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Can anyone tell me what ELB will do if one of the instances fails health check?

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The load balancers of ELB monitors the health of registered targets and check for unhealthy targets. It stops routing traffic to unhealthy targets and wait for the ASG to replace it. It only resumes routing traffic for that target only if the target is healthy.

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You can watch this video to understand ELB and creating ELB:

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