Pennsylvania Life and Health Insurance Exam Practice Question
Which of the following protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail financially?
Correct Answer: A
Rationale: State Guaranty Associations serve as safety nets for policyowners, insureds, and beneficiaries, ensuring that they receive compensation if an insurer becomes insolvent. These associations are established by state law and provide financial protection, which is crucial for maintaining trust in the insurance system.
The National Association of Insurance Commissioners (NAIC) primarily focuses on standardizing regulations across states but does not provide direct financial protection. The Securities and Exchange Commission (SEC) oversees securities markets, not insurance contracts, while Insurance Rating Services evaluate insurer stability but do not offer financial guarantees. Thus, only State Guaranty Associations fulfill the role of protecting individuals when insurers fail.
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