Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 4, 1993 TAG: 9310040009
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
The $25,000 was split, with $8,900 invested with American Security Life Assurance Co. of North Carolina, in a payout plan of $183.24 a month for 60 months.
As you know, this company was liquidated by the North Carolina Department of Insurance and has been turned over to Metropolitan Life Insurance Co. The checks are still coming, so there's no problem so far.
The 60-month plan comes to a close Oct. 5, 1993 [Tuesday], and I have not heard from Metropolitan Life advising what procedures are followed in closing out this plan. I have tried to contact Financial Services Insurance Agency, but the letter came back marked "return to sender."
The balance of the total sum, $16,100, was invested with North American Co. for Life and Health Insurance in a 60-month deferred payment plan, with myself as annuitant and owner.
My certificate states under the heading of "certificate schedule," sub-heading "withdrawals," that "complete withdrawals are allowed only in the 30-day period following the end of any accumulation period."
On another page, there is a "table of values," which indicates the annuity value will be $24,999.95 at the end of the 60-month contract period which ends on Oct. 5. Both contracts expire on the same date.
I have had no word from North American concerning procedures to close out this contract.
Am I to assume that within 30 days of the expiration of the contract that I may withdraw the sum of $24,999.95 and end the matter? Will the company try to retain me as a customer?
In these days of low interest rates, what suggestions do you have for small investors like me to invest $25,000?
A: When you buy an annuity, it is important to obtain several of the ratings for the insurance company. These are issued by Best, Standard & Poors, Moody's, Duff & Phelps and Weiss Research. You are relying on the expectation that the company will be able to pay you many years down the road.
Your experience shows why it is also wise to deal with a local agency with a proven track record for longevity. You need continuing help from a reliable agency for all of your insurance dealings. You can also buy annuities through banks, but be sure to ask the same questions about the insurance company.
Andrew M. Hudick, of Fee-Only Financial Planning Inc. of Roanoke, said it appears that five years ago you purchased both an immediate annuity and a deferred.
Your immediate annuity paid you the full amount each month for the contractual five years. At the end of 60 months, Hudick said, this annuity will have no value. Metropolitan Life should have no further obligation to you as of Oct. 6, 1993 - Wednesday.
Your deferred annuity, purchased for $16,100, should have increased to $24,999 at the end of the five years. That's a gain of 55 percent, or about 10 percent a year.
This amount of money should be available for withdrawal Tuesday and for 30 days thereafter. The company, however, would probably be happy to keep you as a customer for a monthly payout or for another five-year accumulation period.
Hudick noted there are two companies that carry the name of North American Company for Life and Health. One is based in Illinois and the other in New York.
He found ratings for both companies of A(3) from Best, which has both of them under review, and BBB from Standard & Poors. These are not very good ratings. Weiss, a company known for its strict grading, gives both the New York and the Illinois companies mediocre ratings.
You can do much better than that. Many insurance companies carry a rating of excellent. You should, therefore, consider removing your money before the window of opportunity closes. You can buy another immediate annuity from a top-rated company that will provide you with monthly payments, or you can invest elsewhere.
Because your agency is no longer in business, Hudick said, you should either contact the company directly or else engage a new agent. The new agent then can contact the company on your behalf. If you wish to buy an immediate annuity from another company, the agency can help you choose a carrier with higher ratings.
He said the company may not contact you. If you don't notify the company of your intent to make a change it will likely result in the company assuming that you have agreed to another five-year accumulation term. He said the carrier will likely be happy to retain your business and continue the contract.
He said it is impossible to offer investment alternatives for small amounts of capital without more information about your individual situation. Hudick suggested that you follow some of the advice in an article on investing $1,000 which appeared Sept. 13 on the Money Page. Public libraries have our newspapers on file, or you can buy back issues from the newspaper's public service desk.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke, Va. 24010.
by CNB