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In the United States, life insurance is heavily regulated at the state level, meaning that each state has its own insurance laws. As such, policy differences can affect you if you move between states. State legislators set broad policies for state insurance departments, and advisory bodies like the National Association of Insurance Commissioners (NAIC) provide opportunities to pool resources and discuss issues related to life insurance regulation, since some state regulations affect life insurance rating rules.
It's important to note that state insurance regulation involves several key functions, including market regulation to protect the consumer from overpriced policies. Regulating the market helps control how life insurance coverage availability is offered to high-risk individuals.
Other key functions of state regulations include agent and broker licensing to maintain a high caliber of insurance professionals and consumer services that give people options for resolving insurance issues and comparing their options. Best of all, many states give policy holders inalienable rights. These rights can't be taken away from consumers and ensure that everyone remains covered as long as they continue to pay their policy premiums.
In certain states, regulations make it easier to purchase low-cost plans that provide basic coverage. Other states might allow the cost of premiums to increase to the point that life insurance is too expensive for most residents. These differences may seem shocking to someone shopping around for life insurance, especially when you're trying to balance cost with coverage.
State laws come into play both when you purchase your policy and when it's time to make a claim. You have a right to certain types of provisions that help you make the best decision for you and your family. The "free look" provision, for example, gives you a specific amount of time to terminate your contract without penalty after purchasing a policy. This provision, however, varies from state to state.
Understanding how state laws can affect your premiums is important before making a big move or purchasing additional coverage. Know your rights and educate yourself on the factors that can greatly influence your premium rates, such as living a dangerous lifestyle, your age and gender, and your current health status. This isn't automotive insurance you're purchasing. It's literally about life and death, so you want to be as knowledgeable about your options as possible to secure adequate coverage that will see your loved ones through a difficult time.