West Virginia State Life Insurance Practice Exam

The West Virginia Life and Health Insurance Guaranty Association is funded by:

1. State taxes

2. Admitted insurance companies through assessments

3. Federal grants

4. Policyholder fees

The correct answer is: Admitted insurance companies through assessments

The West Virginia Life and Health Insurance Guaranty Association is primarily funded by assessments levied on admitted insurance companies operating within the state. This mechanism ensures that member insurers contribute to a financial pool intended to protect policyholders in the event that an insurance company becomes insolvent. By requiring these assessments, the association can provide necessary benefits, such as paying valid claims and maintaining coverage for policyholders, even if a member insurer is unable to fulfill its obligations. This funding method is essential for maintaining the stability and trust in the insurance market, as it safeguards consumers against losses resulting from insurer insolvency. The other options do not align with the operational funding structure of the Guaranty Association, as it does not rely on state taxes, federal grants, or fees from policyholders to sustain its financial backing. Instead, by focusing on assessments from admitted insurers, the association ensures that the industry collectively supports the security of policyholders.