RETAINED ASSET ACCOUNTS AND LIFE
The death of a spouse, parent, child, partner or other loved one is a difficult time. In addition to the emotional stress present during the weeks, months or years following a death, financial burdens may also arise. Life insurance is intended to assist with these financial burdens. While life insurance policies provide for a single payment of the death benefit, policies may also offer other payout options that are intended to fit your needs and those of your family. The National Association of Insurance Commissioners (NAIC) suggests you consider the following information if a life insurance company offers you a Retained Asset Account as an option to a single payment.
What is a Retained Asset Account?
A Retained Asset Account (RAA) is a temporary repository of funds. The account’s function is to give you (the beneficiary) the time you need to consider all of the financial options available. The payment of the total proceeds will be accomplished by delivery of a “checkbook.” While the documents you receive might look like a checkbook, it might actually be drafts which are similar to checks, but different in some ways.
The use of a RAA provides you the flexibility to make the right decision regarding your long-term financial needs while earning interest on the life insurance proceeds. You can choose to write one check or draft to access the entire proceeds at any time. However, you may be able to earn a higher rate of interest on the life insurance proceeds if you select a different payout option.
RAAs are generally provided as an option to the beneficiary, however for some group policies, the employer might have agreed that a RAA is the only way life insurance claims are settled. If that is true in your case, you may write a check or draft to transfer the remaining funds as you see fit.
Key Questions to Ask and Issues to Understand
If you are considering the option of a RAA or are provided one to settle a death claim, here are some important issues to consider:
Other Payout Options
One size does not fit all and this is why various payout options are offered. If you choose to initially receive life insurance proceeds through a RAA, other payment options should be preserved until the entire balance is withdrawn or the balance drops below a certain dollar amount. Other payout options may include one or more of the following:
If you have questions about RAAs or other life insurance proceed options, contact your state insurance department. Visit www.naic.org for contact information and Web links to your state insurance department.
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About the NAIC
Formed in 1871, the National Association of Insurance Commissioners
(NAIC) is a voluntary organization of the chief insurance regulatory
officials of the 50 states, the District of Columbia and five U.S.
territories. The NAIC has three offices: Executive Office, Washington,
D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office,
New York City. The NAIC serves the needs of consumers and the industry,
with an overriding objective of supporting state insurance regulators as
they protect consumers and maintain the financial stability of the
insurance marketplace. For more consumer information, visit insureUonline.org.
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