Legal Reserve System

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An Explanation of the Legal Reserve System
The economic challenges that we face in today's world have become second only to the great depression. The recent collapses of banks and large corporations in our country have made people scramble for a place that has security. We are asked often, "Where can we place assets that provide safety and security in uncertain times"? One place that should be considered is life insurance companies that have a Legal Reserve classification. Life companies that comply with the legal reserve requirements established by the state insurance laws are known as Legal Reserve Life Insurance Companies. Legal Reserve companies had their strongest showing of strength during the Great Depression of 1929-38 when some 9,000 banks suspended operations while 99% of all life insurance in force continued unaffected. Many people are not aware that it was not the government that bailed out the banking industry during the Great Depression; it was the U.S. insurance companies. In a financial collapse, the insurance companies would be second only to the U.S. government to fold. This is true because the government has taxing power, and can print money. Reinsurance, acquisitions, and mergers protected virtually all policy owners in the affected companies against personal loss. While thousands of banks closed across the United States, the insurance companies remained in force and continue to this very day. While there is no way of determining the total amount of capitalization of all of these combined legal reserve companies; I would venture to say that no other sector of the economy even comes close. Some of the companies that we recommend to our clients are hundreds of years old with billions of dollars in assets. Unlike any other enterprise where size is a major measure of financial stability, the legal reserve life insurance company's unique series of safeguards can make even the smallest company a tower of strength. In 1949 Mr. Leroy A. Lincoln, then

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