AIG’s flagship company for life insurance, American General, offers a full range of term life and permanent life insurance products. Its primary specialty is its wide array of Universal Life and accompanying riders. In the following AIG review we will help shed light on why we have it ranked as one of our top 10 best life insurance companies by covering a brief history of the company, its ratings, services and products, including life insurance policies offered by American General, and the benefits they provide.
Review of AIG American General Life Insurance Company
Anyone on a search for companies offering the best universal life insurance needs to take a look at AIG’s American General. The products offered and the accompanying riders are top of the line.
We at I&E create various life insurance reviews, covering our favorite dividend paying whole life insurance and indexed universal life insurance policies available. Our goal is that we will empower you to make your own decision on which company is best for you based on your own needs and goals. As advisors, we carefully craft each policy to meet your specific objectives, to help you achieve financial success.
So with that in mind, let’s turn our attention to AIG’s beginnings to see how it arrived where it is today.
AIG stands for American International Group. AIG life insurance policies are issued by American General Life Insurance Company (AGL) except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life).
Cornelius Vander Starr founded what is now AIG back in 1919. He obviously had a knack for what he was doing because he turned a simple general insurance agency into a global behemoth in short order. In just 7 years time he opened his US based office under the auspicious of American International Underwriters Corporation (AIU), also spreading out into Latin America. The 1940s and 50s saw AIU expanding into European countries. In 1967, AIG was incorporated and the company continued to grow into the global powerhouse that it is today. And finally, in 2001 AIG acquired American General, its life insurance provider, and the focus of this AIG review.
Before we move on we thought that no review of AIG would be complete without briefly mentioning AIG and its part in the subprime loan fiasco. Throughout the early part of the last decade, a segment of AIG’s business took on way too much risk through various derivative products, a ticking time bomb that finally exploded in 2008-2009. The Federal Reserve was forced to step in and provide a huge bailout to the company. Of course, this tarnished AIG’s reputation and the company has been working hard on restoring its brand and reputation.
Of note, AIG is a huge global company and the largest commercial insurer in the U.S. and Canada. The division responsible for its downfall was just a small part of this gigantic company. Unfortunately, due to the volatile and destructive nature of the derivatives that division was involved with, it had the power to bring a global giant to its knees. But it should be noted that the life insurance division was never in peril and would have been sold to a willing and able suitor had AIG not had the Federal Reserve step in.
As of September 2017, AIG is restructuring and will have a general insurance business, a life and retirement unit and a stand-alone technology unit. This move demonstrates AIG’s new CEO Brian Duperreault’s commitment to growing AIG into the future.
The bottom line is AIG has recovered and looks as healthy as ever. One can only hope it has learned from its past mistakes and that it has the oversight needed to thrive in the years ahead. One way we can asses its present and future stability is to look at its financial ratings.
AIG Financial Ratings
AIG’s American General Life Insurance Company is a highly rated life insurance company. AG’s current ratings are:
- A.M. Best: A
- Fitch: A+
- Moody’s: A2
- S&P Global: A+
- Comdex Ranking: 81
These ratings are solid but certainly not on level with some of its competitors. As of May 2017, A.M. Best rated American General’s outlook as “stable” with a long term credit rating of a+, excellent, indicating A.M. Best’s belief in AG’s ability to meet long term financial obligation. All in all, AIG is on solid financial footing and appears to be moving in the right direction towards even higher ratings in the near future.
Products Offered by AIG
AIG offers an extensive product line of insurance and investments for both individuals and business. The company’s products and services for individuals feature:
Insurance for Individuals and Family, including
- Life Insurance
- Term life insurance
- Whole life insurance
- Universal life insurance
- Indexed universal life insurance
- Variable universal life insurance
- Travel Insurance
- Private Client Group
- Group Benefits
Investments for Individuals and Family, including
- Mutual Funds
- Structured Settlements
- AIG Home Loan
- VALIC – Variable Annuity Life Insurance Company
Life Insurance Policies offered by AIG
AIG offers both term life and permanent life insurance. There is not one size fits all policy so each type of coverage offers benefits. What type of life insurance you need will be largely determined by your financial health and the reason behind your need for coverage.
