request info email to friend
Insurance Solutions to Market Turmoil
By Joel Feiger
With the mortgage crisis causing national economic difficulties, financial companies experiencing severe liquidity problems, and individuals seeing their net worth decline due to falling real estate and stock markets, can investors insulate themselves from this mess?
Unfortunately, the answer is, not completely. We all live in the United States and, as a result, we have a great chance of experiencing success during what is usually a good economy. However, when national crises hit, they often affect everyone.
The good news is that investors can diversify their assets, not only in traditional markets such as stocks, bonds and real estate, but also by using life insurance as an asset class. In the right situation, life insurance can be viewed as a bond replacement, with the potential to provide better results. Today's life insurance can be designed with flexible and graded premiums, death benefits with return-of-premium riders, and varying cash values, depending on the insurance company and policy chosen.
For example, The Bensman Group could design a policy for a non-smoking 55-year-old male, rated preferred, that could yield tax-free returns of at least 7% if the person dies by age 95. If the person dies earlier, the return would be higher: The person would earn a return of more than 10% at age 85. If the policy owner no longer wanted to keep the policy once he or she became a senior, the life insurance settlement market could be an option. In the right situation, the policyholder could sell the policy on this secondary market.
These policies are backed by strong insurance companies, which -- with one well-known exception, AIG -- have largely escaped the current financial crises by holding to tight regulatory capital standards. And AIG’s life insurance subsidiary, American General, continues to have solid credit ratings.
Although investors cannot escape the economy, they can diversify their asset base in a very conservative fashion, using life insurance as an asset class.