What would happen if a bank or an insurance company went under?

What would happen if a bank or an insurance company went under?

Assuming the bank was an FDIC insured bank, and that your money is in a checking, Negotiable Order of Withdrawal account, a savings account, money market account or certificate of deposit, your deposits are insured by the full faith and credit of the United States government up to a specified amount.

Since 1980 that amount has been $100,000 per depositor, per bank, but was temporarily increased to $250,000 through December 2009 and it still is $250,000 for 2014. Under the Federal Deposit Insurance Reform Act of 2005 individual retirement accounts inside banks are also insured to $250,000.

You may be surprised to learn that the balance in the FDIC’s deposit insurance fund which is the account that insures your deposits contains approximately just 1.25% of all the deposits it insures.

Hmmm… What does this statement really mean? “The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. “

Who is the United States Government that is backing the FDIC? The government has NO MONEY of its own. The only money they have is the money they take off the people in taxes. So really the people are backing their own money in the banks, as we saw with the recent bank $750,000 billion bailouts.

Unlike banks that are regulated at the federal level insurance companies are tightly monitored, auditored and regulated by state insurance departments that require them to maintain adequate reserves on hand to meet their obligations. In most states, if an insurance company begins to have financial difficulties the insurance commissioner in the companies home state first steps in and takes control of the company and tries to help it regain its financial footing. If unsuccessful the company is turned over to the State Insurance Guaranty Association.

The State Insurance Guaranty Association will either transfer the policies to financially sound insurance companies or they themselves will provide continuing coverage and benefits to the policy holders.

Similar to the FDIC State Guaranty Associations also provide benefits up to a certain limit, although it varies from state to state. Most states set limits of $300,000 in life insurance death benefits and $100,000 in cash surrender or withdrawal value for life insurance.

So while there are safety nets for your money with both banks and life insurance companies it seems important and telling to mention the article in FORBES that states that publicly traded insurers are scrambling for cash and cutting dividends, and lobbying Washington for a cut of the $700,000 billion Wall Street bailout, while their Mutually Owned rivals haven’t asked for a dime.

Learn more about FDIC rules here.\

Look up your states rules for its State Insurance Guaranty Association

– i.e Texas reports: If your insurance company is placed in receivership, you may still have coverage.

Life and annuity policies. The Texas Life and Health Insurance Guaranty Association must keep paid-up life policies and annuities active. Guaranteed renewable life policies will remain active as long as you pay your premiums. The guaranty association may non-renew other policies at the end of the policy period.

The guaranty association may transfer some or all of your policies to another insurance company. If your policy is transferred, the new company will send you an assumption certificate as proof of your coverage. In some cases, the guaranty association may continue your policy and act as the insurance company. You will receive notice of any change to your policy.

On top of the fallacy of the FDIC please you must read this next post as well.- http://debtdiagnosis.com/2014/12/30/l50-the-worlds-mega-banks-now-have-official-permission-to-pledge-depositor-accounts-as-collateral-to-make-leveraged-derivative-bets/

and then watch this video, or read the transcript by renowned CPA Ed Slott. – http://debtdiagnosis.com/2015/03/04/forever-taxed-or-never-taxed-if-you-have-taxable-savings-you-have-a-problem-by-established-cpa-and-tax-adviser-ed-slott/

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November 5, 2014 · Jennifer · No Comments
Posted in: Uncategorized

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