Transamerica, Fidelity and Guarantee, and Gambling with your Life
There’s a reason Life Insurance is considered a safe bet. For over a century, these policies have been among the most carefully regulated in the financial world. Insurers like Transamerica, Allstate, and Fidelity and Guarantee are obligated to have cash on hand to cover all of their financial obligations, and must invest the bulk of their assets in bonds and other guaranteed investments. For some insurers, however, the reputation for rock-solid returns is not enough. Motivated by the unprecedented booms of the boom and bust cycle on Wall St., some major insurers are trying to get customers permission to invest in riskier, high return investments on the free market. Instead of doing this in a straightforward manner, they are trying to promise the high returns of market investment with guaranteed returns of Life Insurance. An experienced California insurance fraud lawyer will tell you that if something looks fishy about that, it’s because it is.
Look at Your Policy – Who Stands to Gain?
Indexed Universal Life Insurance is a policy that allows Insurers to use your insurance funds to play the market. Conveniently, it also allows them to keep the bulk of the profits and pass on the bulk of the risks. Insurers suggest that it’s the reverse, but upon examining the details of these policies, it becomes clear who stand to gain. For example, let’s say you hold an Indexed Universal Life Insurance Policy, and the insurance company invests your funds across the market. If it’s an incredible year and your investments returned 30%, the company has a cap on your policy, and you may get less than half that amount. There is also a floor on your returns, usually around 3% that loses quite badly to traditional Life Insurance Policies.
Companies like Transamerica, Fidelity and Guaranty are among the major sellers of indexed universal life insurance.
What Seems Like a Great Policy Might be the Exact Opposite
Insurers see this as a way of dealing with what they call “redundant reserves,” and posit that they are helping the economy by getting this money back in the economy. If history is any lesson, though, stock investments are a more reliable method of transferring money into executives’ pockets than into your own. Their suitability for Life Insurance is questionable at best, and without the careful regulation that has guided these companies for so long, it’s only a matter of time before they lose the gilding that allowed them to accumulate so much wealth in the first place. When people stop seeing life insurance as the safest place to put your money, some insurers will have to look elsewhere for money to gamble with.
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If you believe that you or a loved one has been the victim of an improperly administered Life Insurance Policy, contact the Evans Law Firm at (415) 441-8669. Based out of San Francisco, the Evans Law Firm handles estate planning, consumer fraud class actions involving particularly insurance and banking fraud claims, and consumer product liability.