Hawaii Insurance License Practice Exam

What is the Guaranty Association's maximum liability for the return of unearned premiums?

1. $5,000 per policy

2. $10,000 per policy

3. $25,000 per policy

4. $50,000 per policy

The correct answer is: $10,000 per policy

The correct answer reflects the established maximum liability of the Guaranty Association for the return of unearned premiums, which is set at $10,000 per policy. This limit is in place to provide a safety net for policyholders in the event that their insurance company becomes insolvent. The Guaranty Association steps in to help protect consumers by ensuring that they can recover unearned premiums, which are the portions of the insurance premium that have not been used to provide coverage and would typically be refunded if a policy is canceled. This limit is particularly significant for policyholders because it helps to instill confidence in the insurance market, knowing that there is a financial mechanism designed to mitigate the risks associated with insurer insolvency. The figure of $10,000 has been chosen to balance the need for consumer protection with the financial realities of the Guaranty Association's obligations, allowing them to manage their resources while providing assistance where necessary.