Deposit Insurance

Is Your Money Safe?  Please note: Annuity products are issued by life insurance companies and are not insured by the FDIC. They are backed by the full faith and credit of the issuing insurance company. Any withdrawals may be subject to income tax and/or surrender charges and, prior to age 59 1/2, a 10% federal penalty tax may apply. How does the law protect annuity investments?   In order to safeguard the funds of Insurance and annuity contract holders or policy owners, State Laws demand the insurance companies to meet strict financial requirements. According to these legal financial requirements, the insurance companies are legally bound to set up a reserve, which at all times must be equal to the withdrawal or surrender value of their total block of annuity policies or contracts i.e. the annuity providing insurance companies must set aside funds equal to the surrender value of every annuity contract in force. Additionally the state laws also require certain levels of capital and surplus to further protect the insurance/annuity holders or policy owners.  What happens when my insurance company goes out of business?  Insurance companies that experience severe financial difficulties are taken over by the insurance department of the state in which they are based. You should be notified by the insurance department if this occurs. Even if the company is placed under the control of the insurance department, claims will continue to be honored as long as premiums are paid or cash value exists. The claims will be covered by state guaranty associations, which will either pay them directly or transfer the policies to a financially stable insurance company. What will happen to my insurance coverage if my state guaranty association becomes liable for my policy?  Protection can be provided in one of several different ways. For example, a financially sound insurer may take over the troubled company’s policies and assume the responsibility for continuing coverage and paying covered claims. The guaranty association may provide coverage directly by continuing the insurer’s policies or issuing replacement policies with the guaranty association; in some situations, the association may work with other state guaranty associations to develop an overall plan to provide protection for the failed insurer’s policyholders. The amount of protection provided and when you receive it may depend on the particular arrangement worked out for handling the failed insurer’s policyholder obligations. Are all covered policies fully protected? Not always. If your insurance company fails, the maximum amount of protection provided by the Minnesota guaranty association for each type of policy, no matter how many of that type of policy you bought from your company, is: Life Insurance Death Benefit: $410,000. per insured life Life Insurance Net Cash Surrender: $130,000. per insured life Health Insurance Claims: $410,000 per insured life Annuity Net Cash Surrender Value: $130,000 per contract owner Structured Settlement Annuities and Annuities with a period certain benefit of at least ten years to life: $410,000 in present value per annuitant Unallocated Group Annuities: subject to a maximum amount per covered plan--$130,000 per individual resident participant The Minnesota Statute provides that the above amounts shall be adjusted annually, in $10,000 minimum increments, by an inflation adjusted index. The above amounts are covered as of October 1, 2008  For more information visit:  National Organization of Life & Health Insurance Guaranty Association’s web site at:   www.nolhga.com Bank Deposit Insurance. Bank deposits are protected by FDIC, while credit unions are protected by the National Credit Union Administration. Chartered by Congress, these two entities are private insurance companies that receive no federal funding. Rather, banks and credit unions pay insurance premiums, much as you pay premiums to your auto insurer. Should a bank fail, it files a claim with FDIC or NCUA. Customers and members typically receive access to their insured deposits within a few days.  To find out whether your bank or credit union has FDIC or NCUA insurance coverage, visit www.fdic.gov or www.ncua.gov. To estimate how much of your money is insured, use the FDIC Electronic Deposit Insurance Estimator (www.fdic.gov/edie/) or the NCUA Share Insurance Estimator (webapps.ncua.gov/ins).  FDIC and NCUA insure deposits in a similar fashion: Single Accounts: $250,000. All account balances in a single name at the same bank are added together and insured for up to $250,000. IRA, SEP, 457, Keogh and Self-Directed 401(k): All self-directed retirement funds owned by the same person in the same bank are added together and insured for up to $250,000. It is possible for someone to have insurance for $250,000 covering regular accounts plus an additional $250,000 for self-directed accounts.  Joint Accounts: $250,000 for each co-owner. No owner can be a corporation, trust, estate or partnership. Each co-owner must have equal rights to withdraw funds from any account. At the same bank, each co-owner’s share in any account is added to the co-owner’s shares in other accounts to reach the $250,000 limit. Example: Mary and John have $50,000 in one account, Mary or John has $250,000 in one account, Mary or John or Robert has $375,000 in one account: Mary and John are each insured for $250,000; Robert is insured for $125,000.  Payable-on-Death Accounts: Each beneficiary is insured for $250,000. Beneficiaries must be identified by name and can be a person, charity or other non-profit organization. Example - POD Accounts with Multiple Owners and Beneficiaries Account Title Account Balance Amount Insured Amount Uninsured Husband and Wife POD 3 Children $1,500,000 $1,500,000 $0 Husband POD Wife 250,000 250,000 0 Wife POD Husband 250,000 250,000 0 Husband POD Brother and Father 500,000 500,000 0 Husband and Wife POD Grandchild 600,000 500,000 100,000 Total $2,600,000 $2,500,000 $100,000  Living/Family Trust Accounts: Such trust accounts are insured up to $250,000 per owner for each named beneficiary. FDIC assumes that beneficiary interests are equal unless stated otherwise in the trust. Example: Mary deposits $1 million in her family trust account naming her three children as beneficiaries. The account is insured for $750,000.  Brokerage Accounts. FDIC does not insure money you have invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if you bought these products from an insured institution. Although securities are never insured against loss in value, the Securities Investors Protection Corporation does offer protection if a brokerage firm or bank’s brokerage subsidiary fails. In that event, SIPC will replace securities valued up to $500,000, including up to $100,000 in cash.  Ultimate Protection: If none of this is placating you, consider U.S. Treasury bills. These securities enjoy the full faith and credit of the federal government and are widely considered the safest investment in the world. That’s because the federal government has never defaulted on any principal and interest payment in our more than 200-year history.