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People with an annuity or a life-insurance, auto or homeowners policy through American International Group are no doubt mighty worried right now as they watch that company struggling.

But policyholders don't need to panic, experts say. For one thing, while the holding company is in financial distress, AIG's insurance subsidiaries are separate entities that are financially sound, regulators and others say.

AIG's insurance subsidiaries "did not receive a bailout; they are financially solvent," Sandy Praeger, president of the National Association of Insurance Commissioners, said in a statement last week. She added in an interview that "state insurance laws regulate the AIG subsidiaries to assure that the assets are preserved to protect the interests of policyholders."

Further, if an insurance company were to fail, each state runs an insurance guaranty association to protect policyholders. Insurers ante up fees to ensure customers of failed firms are protected. Still, those state guarantees are limited -- and that potentially could mean problems for some policyholders if an insurer becomes insolvent.

Your best bet now is to take a measured approach. Find out whether you're fully protected by state guarantees. Contact your state insurance department, or look up your state's rules at www.nolhga.com.

If you're not, weigh your options. Talk to your insurance broker about possible surrender charges or other penalties for exiting your policy or annuity, and determine the cost of purchasing similar products elsewhere. Remember that even consumers with policies worth more than their state's guaranteed limit may have nothing to worry about given that these insurers are solvent.

Life-Insurance Protections

State guaranty associations protect life-insurance policyholders for at least $100,000 in cash surrender or withdrawal value and at least $300,000 ($250,000 in California) in death benefits, says Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations in Herndon, Va. Some states provide protection up to $500,000.

For policyholders within their state's limits, if a company fails, "there is a very good chance that your policy will be transferred [to a different insurer] and you'll never miss a beat," Mr. Gallanis says.

For fixed annuities, states generally cover up to $100,000, though some guarantee $300,000 or more.

Variable annuities are investment products. Generally your money is invested through a subaccount that is separate from the insurer's assets and not covered by state associations. However, the portion of the contract that promises a payout from the insurer usually is covered.

Usually a failed insurer's business is taken over by another company in what can be a seamless transition for policyholders, Mr. Gallanis says.

"Typically the new insurer will provide all of the protection that would have been provided under the old policy," he says.

But it is possible in some situations that people with life-insurance policies worth more than the state limits may find they're on the hook for a higher premium or a reduced death benefit, Mr. Gallanis says.

Similarly, it's possible an annuity contract might be modified by an acquiring company; for instance, if the promised interest rate is deemed too high. But that's a rare event, requires approval by regulators, and is much likelier when an insurance company's failure is rooted in its policy-writing practices.

Auto, Home Policies

There are similar state guaranty associations protecting consumers with homeowners and auto-insurance policies. If you have a claim filed with a company that then fails, "the guaranty fund steps into the shoes of the insurance company from a claims-paying perspective," says Roger Schmelzer, chief executive of the National Conference of Insurance Guaranty Funds in Indianapolis. Most state guaranty associations cover homeowners- and auto-policy claims up to $300,000, he says.

If you've prepaid a premium, that is also usually recoverable through the guaranty association, says Barb Cox, the group's vice president of legal and regulatory affairs, though the limit may be $10,000 or $25,000.

Meanwhile, if you're simply holding a policy, with no claims in process, then consider shopping around, Mr. Schmelzer says.

Read more at marketwatch.com

IT looks as if we may get through this weekend without another scramble to save a troubled financial firm with a trillion-dollar balance sheet.

But that doesn’t mean taxpayers are out of danger. No, sir. No, ma’am. Because lawmakers are at work on a bailout fund that would buy the kind of distressed assets (defaulted mortgages, for example) that have ignited this firestorm.

Treasury Secretary Henry M. Paulson Jr. has called the fund the “troubled asset relief program.” I’ll just call it TARP for short (you know, the kind of thing they spread over muddy fields so you don’t soil your Guccis).

And depending on how TARP is operated, and how the assets are valued before taxpayers are forced to buy them, it could bloat our final bill for this mess while benefiting the very institutions that got us into it.

Yes, we need a smart plan and a concerted effort to get the frozen credit markets up and running. But we also have to be certain that the types of conflicts of interest that riddle Wall Street aren’t visited upon TARP.

Consider: A bank wants to sell the TARPistas (also known as TAXPAYERS) a pile of stinky mortgage securities that it currently values at 60 cents on the dollar. Let’s assume that the most recent actual trade between market participants for similar assets was struck at 30 cents on the dollar.

So what’s a fair price that we TARPistas should pay for the assets?

If we bought at 60 cents, a price that the bank would argue is appropriate, we would most likely face a loss. The bank, however, would be much better off than if it had to dump at 30 cents.

Conversely, if the assets were sold at 30 cents, taxpayers could wind up making a profit on the purchase if the assets performed better than expected over time. But the bank would have to write down the value of the assets as a result of the sale, possibly threatening its financial standing yet again.

Do you think, perchance, that financial services lobbyists might be working their Hill contacts right this very minute to ensure that the TARP valuations are rigged in their favor?

You know the answer to that.

And you also know that we should steel ourselves for heavy losses as the TARP gets pulled over our eyes. Never mind that it was the banks, with their reckless lending and monumental leverage, that drove us into this ditch.

Such is our lot today: They break it. We own it.

Taxpayers deserve better than this, of course. But we have no lobbyists, so we get skinned.

