Ed Hinerman On Life Insurance

Could The Financial News Get Much Worse?

I’ve fielded a number of questions in the past several days concerning AIG, American General Life. With AIG, American International Group, taking a beating in the last quarter, mainly due to the mortgage meltdown and its’ exposure to that, clients who have their life insurance with American General or who are considering American General for coverage have, well, been a bit nervous.

The truth is that while the hit to AIG sounded big, in the context of how profoundly huge the company is, the overall impact has and likely will be minimal. As for life insurance, and this will probably sound like my stump speech on how to purchase coverage, if you purchased guaranteed products you won’t have anything to worry about. As they look for ways to spread their loss over different areas of the total company, non guaranteed products may see some adjustment, but guaranteed term insurance and guaranteed universal life won’t be touched.

As part of American General’s attempt to calm the waters a bit, they sent out an email to agents. It had a colorful little piece that we could send out to you, our customers, and another attachment that was for us agents only, “not for dissemination to the public”. Well, here you go. If it good for me to know then it’s also good for you. aig-strength-questions

The one thing I found of value that makes the life insurance branch of AIG stand out from the rest of the company is the fact that all insurance companies, by state law, are required to maintain adequate reserves to meet their obligations. Obligations in this sense would be death benefits and any contractual guarantees. I already knew that, but hopefully that will put life insurance with AIG in a safer perspective for you.

Bottom line. There is no time like the present to know for a fact that your life insurance products are guaranteed. The world and the financial markets are far too volatile for anyone to comfortably sit and trust that you non guaranteed life insurance won’t suffer some distasteful adjustment. If you just aren’t sure if what you have is guaranteed or not, seek a review by an independent agent other than the agent that sold it to you. I know I keep coming back to that point post after post, but if an agent sold you a non guaranteed product, their trustworthiness is suspect to start with. That would be like getting a second opinion from the same doctor that gave you the first one.

Add comment September 15th, 2008

Different Times Require A Different Plan!

The financial justification for most personal life insurance really comes down to income replacement. If, for instance, I am making $60,000 a year and I have a family, even just a wife, who is dependent on that income. The whole premise with life insurance is that if I should happen to die prematurely, my income would be replaced.

In today’s economy, and really even once the economy is back on more solid footing, I think the idea of replacement of income needs to be expanded. While the basic replacement of income, the $60,000 is still valid, there is certainly financial justification in using life insurance to protect against the downsizing of our savings, investment, real estate and retirement funds. The same forces that have so many of us planning on working more years before retirement also impact the future of our family if we should happen to not wake up some morning.

I know there is a tendency to think that periodic reviews of your life insurance are just made up opportunities for agents to try to dig deeper into your pocket, but now, more than ever, a review may be a prudent move. It could be that the long term picture may be all right….bad economic times followed by good economic times, etc, but there may be some short term measures that would be appropriate such as adding an amount of 10 year term insurance roughly equal to the current economic hit that your investments and real estate have taken.

Bottom line. Financial justification for the amount of life insurance you carry is all about protection of loss of income and assets. Make sure you’re considering all of your needs.

Add comment September 15th, 2008