Life insurances
How Does Life Insurance Work in the United States?
Life insurance is an essential tool in protecting your family’s financial future. This may be your children, your parents, your spouse, or any other member of your family who is financially dependent on you. In the event of your death, the insurance policy pays money to your beneficiaries.
In the United States there is no entity or federal law that regulates the activity of life insurance. According to the Insurance Information Institute, (or Insurance Information Institute, for its original name in English) this industry is regulated at the state level, that is, each state has the power to establish its own rules and conditions for companies with license or certification to offer insurance in your state.
What are the different types of life insurance?
In the United States, life insurance can be separated into two large groups:
term life insurance; and permanent or whole life insurance.
Here’s how term life insurance works: Policies have a fixed, limited duration at the end of which coverage ends. Beneficiaries only receive the policy benefit if the person dies during the time the coverage was in force. One characteristic of the operation of these insurances is that the cost of the premium will probably increase if the client wants to renew for another period.
Within these insurance policies there are policies with coverage for one year, while others offer coverage for longer terms, 20 or 30 years, for example.
On the other hand, permanent life insurance covers the person throughout his life, permanently, as long as the premiums are paid without interruption. These work differently, since the value of the premium does not increase over the years.
What does an insurance company take into account when issuing a life insurance policy?
Insurers calculate the risk that each of their clients represents, and that is why they want to obtain as much personal information as possible from a potential client before granting insurance. That is why in the application they will ask you about your age, your general state of health, the diseases you suffer from and if you have habits considered harmful to health, such as smoking.
Your age can be decisive in life insurance. Companies recommend taking life insurance when you are young, to offer better rates.
Your profession or activity also influences the decision to insure you, since there are high-risk activities that endanger your life or integrity. People who engage in dangerous activities may have to pay much higher premiums, for example.
The issue of health is very important, since many insurance companies do not issue policies to people who have serious pre-existing health conditions. Patients of some varieties of cancer, carriers of HIV and other serious diseases in many cases cannot be insured.
For the same reason, some insurance companies require a medical exam before insuring a client with life insurance.
Each insurer will require specific information for their policies according to their needs. Fortunately, some of the largest insurance companies are located in the United States, thus offering a wide range of possibilities to consumers.
Good life insurance depends on the policy providing the right coverage for the right price, and it’s important that the company issuing it has a long history of strength and trust.
