Are your Annuities SAFE? The truth about annunities
and other insurance products..
Dateline: September 17, 2008 Sarasota Florida
If you own an annuity
you have to be wondering is it SAFE.
With the government takeover of insurance giant, AIG, what you should be wondering
is the insurance I own safe money or risk money.
For 100's of years, insurance investments ( Annuities, Life Insurance, Property
and Casualty Insurance ) have been considered safe money.
Today, the safety of these companies has been rattled to their foundation.
You, as an investor and consumer, need to review your investments in these
companies.
Insurance policies of all kinds are "guaranteed" by the insurance
company itself. So the financial well being of the company is paramount.
Traditionally to check your insurance company out you would first look at
how the rating agencies rate these companies. Standard and Poor's, Moody's,
and AM Best are the primary rating agencies for insurance companies. While there
ratings are helpful, and as we have found out this year, they may not be an accurate
look at the companies ability to pay you.
Next, most state insurance agencies have regulations which require insurance
companies to have a certain amount of assets on hand to cover "losses"
incurred by insurance companies. If your state allows the insurance
company to do business within your state, then at this time, they must "currently"
be meeting
these requirements. The problem with this is that by time the state tells
you the company is not meeting this requirement, it may be too late.
To protect you, each state regulator my have at their disposal
a state guaranty fund. The fund may help protect insurance contract owners (you)
depending
on the policy and/or its dollar amount in the event of an insurer failure.
If an insurance company becomes unable to pay claims, the guaranty fund will
provide coverage, subject to certain limits, similar to the FDIC's coverage
for bank accounts.
HERE'S THE CATCH!........ "subject to certain limits".
Subject to certain limits means that each state has an upper limit on how
much per person they will cover. If your state has a $200,000 limit and
you have $300,000 with one insurance company you may have a problem. $100,000
of your annuity may not be covered.
Does this mean you will lose this additional money? It depends on how
YOUR state regulator deals with the failure. Sometimes the regulators will
merge the failed company into a stronger insurer. In this case your annuity would
be taken over by the new company in whole (usually at a nominal interest rate.)
But if the company could not be merged, then you may lose the money in excess
of the "guaranty funds" limit.
How do you protect yourself?
You protect yourself the same way you would if you own Certificates of Deposit.
Knowing that the upper limit on FDIC insurance is $100,000 you never put
more than $100,000 in any one bank. With insurance policies and annuities you
need to know what your states' upper guaranty fund limit is and not invest anymore
than that amount in any one insurance company. (remember: interest is
also part of that limit so always invest an amount that takes into consideration
the interest).
States usually try to keep their "guaranty funds" quiet. Brokers
and insurance agents are not allowed to sell you insurance based on the guaranty
fund. So be prepared that it may take a little work on your part to determine
what the state guaranty fund coverage is.
If you feel that you are not capable of reviewing your policies on your own,
contact us at the link below and we will inform you how we can help you with
your review
Contact Annuity Reviews