Woodmen of the World = No State Guaranty Fund?

[LGilmore]

I guess as long your E&O is paid up.....

Like it or not, having a guarantee is an extra layer of protection. If I were to use a fraternal, I would have the client sign off that we went through the options and the client chose the option without a guarantee. memmories have a way of changing should a problem come along.

 

[MrMack]

In Iowa it is against the law to even mention that there is a state guaranatee program. You are not allowed to tell them that it is even there.

Like you are not supposed to tell people about Medicare Advantage unless they ask first.

 

[djs]

In California you are not supposed to talk about the state guarantee either, mostly because I don't think it actually exists, as in, money in the bank.

On the other hand, when I sell a policy with a non-admitted carrier, there is always a form they sign (from the carrier) that says it is a non-admitted policy, and as such, does not participate in the state guarantee fund. I just always hope the client signs and doesn't ask questions because I'm not allowed to talk about it

Dan
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To put things in perspective, here in NC the guaranty association has been activated 45 times - ever. Only 7 times since 2000. It will matter to some, not to others.

What do you mean 'activated'? Has it actually paid out money or has it simply brokered a deal with other insurance companies to buy the troubled company?

 

[0b1kanobee]

Fraternal society puts $12 million lien on policies

Read more: Fraternal society puts $12 million lien on policies - Pittsburgh Tribune-Review Fraternal society puts $12 million lien on policies - Pittsburgh Tribune-Review

"Beaver-based Greek Catholic Union — the state's largest fraternal-benefit society — has placed $12 million in liens on members' policies in an unusual bid to shore up a capital base wracked by financial markets." FROM THE ARTICLE

I found this while searching on Google. Not posting it as a negative or positive find. Make of the article what you want.

 

[Larry Tew]

Let me address a couple of comments:

LGimore said: "...If I were to use a fraternal, I would have the client sign off that we went through the options and the client chose the option without a guarantee. memmories have a way of changing should a problem come along."

If you placed someone with an "A" or "A+" company, would you ask them to sign off on the fact that there are "A++" companies that might be stronger? Even though the "A" company falls under the guaranty plan, it is an unpleasant experience and no guarantee that the client will be made whole.

MrMack said: "In Iowa it is against the law to even mention that there is a state guaranatee program. You are not allowed to tell them that it is even there."

While working this case, I called the association and asked them about being handcuffed by not being able to mention the association while banks prominently display the FDIC logo. I was told that the spirit of the law is to keep agents from selling "C" rated companies and telling clients that the company's strength doesn't matter because of the existence of the association. I was also told that if a client asked what would happen to their coverage if the company failed, you ARE allowed to tell the client about the existence of the association. He told me the best way to do that was to give them the web address of the association and have the client call if they had questions.

The Greek Catholic Union was a tiny low-rated company. Not in the same league as Thrivent, Modern Woodmen, etc.

djs said: "What do you mean 'activated'? Has it actually paid out money or has it simply brokered a deal with other insurance companies to buy the troubled company?"

Both. I would have had to open each case to see the specifics. Activation happens any time a company is placed into rehab or receivership. For example, Kentucky Central was taken over by Jefferson-Pilot, and General American was taken over by Met. Association funds never came into play for those companies, even though with Kentucky Central additional surrender charges were applied as well as surrender moratoriums.

I agree that with "all things being equal" it's better to have the coverage. However, I hardly ever find that all things are equal.

 

[0b1kanobee]

As many here already know, Variable Annuities are not covered by any state guarantee fund either. Neither are stocks. bonds, mutual funds, ect. YET people put money in their alla the time based on financial strength amongst other things.

 

[retread]

A good point...also something to keep in mind is how much the Guarantee Association protects...in My state annuities are only protected up to 100K so per your previous case in my state to have that account protected by the guarantee association would have required 4 seperate carriers.

Excellent point. Also, some states will not cover laddered or stacked policies. Here's the KS liability:

The association does not pay more than the amount of the contractual obligation of the insurance company. Regardless of the number of policies or contracts the association is not obligated to pay amounts over $300,000 in life insurance death benefits; $100,000 in net cash surrender and net cash withdrawal values for life insurance; $100,000 in health insurance benefits, including any net cash surrender and net cash withdrawal values;$250,000 in the present value ofannuity benefits,including net cash surrender and net cash withdrawal values, unless the annuity contract is awarded pursuant to a judgement or settlement agreement in a medical malpractice liability action; or more than $300,000 in the aggregate for the above coverages with respect to any one life.​

 

[djs]

California is a bit worse:

Are covered life insurance and annuity policies fully protected?
No. The maximum amount of protection for which the Guarantee Association may become liable for life insurance and annuity policies is as follows: Life insurance death benefit protection: 80% of the policy death benefit up to a maximum of $250,000; Life insurance net cash surrender and net cash withdrawal values: 80% of the policy value up to a maximum of $100,000; Present value of annuity benefits including net cash surrender and net cash withdrawal values: 80% of the present value up to a maximum of $100,000. Life insurance benefits including net cash surrender and net cash withdrawal values, and annuity benefits including net cash surrender and net cash withdrawal values are subject to interest rate adjustments. Generally, interest rate reductions are made when an insolvent insurer promised a rate of interest in excess of that provided for in the California Life & Health Insurance Guarantee Association Act. The maximum total amount the Guarantee Association will provide for any one individual for life insurance and annuity coverage is $250,000, even if that individual is covered by multiple life insurance policies and annuities.

 

[retread]

It sounds like CA IS worse... Guaranty for Life AND annuity is capped at $250K. So if a client had a $250K CV life policy, nothing is left over to cover ANY annuity?

It would appear that KS indicates a $300K AGGREGATE.... I assumed that was for Life, but realize it probably means Life AND Annuity on ONE LIFE.

 

[djs]

Yes there would be. They would only get 80% of the $250K cash in their life policy, so there would be $50K left to cover annuities.

To be honest though, the chances of multiple companies going belly up at the same time is pretty slim. Because of this, you may have time to rethink your strategy if one did default.

Dan
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Correction: Life cash value is only protected to $100K. And with annuities only covered to $100K, so in this case, the $250K cash value life policy would net only $100K, then there would still be coverage for up to $100K on an annuity.

Dan