Washington Life Producer Practice Exam

What is an essential duty of the Life and Disability Guaranty Association?

1. Collect premiums from policyholders

2. Assess risks for new insurance policies

3. Provide consumer education

4. Ensure payment of claims for insureds

The correct answer is: Ensure payment of claims for insureds

The Life and Disability Guaranty Association plays a critical role in providing protection to policyholders in the event that their insurance company becomes insolvent. Ensuring payment of claims for insureds is a fundamental duty because it reinforces consumer confidence in the insurance system by safeguarding policyholders from financial loss associated with a failed insurance company. This means that if an insurer cannot fulfill its obligations to pay claims due to bankruptcy or insolvency, the Guaranty Association steps in to cover those claims up to certain limits. This protection helps to maintain stability within the insurance market and assures consumers that their life and disability insurance benefits will be honored, even in adverse circumstances. This essential function is central to the mission of the Guaranty Association, highlighting its importance in the insurance industry and to consumers.