Woodmen of the World = No State Guaranty Fund?

Discussion in 'Annuities Forum' started by jacobtn, Jan 22, 2011.

  1. retread
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    retread Guru

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    Yeah, agree on multiple companies with the same client, but this brings to my attention the danger of multiple products from ONE company. Perhaps it is not good to sell an annuity from the same company one has contracted a Life policy!
     
  2. djs
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    djs Super Moderator Moderator

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    It would depend on the values. If its a high enough value, I think the client would see the wisdom of your words.

    Dan
     
  3. retread
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    retread Guru

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    I suppose there is little difference in the long run.... the aggregated funds clause would only be significant for small FV policies... However, this is my market.
     
  4. Norwayguy
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    Norwayguy Guru

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    Did I read that correctly in CA if client has $100K in an annuity with ABC company and they fold they are only protected by 80% of the policy value up to a max of 100K so in my example the protection runs out at $80K? So if I read it right account size doesn't matter even small policies would take a loss of 20%?

    Dang sounds like a good reason to drive to the next state to sign the policy...would that work, If the policy was written in say Maine would the CA resident be covered by Maines guarantee fund or CAs?
     
  5. retread
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    For KS:


    However, not all individuals with a right to recover under life or health insurance policies are protected by the act. An individual is only provided protection when:

    1. the individual, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, is the beneficiary, assignee or payee of a covered policy or contractholder,

    2. the individual policy or contractholder is a resident of the state of Kansas,
    3. the individual is not a resident of the state of Kansas,but only with respect to an annuity contract which has been awarded pursuant to a judgement or settlement agreement in a medical malpractice liability action,
    4. the individual is not a resident of the state of Kansas, but only under all of the following conditions:
    a. the impaired or insolvent insurer was a Kansas domesticinsurer; and

    b. the insurer never had a license to do business in the state in which the individual resides; and
    c. the state in which the individual resides has an association similar to this state’s; and
    d. the individual is not eligible for coverage by the association of the state in which the individual resides.
     
  6. LGilmore
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    LGilmore Guru

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    "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."

    Actually Larry, since I am independent, I do go through ratings and financials with clients. And since it has been beat into my head because of securities, I do note and have the client sign off on a buttload of things.

    But actually your question really doesn't compare to who is and who isn't part of the guarantee association. the guarantee association isn't about who is strong or stronger, it is about an extra layer of consumer protection in the case of trouble. It has ABSOLUTELY nothing to do with best ratings. thanks.
     
  7. mynarky
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    mynarky Super Genius

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    Guaranty association or not, another insurance company would likely just buy up the contracts, at least thats how I understand life insurance companies disolving usually happens
     
  8. Larry Tew
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    It seems we have a difference of opinion.
     
  9. LGilmore
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    "It seems we have a difference of opinion."

    Larry, you're using companies with different financial ratings, which can move up or down to compare with the state guarantee association. It's not a good comparison.

    You either belong to the guarantee assoc or not. the level of guarantee doesn't move up or down depending on the strength of the company. It is there for the customer, not the company. A company can have a best rating that moves up or down in the market. The best rating cannot fullfil an obligation to a customer can it?

    So we can disagree, but that doesn't mean your comparsion is correct. Please think about it or simply explain how being part of a guarantee association is the same as a best rating.

    To me, one has the ability to pay, the other doesn't. How do you see it that they are the same?
     
  10. Larry Tew
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    Your first comment in this thread was "I guess as long your E&O is paid up..... " The thread (to me) is about being responsible in your recommendations to your clients. Your comment suggests that any agent recommending a fraternal is guilty of either an error and / or an omission. I disagree with that point of view. Does your E&O prohibit you from using a fraternal? Mine doesn't.

    Policy holders of Baldwin United, Executive Life, and Kentucky Central were covered under the Guaranty Association, but it was anything but a cake walk for them. The existence of the Guaranty Association is not a magic wand that heals all wounds.

    You said that if you ever used a fraternal, you would have the client sign a waiver acknowledging the use of a fraternal. You did not agree with my point where I asked you if you would also get a waiver letting the client know there may be stronger companies than the one you placed them in. You disagreed with my thought process on that. Since the whole issue is about safety for the client, I still think it is a fair question.

    Finally, if Guaranty association coverage is critical, here's a thought. In Washington, your Gauranty association has activated 36 times since 1971 - less than one time per year on average. Cash values and death benefits are covered up to 500k. While you wouldn't want to put a client's coverage in a position that would not have association coverage (i.e. a fraternal), do you limit your client's coverage to 500k in any one company? If you have a client with $1,000,000 face amount in one company, do you disclose to the client that 500k of his death benefit isn't covered by the association?

    Even though life insurance company failures are rare, I'm not discounting the value of the guaranty association. I'm trying to see it in it's proper perspective. I still believe that the financial strength of a company is far more important than their association coverage status. Best's assigns letter ratings to approximately 550 companies. 22 are rated A++, and 105 are rated A+. There are agents that have no reservations about writing business with lesser rated companies, yet would never write with a higher-rated fraternal. I don't share that view. And, it would be interesting to know how many agents think association coverage is critical yet have their clients covered by one company for more than their association covers.

    I hope this clarifies my position and that we can respect each other's preferences.
     
    Last edited: Jan 30, 2011

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