How risky is a life insurance company?


K

kevwalsh

Hi,

I am young and have a small family, so last year I purchased term life
insurance for myself and a little for my wife also, but now I am
worried that perhaps I should re-apply to a different company. Here is
my reasoning:

After researching companies and policies a bit, I decided to get
(basically) the same plan from either TIAA-CREF or Vanguard (the
investment company). I already have several vanguard investments, and
they were slightly cheaper, so I decided to just stick with the
company I already know and get Vanguard.

Our policy numbers are (something like) A00000000000057 and
A00000000000058, which made me think gee, this must be a really new
program! Although vanguard is the agent, the actual policy is backed
by AUSA, about which I know nothing.

After a few months, Vanguard tells us that AUSA will now be called
"Transamerica" instead, but they try to reassure that everything is
okay, and the investment grade of the company is still good.

After a few more months, just a few weeks ago, Vanguard tells us that
they are discontinuing their life insurance product line, but they try
to reassure us that everything is okay, and existing plans will be
honored, with no changes, and still backed by Transamerica.

So should I worry? Worst case, what can happen? On the one hand I am
figuring that worst case my coverage just gets dropped, and I have to
apply to, say, TIAA-CREF. On the other hand, maybe I should switch
while I am young and healthy, and before I am diagnosed with (say) a
genetic predisposition to bad stuff. On the third hand, I'll have
reapply in 10 or 15 years anyway, when the term is up.

Any suggestions? Does stability matter in a term life insurance
company?

Regards,
-Kevin
 
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P

PaulMaf

From: (e-mail address removed) (kevwalsh)
Date: 11/29/2004 11:11 AM Pacific Standard Time
Message-id: <[email protected]>

Hi,

I am young and have a small family, so last year I purchased term life
insurance for myself and a little for my wife also, but now I am
worried that perhaps I should re-apply to a different company. Here is
my reasoning:

After researching companies and policies a bit, I decided to get
(basically) the same plan from either TIAA-CREF or Vanguard (the
investment company). I already have several vanguard investments, and
they were slightly cheaper, so I decided to just stick with the
company I already know and get Vanguard.

Our policy numbers are (something like) A00000000000057 and
A00000000000058, which made me think gee, this must be a really new
program! Although vanguard is the agent, the actual policy is backed
by AUSA, about which I know nothing.

After a few months, Vanguard tells us that AUSA will now be called
"Transamerica" instead, but they try to reassure that everything is
okay, and the investment grade of the company is still good.

After a few more months, just a few weeks ago, Vanguard tells us that
they are discontinuing their life insurance product line, but they try
to reassure us that everything is okay, and existing plans will be
honored, with no changes, and still backed by Transamerica.

So should I worry? Worst case, what can happen? On the one hand I am
figuring that worst case my coverage just gets dropped, and I have to
apply to, say, TIAA-CREF. On the other hand, maybe I should switch
while I am young and healthy, and before I am diagnosed with (say) a
genetic predisposition to bad stuff. On the third hand, I'll have
reapply in 10 or 15 years anyway, when the term is up.

Any suggestions? Does stability matter in a term life insurance
company?>
Transamerica is a very large solvent insurance company that has been around for
an awful lot of years.

It is not very likely that it will go broke.

Is that guaranteed? Of course not. But the chances are if that unlikely event
occurred, your policy will just be transferred to some other company selected
by the Insurance Commisioner of the state in which Tranamerica is
headquartered, which, I believe, is California.
 
H

HW \Skip\ Weldon

So should I worry? Worst case, what can happen?
Any policy written in my state is covered by the Insurance Guaranty
Fund to which all companies contribute. It covers the death benefit
but not cash value or special riders. You might check to see if your
State has anything like that, and if not, what their procedures are in
the event of default.


-HW "Skip" Weldon
Columbia, SC
 
C

Cal Lester

After a few months, Vanguard tells us that AUSA will now be called
"Transamerica" instead, but they try to reassure that everything is
okay, and the investment grade of the company is still good.

After a few more months, just a few weeks ago, Vanguard tells us that
they are discontinuing their life insurance product line, but they try
to reassure us that everything is okay, and existing plans will be
honored, with no changes, and still backed by Transamerica.