Benefits of Term Life Insurance
- Lower Initial Cost
- Income Protection
- Mortgage Protection
- Conversion Option
Benefits of Permanent Life Insurance
- Buy Sell Agreements
- Key Man Insurance
- Estate Planning
- Executive Bonus (Section 162) Plans
- Non-Qualified Deferred Compensation Plans
- Split Dollar Life Insurance
Life insurance policies offered through American General
American General provides various life insurance solutions, including term life, whole life, guaranteed issue whole life and universal life.
AIG, via American General, offers two term life options, level term life and return of premium.
The company’s term product is coined “Select-A-Term” due to its unique ability to be tailored to meet specific number of years. The term options include 10 year, and then 15 year to 35 year. Term years 15-30 include all years in between.
The policy is fully convertible by the end of the term conversion period or age 70, whichever comes first. A conversion option allows you to convert all or a portion of your policy to permanent coverage with no evidence of insurability. Rather, your original health rating is used.
AG ROP Select-A-Term
AG ROP is a level premium term product that allows you to surrender the policy for cash value at the end of the term, providing a full return of your premiums. Term lengths include 20, 25 & 26 – 35.
American Elite Whole Life
A non participating whole life policy that provides guaranteed cash value, guaranteed level premiums and guaranteed death benefit protection. No medical underwriting for policies of $99,999 or less for clients up to age 55.
Guaranteed Option to Purchase Additional Insurance – allows the purchase of up to $50,000 more coverage without underwriting up to age 39.
Guaranteed Issue Whole Life
Available for ages 50-85, AG’s whole life policy offers guaranteed coverage regardless of your health. The policy includes a two-year graded death benefit. The maximum face amount issued is $25,000.
I&E note on GI policies
While we understand the utility of guaranteed issue policies, one has to wonder why this market has exploded in growth over the last two decades. Many top life insurance companies now offer a GI product. Obviously there is a market for it. But why?
In our opinion this is a reflection on the poor financial advice too often propagated by supposed financial “professionals.” They would have you believe that their tired mantras of “buy term and invest the rest” and “buy and hope” ideologies actually work. The reality is for a growing number of retirees, they have not worked. And unfortunately, GI policies have grown in popularity as a result.
The solution is to explore new financial paradigms, and perhaps return to the days of old, to break free from the lies and discover better ways to create wealth than blindly giving your money to banks and other financial institutions.
AIG’s American General offers three types of Universal Life: Guaranteed, Indexed and Variable.
Guaranteed Universal Life
- Secure Lifetime GUL 3
- AG Secure Survivor GUL 2
- Asset Protector
Secure Lifetime GUL 3
The GUL 3 offers a guaranteed death benefit and guaranteed cash value growth. The main draw of this policy is the Lifetime Income Solution rider which provides accelerated benefits that can be used as income later in life.
Indexed Universal Life
- Elite Global Plus II
- Elite Index II
- Elite Survivor Index II
- Value + IUL
Elite Index II
The IUL policy from AG provides three death benefit options: level death benefit, increasing death benefit and level death benefit with return of premium. The policy provides for a decreasing 19 year surrender charge schedule.
Value + IUL
The focus of this indexed universal life policy is on a strong death benefit that has some cash value accumulation. The policy is designed for lower premiums than more conventional permanent coverage. You have a choice of a fixed account with a guaranteed 2% interest rate floor or an indexed account with a guaranteed 0.25% index account crediting, regardless of market performance.
Variable Universal Life
- AG Platinum Choice VUL 2
Indexed Universal Life vs Variable Universal Life
Both IUL and VUL policies provide lifetime coverage, pay a death benefit and allow access to cash value.
Both IUL and VUL policies are flexible policies, allowing you to adjust your payments and death benefit protection up or down in order to accommodate lifestyle changes.
The main differentiation being how the IUL and VUL allocate funds within the policy.
