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Happy Holidays!
Prudential Financial today announced A.M. Best, an industry leading rating agency, has affirmed the company's financial strength rating of A+ (Superior). The rating also applies to Pruco Life Insurance Company, the company that underwrites the Prudential term life insurance policies offered through QuickQuote.
Please click here to read the bulletin released by Prudential.
The National Bureau of Economic Research (NEBR) this week made the proclamation that the US economy is officially in the midst of a recession or as the White House calls it, an 'economic downturn.' And according to the NEBR, the current downturn has been in place for over a year now. Heck, the media could have told us that months ago. Oh yeah ... they did. In fact, it seems that's all the media have been reporting on for several months now; that and the election. Some call the current conditions the result of a self-fulfilling prophecy brought on by fear caused by the media. Others believe we have the bursting of the housing bubble to blame, while still others lay the blame on the Bush administration. There is surely no shortage of fingers pointing every which way on this issue.
Regardless, there is little doubt these are tough economic times. And many Americans are feeling the pain. According to the most recent data released by the US Bureau of Labor Statistics, the number of unemployed Americans has increased by 2.8 million in the last twelve months and the unemployment rate has risen by 1.7 percentage points.
Yet despite these alarming numbers, we continue to see more people purchasing term life insurance. A recent survey of Americans by LIMRA International indicated only 21 percent of those in need of life insurance are considering delaying the purchase for economic reasons. A mere 5 percent of respondents plan to cancel or reduce their life insurance coverage. And perhaps the most interesting result to come out of the study is that 6 percent of respondents plan to purchase more life insurance coverage.
A deeper look at that last statement actually makes a lot of sense. What's important to remember about life insurance is one of its main purposes is to replace the income lost when the insured dies prematurely. In difficult economic times when unemployment is high and good jobs are hard to find, replacing that lost income becomes even more critical. For example, imagine you are the primary breadwinner in your family and you die unexpectedly and uninsured. Your spouse would be left to find a higher paying job to replace your lost income. That would be challenging enough in a strong economic environment, let alone the current one.
So while the case for keeping life insurance coverage in place is a strong one, we are not so naive that we can overlook the importance of basic human needs such as food, shelter, etc. Obviously those needs are first and foremost. If you are planning to delay your purchase of life insurance coverage or cancel existing coverage for economic reasons, you may want to consider simply reducing the coverage amount and/or term of your new or existing policy. You may be surprised at how inexpensive term life coverage can be in small amounts. And a small amount of life insurance coverage is better than none at all.
Credits: www.bls.gov, LIMRA International
The expanding credit crisis our economy currently faces continues to stress nearly all industries. We've written several blogs recently about the crisis and the effects on specific life insurance companies and the industry as a whole. An emerging trend we've recently witnessed within the industry is life insurance companies producing materials aimed at educating consumers on the current financial positions of those companies, as well as answer common questions posed by customers.
Genworth Life Insurance Company today released this FAQ guide for consumer use. It addresses common concerns such as "Is my policy safe?" and "Is the company solvent?"
Please take a look at the guide and, as always, please contact one of our licensed representatives with any questions about Genworth Life or any other life insurance company.
In light of the economic climate our country is currently in and with all the recent negative news surrounding financial companies, it is normal for consumers to be wary of doing business with these companies and with financial products in general. When it comes to life insurance companies and term life insurance specifically, it has also become quite common for consumers to contact QuickQuote looking for answers and reassurance.
Until the recent troubles experienced by AIG, the life insurance industry seemed insulated from the financial meltdown we have experienced. However, the AIG situation has taught us many important lessons. Perhaps the most important one our industry has learned is that a strong financial position does not in and of itself isolate a life insurance company from the negative impact of its parent company's actions. A life insurance company's name is quickly and easily associated with that of its parent company, in both good time and bad.
Case in point: American General Life Insurance Company, a subsidiary of AIG. American General is one of the strongest life insurance companies in America. The company has excellent management, solid financials and a reputation as a leading issuer of term life insurance among other financial products. However, the company has had to deal with the fallout of its parent company in ways most of us cannot imagine. Whether that is fair or not is open to debate. Many believe you have to take the bad with the good, and the company has taken its share of both over the years for its affiliation with AIG.
But let's get back to the focus of this blog ... life insurance consumer protection in times of financial crisis. We always advise our customers to consider only A-rated or better companies for their term life coverage. That by itself is not enough, however. What about after the purchase? What happens if American General or any other life insurance company 'goes under.'
Well, let's start by saying that is highly unlikely to happen. First and foremost, insurance is one of the most highly regulated industries in the nation. Insurance is regulated at the state level, and individual states impose reserve requirements on all life insurance companies. Those reserves are in the form of cash, and they offer the first layer of protection for your policy.
Second, if an A-rated life insurance company found itself in dire financial straits to the point of ceasing operations, the company would most likely look to either merge or sell itself to another life insurance company or financial organization. When this happens, the policies of the acquired company are typically assumed by the new owner which offers another layer of protection.
Finally, in the worst case scenario game, let's assume a life insurance company does fail and defaults on its policies. In this case, the individual states would step in once again and provide protection for those policies in the form of the State Guaranty Association. Funds from the association are used to pay the claims of insolvent insurance companies. Each state offers its own amount of coverage for life insurance policies. These range in amounts from a percentage of the coverage amount in some states to a high of $500k in others, with the most common amount being $300k. We will provide a chart in a related article on this topic soon and will update this blog to include the article link.
Please be sure to check with your state department of insurance to determine the amount of protection your state offers under this program. Our licensed representatives are also available to answer your questions about this program as well as specific life insurance company related questions.
We'll have more tomorrow on the importance of term life insurance in tough economic times.
The Troubled Asset Relief Program (TARP) is the U.S. Government's $700 billion financial rescue plan that was recently signed into law by President Bush. Reuters has reported that as many as 1,800 financial institutions could soon apply for government funds. $250 billion has already been allocated, and of that amount, $125 billion will go to nine of the nation's largest banks with another $33 billion going to regional banks.
These financial institutions are all publicly held companies. It is still unclear whether TARP funds will be made available to privately held companies and life insruance companies. If so, it is reasonable to expect some life insurance companies will take advantage of the government funding, although not to the extent of the funds borrowed by AIG.
Credits: Reuters.com