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By Mike Heuer

The recent economic turmoil coupled with its impact on many life insurance and term life insurance companies understandably has many people concerned insurers might not have the funds necessary to fulfill their obligations, but the companies participating in the United States term life insurance market are well-funded, according to the American Council of Life Insurers.

America’s term life insurance companies along with whole life insurance companies recently held a surplus of more than $281 billion, according to the American Council of Life Insurers. While recent stock market performance reduced the surplus amount, what remains is more than sufficient to pay expected life insurance claims. Life insurance companies also recently held some $462 billion in government bonds. Some 94 percent of total bond holdings are considered “investment grade,” meaning they are among the highest rated bonds on the market. Total life insurance industry general account bond holdings amounted to nearly $2.3 trillion at the end of 2007, according to the American Council of Life Insurers.

Term life insurance policyholders are protected by their respective state insurance guaranty associations, which guarantee policyholders receive their insurance benefits in even if an insurer suffers a major financial loss. Term life insurance is regulated by respective state insurance departments. Each insurance company must have state authorization to sell insurance policies of any kind to state residents, and states typically place strict limitations on the types of investments insurers can hold.

Term life insurance companies mostly invest in secure bonds, which have a proven history of long-term growth and strength. Term life insurance and whole life companies are among the largest investors in corporate bond financing with more than $1.8 trillion invested, according to the life insurers’ council.

Due to sound investing and regulatory oversight, the United States term life insurance industry has a long history of financial strength and remains strong despite current economic uncertainties, the American Council of Life Insurers says.