With IUL policies, You are not directly investing in the stock market. Rather, the cash value is allocated to the policy’s fixed account, where it will earn interest based on the company’s declared rate. Alternatively, you can transfer all or a portion of your funds to an indexed account. The indexed account tracks a particular index, and your index account is credited interest based, in large part, on how the index performs.
With IUL policies, your policy has built in safeguards. Although your maximum interest credited is limited by a cap, your downside is also protected due to a guaranteed floor, never less than 0.25% for AG IUL policies.
With VUL policies, you can also choose to allocate funds to the a fixed account, or transfer to variable investment options sub-accounts. The VUL sub-accounts invest directly in the underlying assets. With VUL policies, there is no minimum floor and no maximum cap. Your policy’s value may go up or down based on the performance of the market you are invested in.
Accelerated Access Solution
As people are living longer and longer, the need for help with long term care costs increases. There are linked benefit long term care options and stand alone long term care insurance policies. However, alternatives exists that provide income benefits derived from the death benefit for a lower premium that typical long term care insurance, such as AIG’s Accelerated Access Solution.
Accelerated Access Solution is a chronic illness life insurance rider that provides income benefits if you are unable to perform 2 of 6 activities of daily living or have a cognitive impairment that threatens your health and well being requiring substantial supervision. Your benefit options are 2% or 4% of the death benefit, subject to $360 daily and $10950 a month IRS per diem limits for 2017.
If you meet the chronic illness requirements, all your policy and rider deductions are waived.
You do not need to submit receipts. You can use the tax free income benefit however you choose. Benefits are available once the policy has been issued, once the standard 90 day elimination period ends.
The rider allows you to either receive benefits if you meet the requirements for chronic illness. Alternatively, if you do not need the chronic illness benefit, your beneficiary receives the life insurance death benefit. Either way, the policy will pay out.
Additional Benefits of Cash Value Life Insurance
Cash value life insurance is a tax advantaged vehicle that provides the following additional benefits.
Tax free life insurance policy loans
Life insurance loans are not taxable. You have the right to borrow from the carrier, using your cash value as collateral, for whatever you wish. The loan is charged against your death benefit. If you die with an outstanding loan, any amount still owed, plus interest, will be taken from your death benefit before your beneficiary receives the remainder.
Because they are not taxed, you can use life insurance loans to supplement your retirement income without fear of losing certain retirement benefits.
Tax deferred cash value growth
Under IRC 7702 which deals with cash value life insurance, the cash value in your policy grows tax deferred. Apart form withdrawing your cash value above your basis or having your policy lapse, your cash value is yours tax free by utilizing policy loans. Just be sensible and don’t borrow so much that your policy ends up imploding on you.
Tax free death benefit
The life insurance death benefit is no taxed. As long as your estate is under the federal exemption limit, or your own state inheritance tax level, no tax from your life insurance proceeds will be taxable. For larger estates, careful asset protection planning is necessary.
American General Life Insurance Company Policy Riders
The following life insurance riders from American General are not available on all types of policies.
Child Rider – you can add term life insurance for children to your coverage at one set price no matter how many children you have.
Terminal Illness Rider – allows access to your death benefit if you have a qualifying terminal illness resulting in a life expectancy of 12 months or less.
Waiver of Premium Rider – premium is waived if you become totally disabled before a certain age, typically 60 – 65.
Lifestyle Income Solution – Starting at age 85, you can accelerate up to 10% of the death benefit per year tax free up to your basis in the policy.
Accelerated Access Solution – You can access the death benefit to help pay for care due to a qualifying chronic condition after a 90 day elimination period.
AIG Review Conclusion
AIG is a highly-rated company, providing some unique life insurance products and riders. Each of these can be tailored to create a great life insurance policy. But the underlying question remains…
Is AIG the best company for your needs and goals?
It may be.
But without speaking to you and discovering your goals, needs and objectives we cannot say which company will best suit your needs.
Do you have questions or would you like to see an illustration of AIG or any of the other companies we represent?
Give us a call today for a free life insurance consultation with an advanced markets professional.