"Retained-asset accounts" are in the news recently. See, e.g, Andrew Frye, "Lawmakers Question Value of Insurer Safety Net to Beneficiaries" (Bloomberg.com, Friday, August 13, 2010). Retained-asset accounts hold and invest benefits payable by Life Insurance Companies to the survivors of dead soldiers. The survivor may get a partial payment of death benefits. Whether or not the survivor receives any of the benefits, in every case the survivor gets a "checkbook" from the Life Insurance Company to draw on the account, with a caution from the Life Insurer not to spend it all in one place. In the meantime, the Life Insurer takes the money and invests it, making itself a profit.
Retained-asset accounts are not protected by the Federal Deposit Insurance Corporation. They may not be protected under State Guaranty Funds in the event of Insurer insolvency.
If an informed survivor was aware of her or his choice, it seems like the best choice they might make is to take a payout and invest the benefits, by and for themselves.
The National Conference of Insurance Legislators is set to consider a draft Model Bill of Rights of beneficiaries under retained asset accounts at NCoil's November meeting. For its part, although the National Association of Insurance Commissioners has apparently issued press releases favoring retained-asset accounts, it will at least examine the issue. The NAIC's inquiry began at its meeting in Seattle this month. It is fair to predict that its inquiry will continue at its meeting in October in Orlando. I plan to be there to report on what they decide.
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