If an insurance company is declared insolvent, the state guaranty association and guaranty fund swing into action. Paying your premiums keeps your coverage intact. However, states have a cap on the amount of claims they will pay. Most states limit benefit payouts to the following amounts:. Keep in mind, though, that something is better than nothing. Insurance companies are rated on their financial strength by independent agencies that each have their own rating scale and standards.
The five rating agencies are:. The highest ratings are given to companies that the ratings agencies believe are in the best positions to meet their financial obligations. Low ratings are given to companies that the agencies think have a poor ability to meet financial commitments. You should check ratings from more than one agency because the ratings can vary from agency to agency, according to the Insurance Information Institute.
Be aware, though, that it might be featuring its highest ratings rather than its most-recent ratings. Switching to another auto or homeowners insurance company can be relatively quick and easy. Switching to a new life insurance company may be more complicated. If you abandon a policy, you can expect to pay a higher premium for a new one because of your older age.
If you are looking to ditch a permanent life insurance policy , you might be able to get back the cash value, minus any surrender charge. Traditional annuities do this by pooling your money in the insurance company's internal investment portfolio, which is required by law to be conservative.
That means it's relatively safe, but provides low returns. Variable annuities provide the potential for better returns by investing your money in mutual funds and similar conventional vehicles. This means you might lose money in a down market, so some contracts offer a guaranteed minimum return. Unfortunately, those guarantees depend on your company remaining solvent. If the insurer fails, the picture becomes much more complicated.
That doesn't necessarily mean your money is lost forever. Each state requires its insurance companies to pay into a state-operated fund that essentially insures the insurers. SSQ Insurance serves over three million Canadians and has over 11 billion dollars in assets? Empire Life has been serving the life and critical illness insurance needs of Canadians for over years? Small Life Insurance Companies Still Meet Regulations All Canadian life insurance companies, regardless of size, must maintain a minimum continuing capital and surplus ratio.
Group life, disability and health expense insurance will have the same guarantees as individually owned policies. Deposit type products will be transferred to the solvent company.
These products include tax free savings accounts, accumulation annuities, universal life overflow accounts, premium deposit accounts and dividend deposit accounts. There have been only four instances where Assuries became involved with life insurer insolvency:. Still, you will need to check with your state insurance guaranty association to see what amounts are covered for which types of benefits in your state.
Both general and state-specific laws must be followed. You can check on the ratings of your insurance company at any time. In terms of ratings, the three main companies that keep tabs on the insurance carriers are:. Each of the companies offers a rating system that clearly defines which companies have more risk than others.
Strong ratings mean the company is considered to be financially stable. Be careful, each company uses a slightly different methodology in its rating calculations. There's no guarantee that if a company receives the highest rating that your money is safe. There are plenty of instances when one of these rating companies gave a company a high rating that proved to be wrong.
The bankruptcy of Executive Life in the s, for example, was a surprise to policy holders and many in the industry. Many blamed both state regulators and rating agencies at least in part for their lack of action. Maybe the most useful indicator of your policy or carrier is whether or not it has received any recent downgrades. When you are meeting with your agent or advisor, ask what the current rating is. Compare this rating to where it originally began. The ratings you hope not to hear include A.
Best ratings called E, F, or S.
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