Thursday, January 5, 2012

Investments vs Insurance

Cash value life insurance plans, including Universal and Whole Life, have a very definite and useful place in many (most?) folks' risk management portfolio. One of the criticisms of both UL and WL, though, is that they're "lousy investments."

Quite so.

In point of fact, life insurance professionals are essentially forbidden to use the terms insurance and investment(s) together. And that's as it should be: life insurance is a risk management tool, not an investment vehicle (although some products have investment-like properties).

I bring this up because of an email that went out to those of us who represent Assurity Life. Assurity offers "regular" life insurance and disability products (they're excellent for blue- and gray-collared clients), and they are serious about policing how their products are sold.

How serious?

This serious:

"If Assurity has knowledge that a variable contract is being replaced by an Assurity product and the producer is not licensed as a variable contract producer, the application and funds will not be accepted."

Apparently, some agents (who should know better) have been touting the guarantees inherent in fixed policies (such as UL and WL) based on the rather anemic growth in some prospects' variable life policies (the ones with investment-like sub-accounts). It is Assurity's stance that even discussing this kind of comparison amounts to offering investment advice, and they want no part of it.

I do see their point, although I think it's a far cry from comparing results with actual investment "advice." Still, it's their party, and they get to set their rules.

The bottom line, of course, is still the "need" for any life insurance. As Bob noted over four-and-a-half years ago: "Most folks don't want insurance. What they want is a way to protect their income and other cash assets."

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