Michigan Life & Health Study Guide

National material teaches the life and health guaranty association as a single tidy list of caps. Michigan’s version is two lists doing two different jobs, and confusing them is the most reliable way to get the arithmetic wrong. MCL 500.7704(6) sets the per-benefit caps. MCL 500.7704(7) then sets aggregates that constrain those caps in combination. Learn the split before you learn the numbers, and the rest of this chapter — the exclusions, the sales rule, and the state’s continuing-education regime — falls into place around it.

Subsection (6) prices the benefit; subsection (7) caps the person

Every per-benefit cap in Michigan sits in MCL 500.7704(6):

• Life, death benefits — $300,000, but not more than $100,000 in net cash surrender and net cash withdrawal values ((6)(b)(i)). Both figures live in the same subdivision: the $100,000 is a sub-limit, not a separate bucket.
• Health other than basic hospital, DI or LTC — $100,000, including net cash surrender and withdrawal values ((6)(b)(ii))
• Annuity — $250,000 in present value, including net cash surrender and withdrawal values ((6)(b)(iii))
• Disability income or long-term care — $300,000 ((6)(b)(iv))
• Basic hospital, medical and surgical — $500,000 ((6)(b)(v))
• Governmental 401(k), 403(b) or 457 unallocated annuity — $250,000 per participant ((6)(c))
• Structured settlement annuity — $250,000 per payee, in the aggregate ((6)(d))
• Unallocated annuities — $5,000,000 per contract owner or plan sponsor ((6)(e))

Three aggregates then sit on top, and a candidate who has learned only the (6) list will double-count without them:

• $300,000 per life, across the life, other-health, annuity and DI/LTC caps plus the governmental and structured-settlement caps (MCL 500.7704(7)(a))
• $500,000 for basic hospital, medical and surgical (7704(7)(b))
• $5,000,000 for one owner of multiple nongroup life policies, “regardless of the number of policies and contracts held by the owner” (7704(7)(c))

One measurement rule governs all of it: the limits are applied before subrogation and assignment rights are applied, and before assets attributable to covered policies are applied (MCL 500.7704(8)).

Two figures worth over-learning, and one flat exclusion

$500,000 is the first. Summaries routinely compress Michigan’s health caps into “$100,000,” but basic hospital, medical and surgical has its own cap at (6)(b)(v) and its own matching aggregate at (7)(b) — Michigan’s own statutory phrase, and a number that exists nowhere else in the list.

$5,000,000 is the second, and it is the one that separates careful readers from memorisers, because it appears twice meaning two different things. At 7704(6)(e) it is the cap for unallocated annuities per contract owner or plan sponsor. At 7704(7)(c) it is an aggregate for one owner of multiple nongroup life policies. Same figure, different subsection, different job.

Then the exclusion a producer has to actually say out loud to clients: Medicare Part C and Part D are not covered at all by the association (MCL 500.7704(5)(m)). If you are selling Medicare Advantage, the guaranty association is not standing behind it.

The neighbouring exclusions are worth a pass as well. Subsection (5) also removes exemplary and punitive damages, statutory interest, bad-faith claims and attorney fees ((5)(i)(iv)); self-funded plans, MEWAs, minimum-premium plans, stop-loss and administrative-services-only contracts ((5)(d)); and the nonguaranteed portion of a variable or separate-account product ((5)(a)).

Michigan is narrower than the model on sales inducements

Here the national answer is more prohibitive than the state one, which is an unusual shape for an exam question and exactly why it gets written. The NAIC model bans using the association’s existence to induce a sale. Michigan does not.

What Michigan prohibits, at MCL 500.2005(i), is misrepresenting the nature or extent of the coverage the association affords — by omission or by incorrect statement of a material fact — as an unfair method of competition. There is no separate advertising ban: Chapter 79 contains none, and the old MCL 500.7719 was repealed in 1990.

So read the stem for what the producer actually did. Mentioning the association is not the violation. Misdescribing it is.

Continuing education — 24, 3, and two carryover exceptions

MCL 500.1204c(2) requires 24 hours per two-year period, at least 3 of them in ethics. Note what the statute does not do: it does not multiply. That is one requirement no matter how many lines of authority you hold, not one per line.

Carryover is where the detail sits. Up to 12 hours of surplus credit carries into the next period — with two exceptions at MCL 500.1204c(13)(a)-(c): ethics hours may not be carried, and duplicate completions of the same course may not either.