This is the continuation of the investment tip I did a couple of weeks ago.
First, you want to make sure that the insurance company for your product, is at least fairly highly rated as I explained before. But what if the worst happens and your company fails? Well there is a fallback. Each State has an insurance guarantee fund. This is not like FDIC insurance, where the government will step in. But this is a backup plan that is funded by the insurance companies in each State. As long as there is not a catastrophic failure in the insurance industry, you should have insurance coverage for your annuities and life insurance products, up to the State limits. These limits can vary quite a bit from State to State. For example, in New Jersey the maximum protection for an annuity contract is $100,000. But right across the State border in New York it’s $500,000.
Just like with FDIC bank deposit insurance, you can maximize your insurance guarantee by having policies in the name of you and your partner, and by buying contracts from more than one insurer.
The one caveat to this is in California. In ever other State, you are 100% covered up to the limit of the State coverage. But in California, it’s only 80%. So if you bought a $200,000 annuity in California and the company failed, you might only get back $160,000. So my advice is, if you live in California, stick with higher rated insurers so it’s never an issue.
You can check the insurance limits in your state in the table on this website: