Sell a CD early buy a fixed annuity

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SlowMovingInvestor
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Re: Sell a CD early buy a fixed annuity

Post by SlowMovingInvestor »

indexfundfan wrote: Sun Aug 02, 2020 9:38 pm Any chance that you might move out of your current state? :-)
I think annuities are covered by the guaranty of the state in which you originally purchased them, but not sure about renewals.
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indexfundfan
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Re: Sell a CD early buy a fixed annuity

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SlowMovingInvestor wrote: Mon Aug 03, 2020 9:17 am
indexfundfan wrote: Sun Aug 02, 2020 9:38 pm Any chance that you might move out of your current state? :-)
I think annuities are covered by the guaranty of the state in which you originally purchased them, but not sure about renewals.
I believe I have read that it will be from the state that you are a resident of. But if the insurer is not available in your new state, then it will be provided by the state where the insurer is based in.
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Stinky
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Re: Sell a CD early buy a fixed annuity

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indexfundfan
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Re: Sell a CD early buy a fixed annuity

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Stinky wrote: Mon Aug 03, 2020 9:38 am
SlowMovingInvestor wrote: Mon Aug 03, 2020 9:17 am
indexfundfan wrote: Sun Aug 02, 2020 9:38 pm Any chance that you might move out of your current state? :-)
I think annuities are covered by the guaranty of the state in which you originally purchased them, but not sure about renewals.
Policies are covered by the guaranty fund of the state in which the policy is purchased.

For example, if I live in CA and buy an annuity, I am covered by the CA guaranty fund no matter where I live. If I choose to exercise the contractual right to continue my annuity after the initial term period expires, I have kept the original contract so I am still covered by CA.

However, if I do a 1035 exchange to a new annuity, I will be covered by the guaranty fund of the state where I am residing when the new annuity issued.
This is what is posted for my state's insurance guaranty association website:

If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

https://www.gaiga.org/FAQ
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Stinky
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Re: Sell a CD early buy a fixed annuity

Post by Stinky »

indexfundfan wrote: Mon Aug 03, 2020 9:50 am
SlowMovingInvestor wrote: Mon Aug 03, 2020 9:17 am
indexfundfan wrote: Sun Aug 02, 2020 9:38 pm Any chance that you might move out of your current state? :-)
I think annuities are covered by the guaranty of the state in which you originally purchased them, but not sure about renewals.
This is what is posted for my state's insurance guaranty association website:

If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

https://www.gaiga.org/FAQ
Oops!

You’re dead on right. I’m wrong. My state guaranty fund site says the same thing.

I’ve deleted my prior post about this issue. (Guess I need to read more about guaranty funds before I post again)

One thing that this thread shows is that there is variation amongst the states as to guaranty fund coverage. Folks would be well served to google their own state’s life and health guaranty fund website to see what their coverage is.

There’s an interesting question that I don’t know the answer to. If I purchase an annuity in CA, where the 80% rule applies, and then move to a state where there is no 80% rule, will the rule apply to me in case of an insolvency? I have no idea about that.
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indexfundfan
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Re: Sell a CD early buy a fixed annuity

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Stinky wrote: Mon Aug 03, 2020 9:57 amIf I purchase an annuity in CA, where the 80% rule applies, and then move to a state where there is no 80% rule, will the rule apply to me in case of an insolvency? I have no idea about that.
My interpretation is that it should follow the rules of the state where you get the coverage at the point of insolvency.
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jeffyscott
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Re: Sell a CD early buy a fixed annuity

Post by jeffyscott »

indexfundfan wrote: Mon Aug 03, 2020 10:20 am
Stinky wrote: Mon Aug 03, 2020 9:57 amIf I purchase an annuity in CA, where the 80% rule applies, and then move to a state where there is no 80% rule, will the rule apply to me in case of an insolvency? I have no idea about that.
My interpretation is that it should follow the rules of the state where you get the coverage at the point of insolvency.
That's the way that I had read that too.

