State RegulationsPA specificDifficulty 3/5
A policyowner holds a variable annuity whose separate-account values have grown well beyond the guaranteed minimum. If the issuing insurer becomes impaired, which statement is correct under 40 P.S. § 991.1717 and the rules of the Pennsylvania Life and Health Insurance Guaranty Association?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
The Pennsylvania Life and Health Insurance Guaranty Association protects guaranteed dollar benefits — for annuities, the present value of guaranteed benefits up to $250,000 per individual under 40 P.S. § 991.1717. Non-guaranteed portions of variable contracts, including amounts that depend on separate-account investment performance, fall outside the guaranty umbrella because they are market values, not guaranteed obligations. The association likewise may not be used in advertising or solicitation to imply extra protection.
Why the other options are wrong
- A) Guaranty protection does not extend to market-driven separate-account gains; it stops at the guaranteed benefits and the applicable cap.
- B) Variable status does not confer full coverage; the non-guaranteed portions are expressly outside the association's protection.
- C) The association does cover guaranteed annuity benefits up to the $250,000 present-value limit; it is not a pay-nothing regime.
Memory hook
PLHIGA guarantees the promise, never the market: separate-account gains stay exposed.