Though AIG has escaped insolvency, your clients may be wondering what would happen if any of the companies from which they've bought insurance products were to go bust.

Here, based on interviews with insurance experts, are some scenarios you can share with clients. The good news is that most policies are backed by state-mandated liquidity requirements. Specifics vary from state to state, so you can check for further detail with your state insurance department.

• Fixed annuities. The ability to continue payouts probably would not be affected, thanks to state-mandated liquidity requirements.

• Variable annuities. Assets are held away from the insurer, so they are not affected.

• Life insurance. Varies by type.

• Term: No effect unless they have guaranteed premiums, which could rise.
• Whole life: Dividends could be affected, and access to cash balances could be curtailed.
  
• Nonguaranteed universal life: Policyholders could end up with a decrease in the adjustable interest rate and/or an increase in the cost-of-insurance charge (covering death claims and expenses). In addition, access to the cash balance could be delayed. This is what happened in 1991, when Mutual Benefit Life became insolvent and was effectively taken over by New Jersey insurance regulators.
• Nonguaranteed universal life policyholders lost access to their full cash value for six years.
  
• Guaranteed universal life policies: No effect.

 

• Property and casualty insurance. A client's ability to collect a claim is not guaranteed. If a claim isn't paid, clients can seek relief from a state insurance fund pool, which would pay out a portion of the claim, and/or seek relief in court.