Life Insurance Crisis: Could Your Policy Really Disappear?
Posted on | March 8, 2009 | 4 Comments
Earlier this month we wrote about the possibility of a Life Insurance Crisis and it seems to be getting closer to a harsh reality. A clear depiction of this is the stock charts of Hartford Financial, Lincoln National and Principal Financial. Each of these life insurers are down over 70% year-to-date as shown on this chart. It almost seems like a forgone conclustion that many of these insurers will go under if the stock market continues to crumble with the failing economy. If your insurer goes under, will you lose your life insurance policy?
In most states, your life insurance policy is covered up to $100,000. While this may seem sufficient, many Americans have been paying on insurance policies that are much more than this. Many of us want to leave our significant others in a financially stable position and have worked very hard to do so. If I have a life insurance policy over $100,000, where will the rest of the money go? Sadly, if your life insurer files for bankruptcy, this money may disappear. A life insurance policy is just like an investment. If your policy is with a company that cannot stay afloat, you have the risk of losing that investment.
It is HIGHLY unlikely that the government will let the larger life insurance companies go under as we have seen AIG being propped up for several months. It would devastate the confidence of the American public if something as stable as life insurance policies started to become risky. What the insurers are hoping for is that the stock market and housing market start to recover. Some insurers have many investments in these two arenas and are “banking,” no pun intended, on these markets to stabilize and hopefully uptrend in the next few years. If they do not, it is likely that our government will bail out these companies with OUR taxes.
There is not much you can do at this moment other than research. Find out what the balance sheet of your life insurer looks like. If you see steep declines in income over the last three years, the company has a strong possibility to fail. If your insurer is a publicly traded company with a stock price under $5, things do not look good. You may want to consider contacting your insurer and weighing your options. Overall, this is a very scary time for the insurance industry and the life insurance industry is being hit the hardest.
- First the Mortgage Crisis, Now the Life Insurance Crisis?
- Will the Obama Mortgage Plan Help Me Get a Lower Mortgage Rate?
- The “Great Refi Boom” of 09? A Must Read!
Comments
4 Responses to “Life Insurance Crisis: Could Your Policy Really Disappear?”
Leave a Reply
March 9th, 2009 @ 12:40 pm
[...] here: Subprime Blogger / Life Insurance Crisis: Could Your Policy Really …SHARETHIS.addEntry({ title: “Subprime Blogger / Life Insurance Crisis: Could Your Policy Really [...]
March 21st, 2009 @ 10:25 am
Why is no one talking about what will happen to annunities? I would bet they will go under also.
March 21st, 2009 @ 12:29 pm
[...] over 60% during the March bear market rally. As I have stated in the past, we are likely to see a Life Insurance Crisis so there is no way these stocks will continue upward for a sustainable period of [...]
April 21st, 2009 @ 9:06 am
This is a screwed up system where good people who have been paying their mortgage, refraining from buying things they could not afford, are being penalized just for that, and those renegades who have been delinquent and most of the times by choice, have been rewarded by the Obama administration.