Check your life-insurance policies

Monday, 9th March 2009

The life-insurance industry is weakening, and policyholders around the country are calling their agents to ask the same question: Is my policy safe?

Probably. But there's good reason for consumers to keep an eye on their insurers' financial standing.Life insurers lost billions of dollars during 2008's last three months. Prudential Financial Inc., Hartford Financial Services Group Inc., Principal Financial Group Inc., Lincoln National Corp., and Conseco Inc. all saw their cash cushions shrink amid the stock market's turmoil. Their stocks have plunged by more than half since Jan. 1.

Insurance has historically been among the most stable of industries, and the concern is that a major breakdown could deplete state-run funds for repaying policyholders.

But regulators and agents alike are warning policyholders not to panic.

Much like bank deposits, insurance policies have a lot of protection. When an insurer goes under, policyholders are the first to get paid back, while shareholders get wiped out.

And cashing out would be an expensive, risky undertaking for most people anyway — especially if a policyholder is older, overweight, a smoker, or all three. These folks might not be able to get insured anywhere else.

But it is wise, in this economy, for consumers to check and see if their policies are with strong companies.

Insurers' policies are backed by state insurance guarantee associations.

If an individual policy is worth more than the limit a particular state will repay in the event of a collapse, the holder might want to consider moving some of it out or switching altogether, said Israel Lustig, CEO of Intergenerational Wealth Preservation.

"Would we recommend that clients move to higher ground? Yes, if there are no big surrender charges," he said, referring to the penalties some policyholders pay for terminating their agreements with insurers.

In Arizona, if you have one life-insurance policy with one company, and for less than $100,000, Arizona's guaranty fund will cover you, said Erin Klug, spokeswoman for the Arizona Department of Insurance.

Or, if you have multiple policies with the same company, the aggregate limit is $300,000, she said, meaning that's the cap on what you would be repaid under Arizona's guaranty fund.

Annuities, in particular, might be for dollar figures beyond those guaranty fund limits, Klug said.

Source: http://www.azstarnet.com/business/283047