Things always have a way of evening themselves out
In the last few years the biggest competition I have faced in selling Life Insurance is the housing market and the stock market. Who would want to but permanent Life Insurance when the returns in the other two asset classes just couldn’t miss. Buy a house or investment property and watch your value take a meteoric rise year over year. Low interest rates were never going to increase. The Government would never be able to get away with raising rates, it would force to many people into heavy debt or bankruptcy. Housing prices would remain high indefinitely.
What about the markets?
There have been double digit returns year over year. The tech laden Nasdaq could do no wrong. What about Crypto currency? New millionaires were made every day. Crypto was the new King with scores of new companies being created on a daily basis.
Money would be a thing of the past.
Billions of dollars were poured into these assets, even the banks were getting in on the act. Then suddenly things started to fall apart at the seams.
Suddenly all the things we were so sure about started to change.
An unexpected war in Ukraine, runaway inflation, out of control. Cost of living rising daily. Things unravelling in front of our very eyes. All of a sudden housing was no longer king, the market shifted rapidly and fear has set in. All this to say that one asset class which has remained stable throughout, is Whole life and Universal Life insurance. Permanent life insurance always was and will continue to be a stable and important part of any financial plan.
In good or bad times, it represents the safe part of your portfolio. You know what your premium is and you know the benefit you’re estate will receive. If you plan it right there will also be a significant cash value included within the plan that can be used very effectively either through leveraging or as an emergency source of revenue. The old saying goes never put all your eggs in one basket, and when the heard is heading in one direction, you should consider going in another.
In the current economic environment, we find ourselves in there are host of unknown factors and they all seem to be converging at the same time. Who would have predicted that housing prices would start to decline and that both the bond and stock markets would drop precipitously both at the same time.
From a market standpoint this is an extremely rare occurrence. The once safe haven of the bond market is no longer and we are seeing an increasing turn to guaranteed investment certificates. In fact, the trend of rising rates is causing is causing GIC holders to sell liquidate and reinvest. Something we have not seen in a long time.
Rising interest rates are a boon for Life insurance companies and long term we expect to see higher returns on products like universal life whereby your returns are a function of the investments you choose.
We fully expect Life insurance companies to continue to pay higher rates on guaranteed accounts which will positively impact the policy holders. Whole life insurance policies will also benefit from higher rates. Interest rates are an important component of the overall return of whole life policies. What is worth noting that any impactful changes of dividend scales tend to lag the market so it will take some time for this to work its way through the system. With respect to term insurance policies, higher rates may offer relief to pricing in the marketplace and give the life insurance companies opportunities to design more innovative products for the term market.
The Life insurance market that has huge opportunities.
This is especially true for companies looking to lead and make an impact in this segment. My hope is that higher rates will allow companies to significantly overhaul their product offerings and offer new innovative products.
In economic times like we are currently experiencing a significant uptick of interest in Life insurance products across the board which includes Life insurance, Critical illness and Disability insurance.
Surprisingly, one area of insurance that is experiencing a spike in sales, is group insurance, especially for smaller companies. With the shrinking labor pool employers have had no choice but to offer additional benefits to their employees to attract new talent and maintain their existing labor force.
In my thirty two plus years in the industry, never have I seen such a renewed interest in all the products we offer. Take the time to review your current situation, it is time to analyze, reflect and adjust.
Please do not hesitate to reach out we would be happy to answer any questions you may have. Solid financial planning always begins with a good base. Don’t overlook the value of Life insurance!