Transcripts

"Money File"-Ensuring Your Insurance & Annuities

SUSIE GHARIB: In the "Money File" tonight, protecting your insurance and annuities in turbulent times. Here's Harriet Johnson Brackey, personal finance columnist at The South Florida Sun-Sentinel.

HARRIET JOHNSON BRACKEY, PERSONAL FINANCE REPORTER, SOUTH FLORIDA SUN- SENTINEL: After the government took over AIG (AIG) last week, people asked, is my life insurance policy still good? What about my annuity? Your policies and contracts are still in force. And state regulators say the insurance companies behind them are solvent. But what if they weren't? That answer to that can be found in an obscure corner of the insurance industry. In every state, Puerto Rico, and D.C., there's something called a guaranty association. If one insurer fails, the others have to pick up the coverage, or some of it. This varies by state, but generally, if your insurer fails, the cash value of a life insurance policy under $100,000 is likely to be covered. For death benefits, the coverage is higher, often to $300,000. And the general rule is that up to $100,000 in annuity contracts would be covered. The life insurance industry insists that its $5 trillion in assets are conservatively invested, mostly in high quality bonds. But its also true that this a heavily-regulated industry that has been through a few panics. The failure of Mutual Benefit comes to mind. And regulators have responded with more and more safeguards, including the guaranty associations. So if you have an insurance policy under your state's limits, I wouldn't lose sleep over it. I'm Harriet Johnson Brackey.