Holding Onto My AIG Policies

In yesterday’s Washington Post, there was an article that examined whether AIG policyholders should cancel their life insurance policies and annuities in light of the insurance giant’s near meltdown several weeks ago.

The Post interviewed various state regulators, and their advice to consumers appeared to be unanimous: “Stay put.” My wife and I own AIG life insurance policies and we’re doing just that. The reason? The policies are extremely secure. When AIG appeared to be on the brink of collapse several weeks ago, there were several days when I couldn’t have proclaimed that with as much certainty. But now that the federal government has intervened, I don’t see any reason for concern.

It’s true that AIG’s life insurance companies were downgraded slightly by the major ratings agencies. But even with the downgrade, their ratings remain quite high compared to other major life insurers. Moreover, AIG’s problems never had anything to do with the health of the life insurance subsidiaries. Bad mortgage investments made by AIG’s holding company are what jeopardized the company.

Life insurance is a highly regulated business and companies are required to maintain very large reserves to meet future claims. If you’re like me and own an AIG policy, there’s no need to panic. Your life insurance policies are safe and secure.