Will our ‘wealth growth plans’ protect us if the dollar collapses?

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Dear Liz,
My wife and I recently purchased a wealth growth plan through our local bank, and it is underwritten by a very good insurance company. The principal is a guaranteed amount payable at time of death. I’d like to know if this is a smart place to put most of our life savings with the current state of the economy. I know no one likes to talk about it, but what happens to the money in that policy if the dollar collapses like many experts are predicting? What would we get back if there is a new currency issued?
— Keen

Dear Keen,
It’s not clear what “experts” you’re listening to, or what financial product you were sold, but few financial institutions likely would survive the kind of economic collapse that would require a new currency to be issued.

Most states have guaranty funds to help pay the obligations of financially distressed insurance companies. The amount you get depends on the state and the product, but the limits are typically $100,000 to $300,000. You can visit the National Organization of Life and Health Insurance Guaranty Associations’ website to learn more details about your state’s plan.

These funds are meant to reimburse policyholders for the occasional insurer insolvency, not a widespread economic catastrophe such as a collapse of the dollar.

Fearmongers may enjoy speculating about what could bring on such a disaster, but the reality is that the U.S. economy is remarkably resilient and the U.S. government, however flawed, is seen as one that will pay its obligations. That’s 1 of the reasons insurers (and foreign investors) tend to invest heavily in U.S. government securities such as Treasury bonds. These are seen as very low-risk investments because they’re backed by the full faith and credit of the U.S.

You might want to take this “wealth growth plan” to an objective 3rd party, such as a financial planner who is not paid on commission, for a more realistic appraisal of its benefits and drawbacks.

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