New Jersey Life and Health State Practice Exam

The New Jersey Life and Health Insurance Guaranty Association is primarily:

1. Voluntary for member companies

2. Funded by assessments on member companies

3. Government funded

4. Independent of member companies

The correct answer is: Funded by assessments on member companies

The New Jersey Life and Health Insurance Guaranty Association is primarily funded by assessments on member companies. This association acts as a safety net to protect policyholders in the event that an insurance company becomes insolvent. Member companies are required to contribute to the funds through regular assessments, which are collected based on their premium volume. This structure ensures that there are sufficient resources available to pay claims and provide benefits to policyholders when needed. By providing a fund that is generated from the insurance companies operating in the state, the association helps maintain consumer confidence in the insurance market, ensuring that policyholders will not face total loss if their insurer fails. This system promotes stability in the industry while safeguarding consumer interests, which is a critical function of any state guaranty association.