Also, I don't know how likely changes to coverage may be, but if your state has 100% coverage now (as most apparently do :?: ) and then changed that to something like the CA 80% coverage prior to the insolvency, you would get only the 80%. The coverage is only what is in effect at the time of insolvency (or maybe it was called the time of impairment), based on faq that I read for my state.
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SlowMovingInvestor
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Re: Sell a CD early buy a fixed annuity

Post by SlowMovingInvestor »

indexfundfan wrote: Mon Aug 03, 2020 10:20 am
Stinky wrote: Mon Aug 03, 2020 9:57 amIf I purchase an annuity in CA, where the 80% rule applies, and then move to a state where there is no 80% rule, will the rule apply to me in case of an insolvency? I have no idea about that.
My interpretation is that it should follow the rules of the state where you get the coverage at the point of insolvency.
When I bought my annuity a few days ago, I talked to the annuity salesperson and I thought he said it would be covered by my state of residence when I purchased the annuity, but I must have misheard him.

[He also mentioned that he wasn't allowed to mention the guaranty association coverage proactively but he could answer my questions because I had brought it up first ]
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indexfundfan
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Re: Sell a CD early buy a fixed annuity

Post by indexfundfan »

Just thought I would share a table (compiled by a third party) which summarizes the insurance guaranty coverage provided by different states

https://www.annuityadvantage.com/resour ... ociations/

It's interesting to note that CA is the only state with the 80% limitation.

Note: Please do not regard the table as authoritative; verify the information with the state's insurance guaranty association before making a decision.
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nalor511
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Re: Sell a CD early buy a fixed annuity

Post by nalor511 »

Anyone know why the interest in a non qualified fixed annuity is locked into IRA-like withdrawal rules? Just curious, seems oddly like trying to lock you into an annuity forever. Also seems interest cannot be rolled into IRA from a non qualified annuity, upon maturity, based on my reading.
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Re: Sell a CD early buy a fixed annuity

Post by afan »

My state does not have a 20% haircut, but the protection is per company. It does not matter how many policies you have. If you have three annuities from the same company and it fails, you are covered up to the maximum ($250,000), that figure is the same if you had 3 policies for $250k each or one policy for $750k.

There is a $300k limit for life insurance policies and $100k for life insurance cash value. Again, holding multiple policies from the same company does not increase coverage.

As far as I can tell from the Best report, not all "impaired" companies fail. Your company could become impaired without being pushed into the hands of the gauranty association and without you losing money.
Those impairment rates don't seem that high but they are much higher than the risk of an FDIC-insured product.

More important to know the rules for your state association and to limit your exposure to the amounts covered. Or allow your exposure to go higher for a product that you can exit if you get nervous. For example, an annuity that has not annuitized. Once you start taking annuity payments I think you are stuck.

If you were to follow that approach, limit yourself to very strong companies and periodically check their ratings then you would have very low risk.
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Stinky
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Re: Sell a CD early buy a fixed annuity

Post by Stinky »

indexfundfan wrote: Tue Aug 04, 2020 3:01 pm Just thought I would share a table (compiled by a third party) which summarizes the insurance guaranty coverage provided by different states

https://www.annuityadvantage.com/resour ... ociations/

It's interesting to note that CA is the only state with the 80% limitation.

Note: Please do not regard the table as authoritative; verify the information with the state's insurance guaranty association before making a decision.
Thanks for the link. Very useful.

Note that the table doesn't cover health insurance (medical, DI, LTC). There's another BH thread where the topic came up, and it appears that the limit in CA on health insurance is just over $600,000, with no 80% haircut.
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indexfundfan
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Re: Sell a CD early buy a fixed annuity

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afan wrote: Wed Aug 05, 2020 12:42 pm As far as I can tell from the Best report, not all "impaired" companies fail. Your company could become impaired without being pushed into the hands of the gauranty association and without you losing money.
Those impairment rates don't seem that high but they are much higher than the risk of an FDIC-insured product.

More important to know the rules for your state association and to limit your exposure to the amounts covered. Or allow your exposure to go higher for a product that you can exit if you get nervous. For example, an annuity that has not annuitized. Once you start taking annuity payments I think you are stuck.

If you were to follow that approach, limit yourself to very strong companies and periodically check their ratings then you would have very low risk.
That's true. Impairment just means that the state's insurance commissioner took some action. It doesn't imply that the insurance guaranty association had to cover any losses.
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