is illegal to use the existence of the Texas Life and Health Guaranty Association, or the fact that coverage may be available under it, for the purpose of sales, solicitation, or inducement to purchase insurance. The Association is a post-insolvency safety net, not a marketing feature, and the department treats using it as a closing tool as a violation. An agent may answer a client's direct question about the Association factually, but may not raise it to make the sale.
Why the other options are wrong
- A) The Association does cover annuities, including the present value of an individual annuity up to a per-life limit.
- B) The Association plays no role in approving solicitations or insurers; that is the department's function.
- C) Accuracy does not cure the violation; the prohibition is on using the Association to sell or induce, not on misstating its limits.
Memory hook
The Guaranty Association is a safety net, never a sales pitch.