The August 26th issue of the Wall Street Journal had an article that started with the
" Investment Now a Draw For Buyers of Insurance"
What assumptions would you make from the following excerpts?
- "Buyers of life insurance in the second quarter moved toward purchasing more-expensive policies that include an investment component, perhaps seeking safety amid turmoil in the stock
- "Annualized premiums on whole-life policies jumped 23% while universal life rose 11% in the quarter"
- "Both whole and universal-life policies invest primarily in the investment-grade bonds. While the premiums are often significantly higher than for term-life insurance, many such policies recently
have promised minimum interest payments of 3% or more."
- "Both whole and universal life delivered positive returns during the 2008 financial crisis even as many other investments sank"
- "The quarterly data appear to show a move toward life insurance as a means of keeping money safe.The annualized premiums of term life fell 11% in the second quarter."
What's Misleading About the WSJ Article?
About guaranteed rate of return:
When you read about the newer indexed life insurance below you'll learn about some options that allow potential returns far past these numbers...
So, if we were to look at a short term horizon ( say 10 years or less ) it is highly unlikely that premiums deposited into a life insurance policy will show a cash on cash return of anything close to 3%.
What if you had the ability to participate in a program
- Minimum 3% interest rate credit.
- Annual credit based on the upward movement on the S&P Index with a cap (currently 16%)
- No current tax liability for annual increases in account value
- Zero impact on the account value if the S&P Index drops during the year. The account value stays the same as the previous year so you are protected from account loss no matter how far the S&P Index might fall
- Tax Free Death Benefit to your heirs
- Option to stop making premium payments and still keep the death benefit in force until age 120
- Ability to borrow the cash value at a very low interest rate
- Ability to use the policy as a supplemental retirement plan with tax free retirement income