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A Fresh Look at Life Insurance as a Separate Asset class

In times past, most investment advisors probably would not have recommended their clients take their life insurance policies out of the same drawer as their automobile/homeowner's insurance policies and instead file them with their investments. 

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But today, clients and advisors are beginning to appreciate the fact that a portfolio of life insurance can serve as a separate asset class. One that allows clients more financial flexibility and planning opportunities for themselves, their heirs and their charitable interests. More advisors work under the premise that: 

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  • Life insurance policies belong in the client's investment drawer. 

  • Life insurance internal rates of return (IRR) on death benefits are competitive with bond portfolios and sometimes equity portfolios over the long term.

  • The major international financial institutions buying life insurance policies in the settlement market have discovered the value in life insurance as a separate asset class uncorrelated with any other investments. 

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So, it's time to take a new look at the traditional life insurance policy and what it can mean for clients. 

Planning Flexibility

  • One great advantage many trusts have is they were created in a manner offering asset protection for the grantor of the trust and the beneficiaries. Thus, when life insurance is held in trust, death benefits can provide clients' families with creditor and divorce protection. With over 50% of all marriages ending in divorce, along with other types of litigation potentially surrounding clients, this is a unique strategic benefit. 

  • It takes more than money to buy life insurance. It takes good health as well, so "stockpiling insurability" can make a lot of sense and in some cases "make" a lot of money for people as they get older. People who look at life insurance as an "asset class" can diversify with various types of life insurance, accumulating a portfolio of policies - that is, a combination of permanent coverage along with convertible term insurance, creating many favorable options. 

  • Americans continue to be the most charitable people in the world. Clients are no exception. Many wealthy families see life insurance as an instrumental part of their charitable planning. 

  • A greater recognition exists among clients and advisors that life insurance is no different from most other investments. 

  • The good news for people who do "need" life insurance protection is the reality that life insurance provides asset diversification for them, as well. They benefit from all the advantages as those received by people who don't "need" it but want to "have it." 

© 2020 by RP America Life Services, LLC.

www.rpalifeserices.com is for informational purposes only. Nothing herein is intended to, nor does it, provide legal or tax advice to potential participants. Potential participate should consult with their personal legal and tax advisors before making any tax- or legal-related decisions. Although reasonable care has been applied to ensure that the statements in this document are accurate, no warranty, express or implied is made as to the accuracy of the information contained at www.rpalifeservices.com. Potential participates should carefully consider the financial implications, tax consequences, risks, and fees and expenses before entering into a financing structure. Economic, legal, and other risks, uncertainties and contingencies may cause the structure to perform materially different than anticipated. 

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