Tuesday, August 17, 2010

Life Insurance Controversy

It may sound like a highly technical, nitpicky issue, but there's some real substance behind the National Association of Insurance Commissioners' warning to consumers about how their life insurance is invested. The controversy is over retained-asset accounts, in which beneficiaries receive their payout from a checkbook-like account, with the funds held at the insurer.

That sort of account allows the life insurance company to invest the money for itself while waiting for the beneficiary to eventually draw down the entire sum. On the other hand, with a lump-sum payout, the beneficiary gets both the money to live on and the ability to invest his or her own assets.

The NAIC says the issue is one of disclosure: Life insurance policy holders deserve to know exactly how their payouts will be structured. This is of course true, but you should be fully informed on all your investment products. If you have any questions about the nature of your life insurance, or anything else you're invested in, feel free to give me a call.

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