Q: I purchased two insurance policies paying me an annual rate of 4.5 percent 20 years ago. The insurance company has always honored this 4.5 percent rate, and my question is, can I count on them to continue to honor it? Could a regulatory agency force them to change that rate?
A: Assuming the policies you bought were some form of annuities, your question may be very timely because annuities often have a 20-year term. However, there are lifetime annuities, which would continue to pay for as long as you live, and may even continue to pay a surviving spouse.
In either case, part of the answer to your question will be in the annuity contracts. Is there a fixed term of years on these annuities? Are there escape clauses that allow the insurance company to terminate the contracts or alter the terms? Annuities come in many forms, so you need to review your contracts to determine whether the insurance company has any options other than continuing to pay you 4.5 percent.
As for whether a regulatory agency would interfere with these contracts, that is highly unlikely. Regulatory agencies are there to make sure insurance companies honor their contracts, not to help them get out of them. The only real risk of this sort of thing would be in the event of a bankruptcy on the part of the insurance company. So, keeping an eye on news and financial information about your insurance company might be of interest.
If it turns out that you've locked in 4.5 percent for life, you will have done very well for yourself. Back when you signed your contracts, you might have been able to earn more in savings accounts, CDs, or money market accounts. Now, though, CD, savings, and money market rates have plunged to a fraction of 1 percent, so your 4.5 percent is looking pretty good.
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