How is life insurance insured or guarenteed?
Life insurance companies may insure or guaranty your life insurance
policy in one of two ways. First, a life insurance company may buy
reinsurance to re-insure the losses they may pay out for their book
of life insurance business in any given year. Also, licensed life
insurance companies contribute to life insurance guaranty funds. A
life insurance guaranty fund is a form of protection providing a
fund that pays out money to policyholders if their life insurance
company is licensed in the state, and unable to meet their
financial obligations. Some life insurance guaranty funds pay out
$100,000 -$500,000 per policy depending on the state, and the
amount of life insurance you have. Many states pay out up to
$300,000 per life insurance policy.
Life insurance protection comes in many forms,
and not all policies are created equal. It depends on various
factors. While the death benefit amounts may be the same, the
costs, structure, durations, etc. vary tremendously across the
types of policies.