Is Your Annuity Safe?
03/20/2012 11:00 am EST
Focus: ASSET PROTECTION
The answer is most likely yes, says Stan "The Annuity Man" Haithcock, but there are simple steps one can take to ensure that, and he explains how here.
Today, Stan the Annuity Man tells us what we need to know about the annuity industry. Stan, give us an overview.
The overview of the annuity industry is pretty complex. Because rates are low, you’re not seeing a lot of new products that are coming out. My opinion is that it’s still a good transfer of risk product.
A lot the annuities that are sold right now are variable annuities. I’m not a huge fan of variable annuities. I like the fixed annuities better, because they protect your money, there is no downside, and you can have some participation on the upside.
But again, you’re trying to solve for problems. Annuities solve for four problems: principal protection, income for life, legacy, and long-term care.
Stan, how would I know that my annuity money is safe?
Well, annuities and life-insurance products are regulated at the state level, not the federal level. Every state has a guarantee fund that backs up annuities at a certain level. If you go to www.nolhga.com or get The Annuity Owner’s Manual off my Web site, Stantheannuityman.com, I will show you what your coverage is per state.
The first thing you need to look at is the carrier. Obviously, you need to look at their ratings, and you need to look at their balance sheet, because really they’re guaranteeing your annuity.
But if something happens to that carrier, the second line of defense would be that state guarantee fund. What is that state guarantee fund backup? How much does it back up for your state? Every state is different.
The third backing, the third level of protection, is what I call the insurance conglomerate. The insurance industry is almost self-regulating.
Annuities are confidence products. In other words, if my mom who owns an annuity doesn’t get an annuity payment for whatever reason…say the company goes out of business, the annuity industry is over, because no one will have any faith in the annuity industry. They almost self-regulate.
The greatest example I could give you is MetLife just purchased AIG and all of the policies inside of it. Why? They just kind of took that conversation off the table.
My opinion is, you have three levels of protection. The carrier is your primary one, the state guarantee fund is your second, and then the insurance industry itself is self regulating and making sure that no confidence is lost within the products. I truly belief that third level is the most important level.
Say a person has an existing annuity. How do they check into this to make sure that what they have is safe?
Well, you can go to my Web site, Stantheannuityman.com, and we’ll link you to that national site that will show you what your state coverage is. You could also contact us and we’ll let you know. You can call your state insurance commissioner and they’ll let you know.
I really think that one of the positive aspects of annuities and life insurance is that it is regulated at the state level. It’s very efficiently run, and you really haven’t seen any problems.