Is your Insurance Policy Safe?

[dollardaze]

With the problems of AIG, you may be wondering if your insurance policy is safe. According to the National Association of Insurance Commissioners, the insurance subsidiaries of AIG have always had enough capital and they weren't in any danger of being unable to pay their claims. The main reason why the company got into trouble was because it bought and guaranteed mortgages and mortgage securities in other subsidiaries. The company also has a plant to repay the government loan by selling assets, which means that if you have an AIG policy, it could be sold to another company.

You may be wondering if other insurance companies will have similar problems as AIG. As of now, there has been no emergence of other insurance companies caught up in the ongoing global credit crisis. If an insurer does go under, and could not pay its claims, the regulator in that company's home state - normally the state insurance commissioner would start rehabilitation. If this process would fail, the company would then be liquidated and claims would then be paid - up to a certain limit - by a guaranty agency in each state. This money comes from companies that are still doing business in each state, and the limits vary somewhat by state. There are no limits on workman's compensation.

If a property/casualty company would fail, its policies are normally cancelled and the policyholder can get a new one from another company. The guaranty covers those claims that are in process but have not yet been paid.

In the case of life insurance, or annuity policies the state regulators normally try to transfer policies that are in force to another company, and also transfer the failed company's assets with enough money from the guaranty fund to ensure the new company can pay any claims from the failed company(at least up to the limits of the guaranty company). Usually there are enough assets in the company that has failed for the new company to take it over with the same benefits and the same premium.

The subsidiaries of AIG are not in rehab or liquidation, some may be sold to other companies which will then take over their policies, with the same terms as those cannot be changed. However, the new companies can raise the premiums or fees or make some other changes. The policyholder can then stay with the new company or can cancel the policy.

With auto, home, and term life insurance it's pretty easy to switch companies, but people that had a level-term policy may then have to pay a higher premium because of age, or poor health than when they took the policy out. It's harder to replace a whole or universal life policy, as they are complicated policies and the policyholder may have to pay surrender charges if they cancel, and big sales commissions which are often hidden, when they buy a new policy. The costs may also rise if they are older or in poor health.

There are predictions that many AIG customers will be urged to change companies by other agencies since AIG has had these problems, but experts are urging the policyholders to wait and see what happens, because if action is taken now, they could incur a significant loss in most situations, and in most cases won't lose anything by waiting a month or two.

It's better, the experts are saying, to have a life insurance policy across several different companies if you have a large policy, instead of having a monster death benefit in just one company. This way you have some added protection, if your particular company should have financial difficulties down the road.

[carol b]

Well I just can't stand it if they have the funds then why bail them out. I pay my premiums and my mortgage payments. So why do you or I suffer. I am tired of bailing out big bussiness and then watching my neighbor loose his house or business. I don't see how they are helping the american people or the economy. Can somebody explain it please?