AIG and Your Annuity

What has happened, and what might happen next?

 

Since AIG promotes itself as the world’s premier provider of fixed annuities, you may be worried if you have an annuity – or life insurance policy - with the worldwide insurance giant. But in reality, you probably don’t have much to worry about. Let’s look beyond the media frenzy and into the reality of AIG and its current situation.

No need to panic. The federal government now owns an 80% stake in AIG, as a result of an $85 billion loan.¹ So Uncle Sam is now the majority shareholder in the company. That ought to make anyone feel a little better.

Beyond the federal intervention to prop up AIG, you also have state guaranty associations ready to protect annuity owners and life insurance policy owners. So even in a worst-case scenario, the picture is not as bleak as the headlines would have you believe.

What if my annuity is sold? Last week, AIG did announce plans to sell off some of its subsidiaries, such as its annuity business. Insurance laws in most states allow for a seamless transition when one insurer buys the annuities or policies of another. So if AIG sells your annuity contract or your life insurance policy to another insurance company, the terms and conditions of your contract or policy should stay the same.²

If your annuity should remain with AIG, the $85 billion Federal Reserve loan is designed to help AIG maintain assets sufficient to meet its contracts and claims. This unique government support for your insurer is a compelling reason to stay the course - and to avoid the hefty surrender charge that may accompany a withdrawal.

How healthy is AIG right now? Well, AIG still faces a challenge. The

U.S.

government didn’t guarantee its debt the way it did with Fannie Mae and Freddie Mac; it simply offered AIG a two-year loan with an 11.3% interest rate.³ But state regulators and insurance industry analysts across the nation don’t anticipate a bankruptcy.

Last week, National Association of Insurance Commissioners president (and

Kansas

state insurance commissioner) Sandy Praeger said: "We have a very strong message for consumers: if you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims."⁴

State protection. There are state guaranty associations that protect life insurance policy owners and annuity owners. If AIG were to go bankrupt and liquidate its assets, you would still have protection for your assets thanks to these agencies.

If you own a fixed annuity, state guaranty associations generally provide up to $100,000 protection in case of insurer bankruptcy – and some states go as high as providing $300,000 or more in protection.⁵

If you own a life insurance policy, state guaranty associations usually provide up to $100,000 protection in cash surrender or withdrawal value, and at least $300,000 in death benefits.⁵

If you have a variable annuity, the investment subaccounts are your assets – creditors snapping up an insurer’s assets won’t be able to touch them. The part of the contract promising a payout from the insurer is usually covered by state insurance regulations.⁵

Care to talk? It is a momentous time financially, and I know you are certainly thinking about your money. I welcome your questions and thoughts, and I invite you to call me or e-mail me to learn even more about the state of your investments and your financial options.

 

Comments

[Christian Debt Reduction]

I have a question. How come AIG is the only insurance carrier we have heard from that is having trouble so far? Are the other biggies far behind?

[iPhone Apps]

I read your article it's really Nice article on Annuity,have some very good points in addition to this i want to discuss some more points regarding Annuity ::-

1. It is just and natural that every employee saves some money for his future.He has to invest these savings so that after his retirement,he gets some money every month which he can use for his day to day needs.

2. Annuities can be structured in a number of ways; varying accumulation period, length of income payments and other factors.

3. Annuity payments are taxable payments. On each monthly payment you receive you will be held responsible for paying a tax on it.

4. Ways to sell annuities :

1.Other pension.
2.Security for a loan.
3.Big purchase.

[commercial insurance quotes]

Very informative post, the big question here is whether to buy or not to buy insurance at AIG. How would you estimate the risk in comparison to other insurance companies?

[accidental death insurance]

AIG is a sociable network to consider but customer should make self judgement while choosing any company...

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[Mike Cornelia]

If you are confused with what to do with your annuity, you might want to consider selling your structured settlement for cash. It relieves you of the hassle of holding an annuity and can help a person financially because it is gives you cash now.