Life insurance companies are regulated by federal and state laws, so you’ll want to make sure you understand those laws before you purchase a policy. While most personal policies are regulated by state laws, employee sponsored policies are regulated by federal law, which trumps state laws. Also, depending on which state you live in, your marital status can affect life insurance policies.
If you’re married and live in a community property state, you’re both equally entitled to the life insurance policy. Also, your income will not determine your premium rate, whether you’re single or married. In fact, income is never used, and in most states, your age and gender will determine your premium rate.
State laws can be tricky for people who participate in the Medicaid program because it has a $2,000 cap on assets, which includes life insurance. Some states have a higher limit on assets so, if you participate in the Medicaid program, be sure to familiarize yourself with the Medicaid law before buying a life insurance policy.
If for whatever reason you aren’t able to make your monthly premium payment, there’s no need to fret. There are consumer protection laws in place that prevent insurers from canceling your policy. If you’re in a situation where you can’t make a payment, notify the insurance company so that you can make payment arrangements.
There are many state laws to be aware of, which can make understanding life insurance tricky. Now that you have reviewed some of the basics, test your knowledge by taking the following quiz.