Which term describes the insurer's ability to meet short-term payout needs for policyowners?

• A. Inflation protection
• B. Underwriting
• C. Mortality
• D. Liquidity

Answer: (D)

Liquidity is the insurer's ability to meet short-term payout needs. It means the company has enough cash or assets that can be quickly converted to cash to pay claims, policy surrenders, and policy loans as they come due. This capability relies on solid reserves, a portfolio of liquid investments, and access to funding if sudden payouts arise. Inflation protection is about preserving purchasing power, underwriting is the risk assessment process, and mortality relates to expected death rates used in pricing—none describe the system's readiness to pay claims now. So liquidity best fits the concept of meeting immediate payout needs.