The Texas Department of Insurance (TDI) has issued a statement and answers to some frequently asked questions regarding AIG insurance companies in Texas.
“AIG’s Texas insurance companies are currently financially sound and able to pay claims,” stated Texas Insurance Commissioner Mike Geeslin. “Policyholders should not make any rash decisions about policies issued by an AIG insurance company as their covered claims will be paid and annuity checks will be distributed.
“Replacing or liquidating a life insurance policy or an annuity can incur hidden costs and carry tax consequences. Also, there may be a penalty for cancellation of certain types of policies. If you have a life insurance or annuity policy with AIG and someone tells you to replace it because of the troubles at AIG’s parent company, call TDI’s toll-free Consumer Help Line at 1-800-252-3439.”
Recent news regarding AIG largely concerns AIG’s non-insurance parent company, which is not regulated by TDI or other state insurance departments. The parent company is not held to the same investment, accounting and capital adequacy standards as its state-regulated insurance subsidiaries. The insurance subsidiaries are solvent and able to pay their obligations.
Frequently Asked Questions and Answers:
Question: Is my AIG insurance company going bankrupt?
Answer: Based on the information we have today, the AIG insurance companies are financially strong. AIG is an international financial holding company with numerous businesses.
Your insurance and annuity policies are written by AIG’s insurance companies, not the parent company. Those companies are financially strong and their assets are governed by state regulators. Laws in each state protect policyholders by requiring insurance companies to have minimum capital, in addition to funds specifically reserved to pay claims. State laws prohibit the parent company from taking these funds from the insurance companies, even if the parent company were bankrupt.
Question: Are the insurance and annuity policies I purchased from AIG safe or will I lose my money?
Answer: Your policies are safe. AIG’s insurance companies are financially sound and able to honor policyholders’ claims. TDI and other state regulators continue to closely monitor the situation to ensure policyholders are protected and that there will continue to be sufficient assets to pay claims.
Question: Should I cash in my insurance and annuity policies and purchase insurance from another insurer?
Answer: Talk to your financial adviser before making any decisions. The AIG insurance companies are financially sound and the insurance policies they issued are not in jeopardy. Whether you should cash in your insurance policy or switch insurance to another insurer is, as always, a personal decision. Please be aware that some policies may contain surrender charges and/or cancellation penalties. Contractual terms governing surrender charges vary substantially from contract to contract. Make sure that you are aware of and understand all surrender/cancellation charges applicable to your contract.
For certain types of annuities and withdrawals, the receipt of annuity funds may be considered income and subject to federal taxation. Consult a tax advisor or the Internal Revenue Service for more details.
Contact TDI’s Consumer Help Line at 1-800-252-3439 to learn about what information you should discuss with your agent or broker before you make a decision. If you have an insurance policy with an AIG company and someone tells you to replace it because of the troubles at AIG’s parent company or supposed trouble at the insurance company, call TDI.
Question: Should I pay the insurance premium bill that I just received from AIG?
Answer: If you choose to continue your coverage with AIG, you will need to pay the insurance premiums. Failure to pay your premiums can result in the termination of your insurance policies by the insurance company.
Question: Would my insurance and annuity policies have been protected had AIG been declared insolvent and ordered to be liquidated by a court?
Answer: There are guaranty funds in place in all states which act as a safety net in the event an insurer becomes insolvent. Certain limits and exceptions may apply that vary by state. Additionally be aware that guaranty associations do not cover policies in which investment risk is borne by the individual, which may include variable annuities.
Question: I heard the government may take over AIG. What are state regulators doing to make sure AIG insurance companies will continue to be able to pay claims?
Answer: The agreement between AIG and the Federal Reserve protects the assets of the insurance companies so they will be available to pay claims. Any significant transaction affecting an AIG insurance company will need approval from state regulators.
Question: What can I do if I am having difficulty getting through to AIG on the telephone?
Answer: Check AIG’s Website (aig.com) to see if it has the answer to your question. You can also contact your agent. TDI’s Web site has information about AIG at: http://www.tdi.state.tx.us/consumer/cpmaig.html.
Source: Texas Department of Insurance
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