Final answer:
Discussing the coverage of a life insurance policy by the New York Life and Health Insurance Guaranty Association assures the client of protection against the insurer's insolvency, acting as a safety net. It mitigates concerns about financial loss and can influence the decision when purchasing insurance, despite the concept of moral hazard.
Step-by-step explanation:
Pointing out to a prospective client that the life insurance policy you are presenting is covered by the New York Life and Health Insurance Guaranty Association is a method to provide assurance to the policy buyer. This association acts as a safety net for policyholders by ensuring they are protected in case the insurance company fails to meet its obligations due to insolvency. The insurance functions by pooling regular payments from policyholders, then compensating a member who suffers a significant financial loss from an event covered by the policy.
However, one should be aware of the concept of moral hazard, which suggests that having insurance might lead some to be less cautious about preventing the insured event from occurring. Nonetheless, the presence of a Guaranty Association gives an additional layer of protection and can be critical in a client's decision-making process when selecting a life insurance policy. It's akin to a money-back guarantee, offering a promise to the policyholder that they will not lose their coverage even if the insurer fails financially.