Final answer:
The Indiana Life and Health Insurance Guaranty Association serves to protect policyholders in case an insurance company becomes insolvent, by ensuring that policy obligations are fulfilled up to a certain limit.
Step-by-step explanation:
Purpose of Indiana Life and Health Insurance Guaranty Association
The purpose of the Indiana Life and Health Insurance Guaranty Association is to provide a safety net for policyholders in the event that their life or health insurance company becomes insolvent. This organization steps in to protect the residents of Indiana by ensuring that the obligations of insurance policies are met, even when an insurance company fails financially. Insurance companies that operate in Indiana are required to be members of this association, and they contribute funds to support its operations. The association helps to maintain public confidence in the insurance industry by offering a guarantee that benefits will be paid out up to a certain limit when an insurance company cannot meet its obligations.
A life insurance company typically has a considerable amount of cash on hand after paying out policies, which can be lent to others or used to allow policyholders to borrow against their policy, based on premiums paid. It's important to note that any loan from the insurance company comes with the expectation that it must be repaid with interest.