Tuesday, December 6, 2011

Shaken by Market, Investors Look for Whole Solution Through Insurance .

Just saw this article in the WSJ this morning:

Overlooking adviser warnings that it can be an investment no-no, a growing number of investors are saying yes to whole-life insurance.

The reason: The promise of guaranteed returns.

The number of whole-life insurance policies sold was up 6% this year through Sept. 30, according to the most recent available data from Limra, an industry trade group. That compares to a 7% drop in "term" insurance, the type most often endorsed by financial planners. The spike in demand for whole life has helped spur Massachusetts Mutual Life Insurance Co. and other insurers to launch new marketing campaigns in recent weeks.

Most advisers of course recommend buy term and invest the difference. However, if you are investing the difference in traditional modern portfolio theory then I can understand how the guarantees in whole life look appealing. On the other hand, if you buy term and invest the difference into a tactical strategy that is designed to get out of the market before bad turns into really bad, then a 3-5% guaranteed return doesn't sound so great.

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