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Subject:  Re: Understanding Annuities Date:  3/21/2011  12:49 PM
Author:  pauleckler Number:  410 of 456

The statement relates to all of the promises made by the annuity contract you sign with the insurance company. It is especially important to those who have annuitized their contracts meaning they have assigned all of the assets to the insurance company in return for a promise to make regular or monthly payments to you under the contract usually for life.

What happens if financial disaster means the company does not have the assets to pay or goes bankrupt? The language says you go to bankruptcy court and press your claim, but you will probably collect only part of what is due you if anything.

As a practical matter, every state requires the industry selling contracts in their state to maintain funds to bail out their failing sister company contract owners. The industry claims that so far everyone has collected on their contracts. Hence, all have been made whole in spite of many bumps in the economy from time to time.

The same language applies to the funds you invest in a variable annuity and the guarantees of future value. They are backed by the company's assets and not by any govt agency. That is why you want to check the AM Best rating of the company selling your contract. You depend on their financial stabilty for the life of the contract, sometimes for decades.
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