IF federal regulators and political leaders want to earn back some trust, they could do two things. First, they could provide us with some transparency about whom precisely we are backing in the recent bailouts.

Take, for example, the rescue on Tuesday of the American International Group, once the world’s largest insurance company. It was pretty breathtaking. Since when do insurance companies, whose business models seem to consist of taking in premiums and stonewalling claims, deserve rescues from beleaguered taxpayers?

Answer: Ever since the world became so intertwined that the failure of one company can topple a host of others. And ever since credit default swaps, those unregulated derivative contracts that allow investors to bet on a debt issuer’s financial prospects, loomed so big on balance sheets that they now drive every bailout decision.

The deal to save A.I.G. involves a two-year, $85 billion loan from taxpayers. In exchange, the new owners — us — get 80 percent of the company. If enough of A.I.G.’s assets are sold for good prices, we may get our money back.

Credit default swaps, which operate like insurance policies against the possibility that an issuer of debt will not pay on its obligations, were the single biggest motivator behind the A.I.G. deal.

A.I.G. had written $441 billion in credit insurance on mortgage-related securities whose values have declined; if A.I.G. were to fail, all the institutions that bought the insurance would have been subject to enormous losses. The ripple effect could have turned into a tsunami.

So, the $85 billion loan to A.I.G. was really a bailout of the company’s counterparties or trading partners.

Now, inquiring minds want to know, whom did we rescue? Which large, wealthy financial institutions — counterparties to A.I.G.’s derivatives contracts — benefited from the taxpayers’ $85 billion loan? Were their representatives involved in the talks that resulted in the last-minute loan?

And did Lehman Brothers not get bailed out because those favored institutions were not on the hook if it failed?

We’ll probably never know the answers to these troubling questions. But by keeping taxpayers in the dark, regulators continue to earn our mistrust. As long as we are not told whom we have bailed out, we will be justified in suspecting that a favored few are making gains on our dimes.

A.I.G.’s financial statements provided a clue to the identities of some of its credit default swap counterparties. The company said that almost three-quarters of the $441 billion it had written on soured mortgage securities was bought by European banks. The banks bought the insurance to reduce the amounts of capital they were required by regulators to set aside to cover future losses.

Enjoy the absurdity: Billions in unregulated derivatives that were about to take down the insurance company that sold them were bought by banks to get around their regulatory capital requirements intended to rein in risk.

Got that?

Which brings us to Item 2 for policy makers. Stop pretending that the $62 trillion market for credit default swaps does not need regulatory oversight. Warren E. Buffett was not engaging in hyperbole when he called these things financial weapons of mass destruction.

“The last eight years have been about permitting derivatives to explode, knowing they were unregulated,” said Eric R. Dinallo, New York’s superintendent of insurance. “It’s about what the government chose not to regulate, measured in dollars. And that is what shook the world.”

And it will continue.

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Some Insurance Types
Different types of Insurance plans are offered based on your needs. Some of them are
• Life Insurance
• Health Insurance
• Dental Insurance
• Automobile insurance
• Property insurance

Life Insurance
Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as terminal illness or critical illness. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums.

Health Insurance
The term health insurance is generally used to describe a form of insurance that pays for medical expenses. Basically, the client pays a sum of money called the Premium and in turn the Insurance firm would commit to pay a predetermined sum of money to meet the customer’s claims. Health insurance plans are offered in two categories. They are individual and group insurance policy. The individual plans covers health costs for a single person whereas the group health insurance plan covers medical coverage for the entire family.

Dental Insurance
Dental insurance covers dental costs for an individual or group. The costs include normal dental care cost as well as damage to teeth in an accident. Dental insurance protects people from financial hardship caused by unexpected dental expenses.

Automobile insurance
Auto insurance protects the policy owner against financial loss if he has an accident. It is a contract between policy owner and the insurance company. The policy owner agrees to pay the premium and the insurance company agrees to pay the losses as defined in your policy.

Property insurance
Property insurance gives protection against your property. This includes specialized forms of insurance like fire insurance, flood insurance, earthquake insurance, home insurance etc.

Life insurance is the building block of any good financial plan. It can protects your family against the loss of income caused by a premature death. Some life insurance policies are permanent, while others only last a specific amount of time and are commonly referred to as term life insurance. Whether you think you need term life insurance or a permanent life insurance plan, you should always get the policy that is right for you.

Disability insurance can protect against the agony of income loss caused by an injury or sickness outside of the workplace.

Group Health Insurance can help employees pay for some of the costs of medical services including yearly physicals, blood testing, and surgeries. Most group health insurance plans require a co-pay for covered doctor visits and prescription drugs.

Travel insurance is a type of insurance that can help indemnify you against a trip cancellation or evacuation. A travel insurance policy comes with specific definitions regarding to what it considers an emergency evacuation or travel related sickness or accident. You can find insurance coverage for terrorism, hazardous sports and activities, annual travel insurance (Holiday Insurance policy), and much more.

Travel Health Insurance is a health insurance coverage for those that do not reside in their native country. Many American's health insurance plans do not offer medical protection outside of the United States. If you are a college student abroad, missionary, or expatriate in need of a doctor or hospital in another country, you might need to purchase a travel health insurance policy; otherwise the school or organization has it available for you. Travel Health Insurance is also known as international or global medical health insurance.