Many consumers who have life insurance policies through AIG are becoming increasingly nervous as news is released about the company’s financial troubles. Currently, AIG continues to operate and has not filed for bankruptcy protection or been declared insolvent. Even if the insurance division was declared insolvent, there are protections in place similar to the FDIC Insurance that back bank deposits.
Life and health insurance annuities are covered by insurance guarantee associations that have been established in every state. These associations will step in when insurance regulars in a state declare an insurance company insolvent and it is placed in receivership.
The level of coverage varies by state, but every state association provides withdrawal and cash value coverage for annuities of at least $100,000. Some states even offer up to $300,000 or $500,000.
In the last 25 years, more than $20 billion in coverage benefits have been provided by the state associations for policyholders and annuity clients of dissolved insurance companies. During that time, protection had been provided for more than 2 million policyholders.