<PAGE>
 
                                                                       Exhibit 5


                                VINSON & ELKINS
                               ATTORNEYS AT LAW

                            VINSON & ELKINS L.L.P.
                             2300 FIRST CITY TOWER
                              1001 FANNIN STREET

                           HOUSTON, TEXAS 77002-6760

                           TELEPHONE (713) 758-2222
                              FAX (713) 758-2346

                                January 26, 1996


American General Corporation
2929 Allen Parkway
Houston, Texas 77019

Ladies and Gentlemen:

     We have acted as counsel to American General Corporation, a Texas
corporation (the "Company"), in connection with the preparation of the 
Registration Statement on Form S-4 (the "Registration Statement") to be filed by
the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), which Registration Statement
relates to the proposed issuance by the Company of certain shares of (i) the
Company's Common Stock, par value $.50 per share (together with the attached
Preferred Share Purchase Rights, "Common Stock"), and (ii) the Company's 7%
Convertible Preferred Stock, par value $1.50 per share (the "Preferred Stock"),
in each case pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") dated as of October 19, 1995, as amended January 25, 1996, among
the Company, AGC Life Insurance Company and Independent Insurance Group, Inc.
("Independent"), which Merger Agreement provides for the acquisition by the
Company of Independent by means of the merger described therein (the "Merger").
In addition to the shares of Common Stock and Preferred Stock to be issued in
connection with the Merger, the Registration Statement also relates to the
shares of Common Stock that may be issued upon conversion of the Preferred Stock
in accordance with the terms thereof.  In such connection, we are passing on
certain legal matters in connection with the foregoing issuances of the Common
Stock and the Preferred Stock.  At your request, this opinion is being furnished
to you for filing as an exhibit to the Registration Statement.

     In connection with rendering this opinion, we have examined such
certificates, instruments and documents and reviewed such questions of law as we
have considered necessary or appropriate for the purposes of this opinion.  In
addition, we have relied as to factual matters on certificates of certain public
officials and officers of the Company.

     Based upon the foregoing examination and review, we are of the opinion
that:

           (i)  when the conditions to the Merger set forth in the Merger
     Agreement have been satisfied and the Merger has been effected in
     accordance therewith, the shares of Common Stock issued in exchange for
     shares of capital stock of Independent pursuant to the Merger will be
     validly issued, fully paid and non-assessable;

           (ii) when (a) the proposed Statement of Resolutions Establishing a
     Series of Shares relating to the Preferred Stock (in substantially the form
     attached as an exhibit to the Merger Agreement) has been duly filed with
     the appropriate officials of the State of Texas in accordance with Article
     2.13 of the Texas Business Corporation Act and (b) the conditions to the
     Merger set forth in the Merger Agreement have been satisfied and the


<PAGE>

American General Corporation
Page 2
January 26, 1996
 
     Merger has been effected in accordance therewith, the shares of Preferred
     Stock issued in exchange for shares of capital stock of Independent
     pursuant to the Merger will be validly issued, fully paid and non-
     assessable; and

          (iii) the shares of Common Stock initially issuable upon conversion of
     the Preferred Stock in accordance with the terms thereof have been
     authorized for issuance and, when such shares have been duly issued upon
     conversion of the Preferred Stock in accordance with the terms thereof,
     such shares will be validly issued, fully paid and non-assessable.

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the caption "Legal
Matters" in the Proxy Statement/Prospectus forming a part of the Registration
Statement.  In giving this consent, however, we do not hereby admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission thereunder.

 
                                       Very truly yours,

                                       /s/ VINSON & ELKINS L.L.P.

                                       VINSON & ELKINS L.L.P.