Annuities Is My Money Safe?
An annuity is often an important component of a strong financial plan, but many consumers don't quite understand the fundamentals and there are often questions regarding the safety of money invested. Before an individual agrees that an annuity is the best product for their specific situation, it is important that they understand exactly how the funds are protected and what guarantees are in place.
Deposits made in bank accounts are subjected to Federal Reserve requirements that mandate approximately 3% of funds be kept on hand. A deposit of $100 therefore only requires $3 to be made readily available, which may make some depositors nervous. Annuities are also regulated by the Legal Reserve System and there are strict financial requirements that must be met by the insurance company. The reserve amount for annuities must equal the withdrawal value of every account, which means that an insurance company must keep $100 for every $100 invested.
Annuities are contracts that are offered by insurance companies, so the full assets of the organization back the policies. An important consideration that must be made before purchasing an annuity is the strength and stability of the issuing company. Business should only be placed with companies that have exhibited responsible past behavior.Each state has precautions in place that are designed to protect policyholders in the event that their annuity insurance company is simply unable to fulfill their obligations. Most states have guidelines that will allow other insurance companies doing business in the state to simply take over the contracts of a failed annuity carrier. If there are no carriers that have the ability to comply with the requirements of each contract, there is a state pool that is funded by contributions from each insurance company. The state pool can provide funds to guarantee the values as required by the annuity contract itself.
Annuities offer an amazing chance for an individual to ensure that they will not outlive a needed income stream, and safety of assets should not be a concern. The various protections that are in place are designed to prevent any type of loss. The fact of the matter is that if an annuity carrier happened to fail, they would then be backed by other insurance companies. If other insurance companies were unable to meet the obligations of the annuity contracts, the state department of insurance would step in and provide assistance using the state pool. Money placed in an annuity is definitely safe and probably more secure than any other investment.
Deposits made in bank accounts are subjected to Federal Reserve requirements that mandate approximately 3% of funds be kept on hand. A deposit of $100 therefore only requires $3 to be made readily available, which may make some depositors nervous. Annuities are also regulated by the Legal Reserve System and there are strict financial requirements that must be met by the insurance company. The reserve amount for annuities must equal the withdrawal value of every account, which means that an insurance company must keep $100 for every $100 invested.
Annuities are contracts that are offered by insurance companies, so the full assets of the organization back the policies. An important consideration that must be made before purchasing an annuity is the strength and stability of the issuing company. Business should only be placed with companies that have exhibited responsible past behavior.Each state has precautions in place that are designed to protect policyholders in the event that their annuity insurance company is simply unable to fulfill their obligations. Most states have guidelines that will allow other insurance companies doing business in the state to simply take over the contracts of a failed annuity carrier. If there are no carriers that have the ability to comply with the requirements of each contract, there is a state pool that is funded by contributions from each insurance company. The state pool can provide funds to guarantee the values as required by the annuity contract itself.
Annuities offer an amazing chance for an individual to ensure that they will not outlive a needed income stream, and safety of assets should not be a concern. The various protections that are in place are designed to prevent any type of loss. The fact of the matter is that if an annuity carrier happened to fail, they would then be backed by other insurance companies. If other insurance companies were unable to meet the obligations of the annuity contracts, the state department of insurance would step in and provide assistance using the state pool. Money placed in an annuity is definitely safe and probably more secure than any other investment.
Source...