State RegulationsTX specificDifficulty 2/5
A Texas agent's marketing flyer tells prospects that their benefits are 'fully protected by the Texas Life and Health Insurance Guaranty Association' if the insurer fails. Why is this a problem?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under TIC 463.101-.205, it is illegal to use the existence of the Association or the fact that coverage may be available from it for the purpose of sales, solicitation or inducement to purchase insurance. Accuracy is not a defense, and adding the coverage limits does not cure the prohibited use. In addition, the word 'fully' overstates the protection: benefits are capped and coverage requires the insured to be a Texas resident on the date of liquidation. The misuse supports TDI discipline under TIC 4005.101-.102.
Why the other options are wrong
- A) The prohibition applies regardless of the insurer's financial condition at the time the statement is made.
- B) Disclosing the coverage limits does not authorize using the Association as a selling point.
- D) The use itself is prohibited, so the accuracy of the statement does not make it lawful.
Memory hook
Never sell with the Guaranty Association — using it as a selling point is itself illegal.