It has recently been reported that the world’s largest insurance carrier – insurance giant AIG – is in deep financial trouble. According to various AP reports, AIG is in immediate need of between $20 and $40 million dollars, and may require as much as $70 – $80 million for long term needs. The entities that rate insurance companies for investment purposes (Standard & Poor’s, Moody’s Investors Services and Fitch Ratings) have all reduced the score of AIG in recent days.
While company investors and executives battle the financial worries and attempt to quell a worried market, many individuals with life insurance policies are concerned over whether they will still have protection for their families in the event that AIG goes under. After quick debate a decision was made by the United States government to provide $85 million in funding to the insurance company to keep it afloat. So, in the short run, it appears that AIG will survive and can attempt to continue its business enterprise. However, the scare placed many life insurance and other policy holders in fear of losing their protection. Policy holders in Texas should know about certain protection plans in place in the event of a worst case scenario.
In the event that an insurance company, such as AIG, becomes insolvent, the State of Texas created a fund that can provide assistance and cover those policy obligations, at least partially. More information can be found by reviewing the information contained at the Texas Life, Accident, Health & Hospital Service Insurance Guaranty Association.
Policy holders whose life insurance is provided by AIG should not panic, inasmuch as the financial crisis has been weathered in the short run; but, if a company does not survive, Texas residents will have some recourse for protection through this State created agency.