So should I worry? Worst case, what can happen? On the one hand I am
figuring that worst case my coverage just gets dropped, and I have to
apply to, say, TIAA-CREF.
NEGATIVE..... In the unlikely event that Transamerica should become
insolvent (an EXTREMELY unlikely event), statistically, other companies
have taken over the "book of business". In any event, you are protected
to some extent by the State Insurance Commision of your State.



On the other hand, maybe I should switch
while I am young and healthy, and before I am diagnosed with (say) a
genetic predisposition to bad stuff.
There is no aparrent reason for you to do this. The premiums listed IN
the contract will remain in force for the life of THAT contract.


On the third hand, I'll have
reapply in 10 or 15 years anyway, when the term is up.

Any suggestions? Does stability matter in a term life insurance
company?
That is the PRIMARY problem with ALL Term Insurance. The name
of the contract tells you that it is coverage for a SPECIFIC TERM.
Depending upon the actual contract, you may have certain options
available to you at that time, ie. Renewable (at a MUCH higher rate),
convert to another form of insurance (at an even higher rate).

I would suggest to you that yuou re-examine your REAL needs,
now and as far as you can see into the future. It is quite likely
that your NEED will extend more than 15 years, at which time
you may or may not be eligible to BUY any insurance (regardless
of the increased costs involved).
I would suggest that if you do persieve a need, then take a look
at Universal Life, a very FLEXIBLE policy, where YOU control
the premiums (and cash value account). However it is a cotract
that YOU can control for as long as you live or want..
Cal Lester CLU
 
T

Tom Malcolm

I would suggest to you that yuou re-examine your REAL needs,
now and as far as you can see into the future. It is quite likely
that your NEED will extend more than 15 years, at which time
you may or may not be eligible to BUY any insurance (regardless
of the increased costs involved).
I would suggest that if you do persieve a need, then take a look
at Universal Life, a very FLEXIBLE policy, where YOU control
the premiums (and cash value account). However it is a cotract
that YOU can control for as long as you live or want..
Yep - and also keep in mind when you are old or get
a terminal illness you can sell your policy - to places
like notebuy.com and thelifeline.com
 
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K

kevwalsh

Cal Lester said:
On the other hand, maybe I should switch

There is no aparrent reason for you to do this. The premiums listed IN
the contract will remain in force for the life of THAT contract.
I am not sure what you mean by this bit. My worry here was that, due
to insurance company bankruptcy, I might find myself in 5 or 10 years
looking for a few more years worth of term insurance, and I might not
be as healthy then as now. Instead, I could just pre-emptively get a
new 15 or 20 year policy NOW and cheap, since I am currently healthy.

All this isn't a concern, though, if the state would step in to
protect existing policies even in the case of bankruptcy. And
Transamerica (and formerly AUSA, but now merged, apparently), which,
as everyone has pointed out, is not likely to go broke any time soon.


-Kevin
 
C

Cal Lester

kevwalsh said:
I am not sure what you mean by this bit. My worry here was that, due
to insurance company bankruptcy, I might find myself in 5 or 10 years
looking for a few more years worth of term insurance, and I might not
be as healthy then as now. Instead, I could just pre-emptively get a
new 15 or 20 year policy NOW and cheap, since I am currently healthy.

As I mentioned previously, in the UNLIKELY event that the company
DID get into trouble, both your State Insurance Commission and many
other companies stand by to "protect" the policy in it's present form.

However, there is a possibility that you might need Insurance Protection
for longer than the "period of THAT policy", which was I reccomended that
you look into Universal Life Insurance.

Cal Lester CLU
 
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C

Cal Lester

Tom said:
Yep - and also keep in mind when you are old or get
a terminal illness you can sell your policy - to places
like notebuy.com and thelifeline.com
actually excellent advise. Many people keep L A R G E
Life Insurance policies in effect long after they are really
NEEDED. In many instances one can ine effect "SELL"
the Death Benefit to such firms, for a great deal more than
the "surrender value" of the contract.
( this is NOT an endorsement of either of the above companies)

Cal Lester CLU
 

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