New Jersey Life Producer Law Practice Test

What is the maximum death benefit amount for which the Guaranty Association is liable when managing an insolvent insurer?

1. $50,000 per person

2. $100,000 per person

3. $200,000 per person

4. $500,000 per person

The correct answer is: $100,000 per person

The Guaranty Association provides a safety net for policyholders in the event that an insurer becomes insolvent, ensuring that individuals are protected to a certain extent. In New Jersey, the maximum death benefit amount for which the Guaranty Association is liable is indeed set at $100,000 per person. This reflects a balance between offering substantial protection to policyholders while also managing the financial load on the Guaranty Association. This limit is significant as it emphasizes the importance of consumers being aware of the risks associated with insurance companies, as well as the coverage limits that back them. The maximum amount ensures that in the unfortunate event of an insurer’s insolvency, beneficiaries can receive a reasonable proportion of their expected benefits, thus providing some peace of mind to policyholders. Understanding this limit is critical for both insurance producers and consumers in navigating the protections available under state law, as it directly impacts decisions related to insurance purchases and risk management.