What is one of the purposes of the Guaranty Association?

The Guaranty Association is primarily established to protect policyholders in the event that an insurance company becomes insolvent and is unable to fulfill its financial obligations to policyholders. This means that if an insurer goes bankrupt and cannot pay claims or refunds, the Guaranty Association steps in to ensure that the affected policyholders still receive compensation for their valid claims, up to certain limits defined by state law. This function is crucial for maintaining consumer confidence in the insurance industry, as it provides a safety net for policyholders, assuring them that they will not lose their premiums or coverage due to the failure of the company.

The other options do not align with the primary role of the Guaranty Association. For instance, managing state health insurance programs, regulating premium rates, and handling legal disputes between insurers fall under different regulatory or operational functions within the insurance industry and are typically managed by state insurance departments or other regulatory bodies, rather than the Guaranty Association itself.