Quick but important one today…
We’ll get the random question about insurance here and there, but for the most part nobody thinks about it very much.
I’ve got to admit, other than briefly checking my coverage amounts on my home each year during renewal time, I don’t think much about it either. (Side note – if you haven’t ever thought about it, ask your insurance agent. He or she will be able to make sure you are okay, discuss “extended or guaranteed replacement cost”, and other important options with you). But I digress.
Anyway, the topic of insurance got really hot overnight…yep, you guessed it – as soon as the American International Group (AIG) story broke in the news.
People were understandably worried that they might be exposed, but luckily this isn’t the case. First of all, regulators can step in really at any time to take over a troubled insurer. (Surprisingly, this is always done at the state level, not the federal level).
Also, insurance companies are required to pay outstanding claims to policyholders like you and me, before other creditors can get anything from insurers.
Insurance companies are almost always backed by guarantee associations or funds at the state level, which protects you up to a certain amount even if your insurer fails. AIG would have been a massive failure, and caused more of the “house of cards” to crumble, which is why the government stepped in.
We know that it turned out “okay” (depending on your view of the government bailout, capitalism, etc. – but that is a topic for a different time). But, that didn’t stop AIG customers from feeling awfully scared for that brief time, and I can’t blame them.
Just a couple other quick things that come to mind on this topic:
- First, if you have a policy with AIG, don’t listen to anybody that uses scare tactics to try to get you to switch. Two different families we’ve talked to have already been approached by agents selling higher-priced policies to replace their “dangerous” AIG policy. Actually, I’d guess that fast-buck agents might even approach people insured by other companies, using AIG as an example. Just hold tight, and talk to your current agent or insurance company before you make any drastic changes.
- Second, while it might have been scary thinking a $5,000 car accident claim wouldn’t be paid…what about when you have a bunch of money in an annuity, or cash value life insurance? That is what really got me thinking when the AIG news came out. As above, just hold tight and don’t panic, knowing that the same regulations discussed above have you protected to a certain limit. The limits vary by state, but if you have over $100,000 with an insurer in an annuity, cash surrender, or even in death benefits then check out The National Conference Of Insurance Guaranty Funds website for the exact limits for your state.
That’s all for today. Have a different viewpoint or something to add? Did I miss anything? Talk to me!
Thanks,
Scott
