Life Insurance Coverage and the Debt Deal Debacle

Standard & Poor’s announced rating actions on ten U.S. life insurers after its downgrade of the U.S. sovereign credit rating yesterday. S&P announced the following actions this week:

• Five U.S. life insurers were downgraded from AAA to AA+ and removed from credit watch negative, with outlook remaining negative: Knights of Columbus, New York Life, Northwestern Mutual, TIAA and USAA.
• Five U.S. life insurers had their ratings affirmed and outlooks revised to negative: Assured Guaranty, Berkshire Hathaway, Guardian, MassMutual and Western & Southern.
• S&P’s view of these companies’ fundamental credit characteristics has not changed. The actions follow as a result of the downgrade of the U.S. sovereign credit rating on Friday from AAA to AA+ with negative outlook.

Individuals should take actions now concerning their own insurance coverage in the wake of this week’s congressional confusion. Individuals with any type of insurance policy other than a term life should contact their insurance company and request an “inforce illustration” and discover how long the policy’s death benefits last.

An “inforce illustration” is a new calculation of an individual’s policy that considers the performance and dates of payments and the consequences to the policy were it to get only a 4% rate of return. By speaking to their insurance companies now, individuals can learn if they will have to pay premiums longer than anticipated, if the premiums will go up in the future, and if their policy is unsustainable.

Deirdre Wheatley-Liss, What Does the Debate Deal Debacle Mean to Your Life Insurance Coverage?, New Jersey Estate Planning & Elder Law Blog, Aug. 12, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.