5 Reasons Why You Should Get Affordable Life Insurance

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PostPosted: Mon Nov 22, 2010 12:55 pm   Post subject:   

As for the definition of "insolvent", since based upon your post, they could be considered "insolvent" while at the same time be able to pay their claims, it doesn't matter if I was wrong. It just means that they met the definition of "insolvent" under California law. They still had the assets to pay their current claims.



AIG is irrelevant. It was used by Udell simply because it caused concerned.



You are correct that there wasn't enough money to pay annuity claims, but that is because the annuity claims were an ongoing expense going forward. Past annuity claims were all paid. Past life insurance claims were paid. There wasn't going to be enough money to pay for future life claims. This problem was solved when Aurora life took over and the policies were transferred to them.



The Guaranty Associations give the companies and orderly way to handle insolvencies while helping with the public trust issues.



Since it is so easy to assume that there has to be cases of beneficiaries not being paid 100%, why can't we find any examples. This should be easy. It isn't.


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ajvmaru
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PostPosted: Fri Nov 26, 2010 4:11 pm   Post subject:   

I have to agree. No life insurance beneficiaries lost a penny.


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PostPosted: Tue Nov 30, 2010 2:10 am   Post subject:   

Max, any follow up? I still can't find anything indicating that there were life insurance death claims not paid with Executive Life. Everything that I read confirms what I thought... At the time that they were taken over, they could afford to pay current claims and all future claims were handled by Aurora Life. The Guaranty Associations as part of the arrangement have been making payments to Aurora Life and Aurora is paying all death claims at 100%.



None of what I'm writing is primary information, so it's pointless to link. It could still be wrong. However, in the absence of any information indicating that death claims weren't paid 100%, it's difficult to believe your claim.


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PostPosted: Tue Nov 30, 2010 3:16 am   Post subject:   

Sorry, haven't had a chance to call the CHLIGA yet -- my 86-year old mom was hospitalized with congestive heart failure, and I've had to spend some time following up on some of her Medicare Advantage questions (I think she's more concerned about how much her deductible is than what the doctors have to say). Give me another 24 hours, thanks!



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PostPosted: Tue Nov 30, 2010 7:58 pm   Post subject:   

Take your time. Nobody other than me and you and a couple of others will be reading this. Spend time with your mom. My prayers are with you and your family.


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PostPosted: Tue Nov 30, 2010 8:44 pm   Post subject:   

Thanks for the kind words. Still hospitalized, but doing a little better each day.



I just got off the phone with the CA L&H Guaranty Association. Here's how it works:



If an insurance company is LIQUIDATED, from the moment of the court order to liquidate the company, all CLAIMS at and after that point are PAID as they are presented to the Guaranty Association -- BUT NEVER MORE than established in the state's law.



California's Legislature changed the state's limits two months ago (effective September 27, 2010) to the following (found in CIC 1067.02(c)):



(c) The benefits for which the association may become liable for life insurance and annuity policies shall in no event exceed the lesser of the following:

(1) Eighty percent of the contractual obligations for each policy or contract as modified pursuant to subparagraph (C) of paragraph (2) of subdivision (b), for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer.

(2) (A) With respect to any one life, regardless of the number of policies or contracts:

(i) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal values for life insurance.

(ii) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits, including net cash surrender and net cash withdrawal values.

(B) With respect to each payee of a structured settlement annuity, or beneficiaries of the payee if deceased, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal

values.

(C) Notwithstanding subparagraphs (A) and (B), in no event shall the association be obligated to cover more than an aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life under subparagraphs (A) and (B).

(D) Notwithstanding subparagraphs (A), (B), and (C), with respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers,

employees, or other persons, in no event shall the association be obligated to cover more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the owner.



That's the state law that controls in California and, other than the 80% limitation, is now fairly consistent with those of most other states in this regard.



Having said that, when an insurance company is in liquidation, ACTIVE policies (those with no current death claims) are often sold to other insurance companies (more often than not) and continued as-is. If an insured under one of those policies dies, their death claim is paid according to the contract, just like any other policy, by the company that assumed the contract. And those with cash value are often assumed by the acquiring company with their full cash value. In the "sale" or transfer of the liability for the policy to the acquiring company, there may be no cash assets to transfer, in which case, the Guaranty Association will fund the cash value of the transferred policies up to the limits established by law. (And in California, that, too, is limited by the 80% factor. So those folks can lose, too)



This was the case with Executive Life, with liabilities EXCEEDING assets by some $10+ Billion, the Guaranty Associations funded the policies being transferred to Aurora up to the cash value limits set by law. MANY PEOPLE LOST MONEY in their new policies, and some policyholders OPTED OUT of that arrangement, hoping to get more by making a claim against the "estate" of the failed company. Those folks are still receiving a little money as new recoveries are being made against Credit Lyonnais and others involved in the fraud that was discovered after the fact. But they have not been made whole. And that includes those policyholders who subsequently opted out and died.



There have been hundreds of pages of Congressional testimony, legal filings, and court proceedings that attest to this fact, and I have already provided links to some of them in previous posts above. When they speak of being paid by the Guaranty Associations, it is exactly as I have previously explained, and which was again told to me by the CHLIGA spokeswoman minutes ago over the phone, as follows . . .



Policies that experience death claims after a company is CONSERVED but before it is LIQUIDATED are generally paid at 100% (they have primacy over death claims that occur after the liquidation order). Deaths and death claims that occur after the liquidation order and before any policies are sold or transferred are ONLY PAID UP TO THE LIMITS ALLOWED BY STATE LAW. The Guaranty Association is legally PROHIBITED from paying more than the amount set by state law.



Now, having said that, a policyholder or beneficiary who has not received the full value of their policy may also file a secondary claim against the ESTATE of the now deceased insurance company for the unpaid balance of their contractual obligation. As a "creditor" of the estate, they stand in line with all the other creditors and can only hope the liquidator recovers enough additional money to satisfy their claims. There is no guarantee of that, and without contacting the individual responsible for the liquidation of an individual insurance company, there may be no way to know who, if anyone, did or did not recover additional money following the liquidation.



So, I'm going to take one additional step -- which will probably take a couple of weeks, maybe longer to get a response -- and contact the CA Dept of Insurance's Conservation and Liquidation Office and see what additional information I can obtain. As soon as I get it, I will be sure to post it for all to see.



At this point, it's still kind of a stalemate. If no recovery is obtained through the liquidator beyond the Guaranty Association's payment, at least in California, all beneficiaries lose a minimum of 20% of the death benefit, and prior to 9/27/2010, they lost all in excess of $250,000 (today it's all in excess of $300,000). In other states, all above whatever the statutory limit is lost, unless additional recovery can be made from the estate of the insurance company. Have all policyholders/beneficiaries been made whole? I still don't believe that it is true. I'll let you know what else I find out.



And you can do the same thing in your state, too.



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PostPosted: Tue May 10, 2011 5:45 pm   Post subject:   

Thanks for sharing these vital information. A life insurance gives you the chance to save forcibly for your beneficiaries. Basically, it is an assurance that if something bad happens to you, rest assured your family can continue to live their lives.



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PostPosted: Sun Oct 16, 2011 6:36 am   Post subject:   

Life Insurance is very essential now days for everybody. A term affordable life insurance policy is known to be the most affordable option. Instead of costing thousands a year, low cost term premiums range in the hundreds of dollars for healthy people under forty or fifty years of age. In policies lasting for twenty years or more, a fixed premium can be a great solution for people in need of cost-effective, long-term protection.



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