What Would Happen if Your Life Insurance Carrier Collapsed?

Some of the biggest, safest insurance companies in the US have lost over 50% of their capital in the last 2 years.

That is Not the bad news.

The bad news is that much of the remaining capital the companies report are of suspect valuation, since mortgage backed securities, especially commercial mortgage backed securities, CMBS, are about to implode.

Recently, a major office building in Boston was sold for 50% of its “value.” I doubt that the securities that mortgage supported reflected the true value of the property, do you? How much of it are owned by insurance companies? I don't know.

Or how about the impending blow up of one of the biggest Mall owners in the world, in the next 30 days, think that will have an impact on the assets of the insurance companies? (See post, The Next Big Bang)

Update! General Growth Properties, the company hinted at above, today, April 16, declared bankruptcy! The stock market gained over 100 Points!


With 10% of life insurers capital invested in commercial real estate, it is estimated that a decline in value of the real estate of 25% would wipe out 1/2 of the insurers nominal capital, including of course the hidden losses mentioned above.

This would crush their stock and may incite shut downs of many companies by their State Legislatures.

Estimates I am seeing are that about 30% of all commercial mortgages will fail!

Did you ever think what would happen if your life insurance company collapsed, went out of business?

On paper, you would be covered for $100,000 in life claims. On paper.

In reality, most life insurance policies are backed by a State Insurance Guarantee.

How many States are currently facing bankruptcy? About 40 out of the 50.

But even if your family did receive the full $100,000, out of the $500,000 you were paying for with the other $400,000 blowing away with the debris from the insurance company itself; along with your premiums you paid for it over the years, what then?

Take out $10,000 for your burial, $20,000 for final hospital, medical and other bills and your family will have between $30-$50,000 to ‘Maintain Their Lifestyle.”

Obviously, that ain’t gonna help!

What to do?

I am assuming you have a whole life policy with cash value.

Remember how much equity you had in your house back in 2006! How much do you have now?

The same with the cash equity in your insurance policy. I would borrow out as much of the cash value as possible, before it evaporates like your home equity and invest it in precious metals, gold and especially silver.

If you should die in the near future, your family’s insurance proceeds would be lessened by the amount of the loan, but would still total the face value, including your investment in precious metals.

We are predicting that the precious metals are going to go on the greatest Bull Run in the history of the world, once the economy is “saved” by devaluing our currency, as that is the only way the gigantic debts we owe can ever be repaid.

There is precedence for such a move. In the ancient world, Emperors would either decrease the size of their coins or in Rome, dilute the gold or silver with other, less valuable fillers, while proclaiming the coins were worth the same amount of money.

In the First Great Depression, Roosevelt devalued the dollar by raising the price of gold, to which the value of the dollar was pegged, from $20 Oz to $35 Oz. This meant that what it used to take $20 to buy now took $35 or 57% more.

Looked at another way, the supply of money was increased by 57%, enough to pay off the huge debts which of course remained fixed in value; albeit with cheaper dollars. This is China's big fear.

There is simply not enough money in the world to pay off the Trillions of dollars in debts and unfunded mandates like medicare and social security facing the US.

If the dollar is devalued by only 10%, it is estimated that gold will go to over $5,000 per ounce and silver over $100. It is also likely that the devaluation will have to be even greater, maybe 20% which would mean gold at $10,000 Oz. Of course we would no longer call it a "dollar." OMG! They are already with the "new dollar" called the Amero, after the Euro; but that is a different discussion.

For reasons discussed in other posts on this blog, I believe that silver will outperform gold, real estate, and the stock market when the economy is re-flated.