Is your Life Insurance Policy Protected?

Whether or not your life insurance policy is protected or not is a topic of great concern for many individuals today. Who wouldn’t be concerned with all of the hype in the media and the uncertainty of the resent bailouts for banks and insurance companies alike. However, rest assured that insurance companies are regulated by their state and that safety precautions are taken in an effort to protect consumers. There are many levels in which insurance companies are evaluated and regulated in order to protect policy holders.

National Association of Insurance Commissioners

The National Association of Insurance Commissioners (NAIC) is one of the companies that are responsible for regulating insurance requirements and providing protected life insurance plans to consumers.  They are a nonprofit organization and help create the regulations and rules that insurance companies must comply with. Most of the rules and regulations developed must be approved by state legislatures before they can be utilized and the primary focus is to protect the insured. Insurance companies are required to take a portion of the premiums paid and put them into a reserve in order to ensure the death benefit will be payable.

Same State Rescues

In addition to state and some federal regulations, in the off chance that an insurance company does become insolvent and it is in turn liquidated, other local insurance companies within the same state will rescue the failing company. It is the responsibility of other, stronger insurance companies to assist failing insurance companies in the same state. State regulators can, in fact, tell life insurance companies that they must help the struggling insurance company; thus providing protected life insurance plans for policy holders and making sure that claims are paid.

Guaranty Funds

Finally, if all else were to fail, there is added protection for consumers called state guaranty funds. State guaranty funds are much like FDIC insurance that protects banks; state guaranty funds ensure protected life insurance plans. All states have state guaranty funds that are set aside in the event that an insurance company fails. The guaranty fund provides protection and coverage, albeit with limitations, but the state guaranty fund is another form of protection that should make you feel better about the safety of your protected life insurance.  For your peace of mind, as an added measure, check up on your insurance company or research potential insurance companies before purchasing a plan.

Checking Insurance Company Ratings

Insurance companies are rated by Standard & Poor’s Corp, A.M. Best Co.; Fitch, Inc.; and Moody’s Investors Services. These insurance companies are rated on many factors, such as; earnings, capital, operating leverage, liquidity, investments, reinsurance programs, integrity and overall experience. In simple terms, they are rated on how sound they are, whether they make good decisions with client premiums and how likely it will be that they can pay claims. These ratings can be found online and it is quite simple to investigate insurance companies. For example, simply go online and type in “A.M. Best Rating” for a specific insurance company to find their current rating and status.

The history of the life insurance industry has been strong and it remains as such today even through economic uncertainties. Consumers can rest assured that their life insurance policies are secure because their protected life insurance policies are not just ensured by the insurance company; the insurance company is obligated to follow all requirements, rules and regulations set forth by their individual states as well as any guidelines required by the federal government. In addition to those responsibilities, other resources are maintained by the state to protect American consumers. Rest assured that your life insurance investments are well protected.

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