5 Tips on Locating a Life Insurance Company Home Office

5 Tips on Locating a Life Insurance Company Home Office

What is the best way to locate the home office of a life insurance company? There are many situations where it is necessary to locate the home office of an insurer. One place to start is a local phone book and the number of the company’s local office. This office, in turn, can often refer callers to the address of their home office. Here is a list of some alternatives: 1. Many company websites have…

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Things to Think About Before You Switch to a New Life Insurer

Things to Think About Before You Switch to a New Life Insurer

A policy holder who is insured by a financially troubled insurer may consider switching insurers. Whether this is a good idea depends on many factors, including the type of policy and the method of switching. In most cases, surrendering an ordinary cash value life insurance policy with the intention of investing cash values more safely elsewhere and acquiring a new policy from a more financially stable company is inadvisable. A policyowner who hangs onto the…

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2 Major Protections for Life Insurance Customers

2 Major Protections for Life Insurance Customers

So far, no one has lost any death benefit from life insurance. In general, policyowners are protected in two ways. First, smaller insolvent companies are taken over by larger, more secure companies that assume the obligations of the smaller company to its policyowners. Second, in the event, an insurer fails (and its obligations are not assumed by another company), policyowners have one primary source of protection, the state “guaranty fund.” To help protect policyowners in…

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The Basics of Life Insurance Underwriting

The Basics of Life Insurance Underwriting

Life insurance companies each have their own extensive policy and procedure manuals they are supposed to follow in determining whether or not to issue an individual life insurance policy and in pricing that policy. The insurer’s underwriters typically use a combination of factors that experience shows equates with the risk of death (and premature death).  They include the applicant’s answers to a series of questions such as: 1. age; 2. sex (except in several states…

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Federal and State Laws and Regulations Affecting Life Insurers

Federal and State Laws and Regulations Affecting Life Insurers

Insurance companies are entrusted with huge amounts of money—in the $50 billion to $200 billion range in the case of the largest life insurance companies (e.g., Prudential, Metropolitan Life, and New York Life). The insurance business thus is regulated in an effort to ensure that the public and its funds are dealt with honestly, and to prevent the insurers from taking unwarranted risks with the money they are holding. The primary purposes of insurance regulation…

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2 Types of Reinsurance in the Life Insurance Industry

2 Types of Reinsurance in the Life Insurance Industry

A number of different types of reinsurance are available. The two main types are proportional reinsurance and nonproportional reinsurance. Proportional Reinsurance Proportional reinsurance is an arrangement where the reinsurer takes a share of each loss the insurer incurs. This is also sometimes referred to as quota share reinsurance— the risk is allocated by a specified percentage that the ceding company and reinsurer will assume. The capital held by the insurer might only allow it to…

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4 Reasons for Reinsurance in the Life Insurance Industry

4 Reasons for Reinsurance in the Life Insurance Industry

Reinsurance refers to situations where insurance companies insure against losses they may incur. Insurance companies have a limited amount of capital and to protect this capital they will often cap the losses they may incur by purchasing reinsurance. Typically, the smaller the insurer the more reinsurance they will buy. Reinsurance also can reduce the risk facing a company when policies are issued with a high probability of lapse or surrender, as in policies whose premiums…

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Mutual Life Insurance Companies vs. Stock Companies Explained

Mutual Life Insurance Companies vs. Stock Companies Explained

Most life insurance companies are either stock or mutual companies. Fraternal benefit societies provide a small fraction of life insurance coverage, and the Department of Veterans Affairs also provides coverage for veterans under six different insurance programs and it oversees three other life insurance programs for members of the uniformed services. Among mutual and stock companies, the vast majority are stock companies—1,076, or 92 percent of the industry, in 2002.  A mutual company is a…

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The 5 Major Life Insurance Rating Agencies Explained

The 5 Major Life Insurance Rating Agencies Explained

To serve the best interests of their clients, as well as to protect themselves from potential malpractice claims, planners should research insurance companies using an analytical methodology similar to the due diligence process required for limited partnership and similar investments. This process should include essentially three steps: 1. An assessment of the company’s rating by the major rating services 2. An evaluation of the general characteristics and financial information of the company 3. A review…

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How to Choose the Right Life Insurance Company

How to Choose the Right Life Insurance Company

Until the 1980s and 1990s, most consumers rarely seriously questioned the financial strength of most life insurance companies. Financial strength was usually only a cursory consideration when selecting life, annuity, and health insurance policies. However, the collapses of the junk bond and real estate markets in the 1980’s had an unprecedented impact on the financial stability of many insurance companies. Thirty-four life and health insurers with total assets of $1 billion went bust over an…

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