Newspaper article THE JOURNAL RECORD

Forum Offers Good Chance to Check Up on Life Insurance

Newspaper article THE JOURNAL RECORD

Forum Offers Good Chance to Check Up on Life Insurance

Article excerpt

Few consumers were concerned about the health of their life insurance companies a few years ago. That's because life insurers were generally considered big, strong and dull. Far too dull to fail.

However, all that changed last year when six of the nation's biggest life companies fell like a row of dominoes. Within a matter of months, more than a million consumers who had insurance policies and annuities with Executive Life Insurance Co., Executive Life of New York, Fidelity Bankers Life, First Capital Life, Monarch Life and Mutual Benefit Life found their accounts frozen and future payments in doubt.

Most of these individuals will eventually recover their money, but 1991's rash of failures underscored one unpleasant truth: An insurance company failure is not like the failure of a federally insured bank or savings and loan. When a bank fails, its customers' deposits are protected up to $100,000 by the federal government. If customers want to withdraw their money, they can usually get it immediately after the failure. The Federal Deposit Insurance Corp. simply writes them a check.

But there's no FDIC in the insurance industry. Instead, life insurance accounts are protected by a patchwork of stateerated guarantee associations, which all have different rules and different levels of coverage. Consequently, how well you survive a life insurance company failure is partially dependent on where you live, what type of policy you have and where your insurer is headquartered.

In addition, before insurance guarantee associations can write you a check, they need to collect money from their members. And they can collect only a set amount each year. That means it can take years to get paid off if you happen to be the victim of an insurance company failure.

Does all this mean you should avoid buying life insurance? No. But consumers should be careful to periodically check on the financial health of their life insurer. And there's no better time for that annual checkup than now.

September is when Joseph Belth, editor of The Insurance Forum, comes out with his annual life insurance ratings issue. It is arguably the most comprehensive consumer guide to life insurer health available anywhere. And at $10 a copy, it's cheap.

Notably, Belth, who is also a professor of insurance at Indiana University's School of Business, does not rate insurers himself. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.