An Explanation of the Operation of a Legal Reserve Life Insurance Company, underwriters of Fixed Annuities. Through devastating world wars, financial recessions and depressions, sweeping epidemics, earthquakes and fires, inflation and deflation, the life insurance industry has protected people to a degree unmatched by any type of financial institution in the history of the world. Today the annuity and life insurance industry provides more than a trillion dollars of death and income protection to American consumers. The State Insurance Department is a most vital department in each of our fifty states. Acting on its own state's insurance laws and regulations, it supervises all aspects of an insurance company's operation within that state. Required Reserves Ensure Payment of Policyholder Benefits. A large percentage of each premium dollar calculated by actuaries for each company goes into the policy owner's reserve fund. This policy reserve (Legal Reserve) fund is a liability to the life insurance company. The reserve liabilities are established as financial safeguards to ensure the company will have sufficient assets to pay its claims and other commitments when they fall due. Life companies that comply with the legal reserve requirements established by the state insurance laws are known as legal reserve life insurance companies. Every year all legal reserve life insurance companies submit annual statements to the insurance departments of each state in which they are licensed to do business. Additional Security Safeguards 1. Reinsurance: Nearly every legal reserve life insurance company further protects its policyholders by reinsuring part of the coverage with a life reinsurance company. 2. Surplus: The surplus is the amount by which a company's assets exceed its liabilities. The surplus protects the policyholders and third parties against any deficiency in the insurer's provisions for meeting its obligations. A legal reserve life insurance company simply does not close its doors and go out of business declaring that all policies are null and void. Legal reserve life policyholders enjoy personal security safeguards unknown by other types of business. Policyholders Protection Comes First Today, as has been the case for many years, it is unlikely for the policyowner of legal reserve life insurance companies to lose their policy benefits. Through strict state insurance department regulations, the establishment of many state insurance guaranty associations and because of the insurance industry's history of financial stability and public responsibility to operate in a manner not detrimental to the welfare of the community, your policy is secured by industry safeguards. You can freely reprint this article as long as the author, bio, and live links are left intact. |
