What is the purpose of the Life and Health Insurance Guaranty Association?

The primary purpose of the Life and Health Insurance Guaranty Association is to protect policyholders against the loss of benefits when an insurance company becomes insolvent. This association acts as a safety net for consumers, ensuring that if an insurer is unable to meet its financial obligations, policyholders will still receive a portion of their coverage, up to certain limits defined by state law.

This protection is crucial in the insurance market because it helps maintain consumer confidence. The existence of this association discourages consumers from fearing the repercussions of an insurer's potential failure, making it easier for them to purchase coverage knowing there is a measure in place that safeguards their interests.

The other options relate to aspects of insurance that aren't directly the function of the Guaranty Association. For example, providing tax incentives or regulating premium rates does not fall under the association's responsibilities. The association does not engage in policy marketing; its main role is to ensure consumer protection in the event of financial insolvency within the insurance industry.