Why Permanent Insurance is more Relevant Today

The typical asset allocation of 60/40 that has worked well for 40 years is now over. Interest rates have decreased since 1979 to the lowest level in history which gave investors great returns in both bonds and equities. Free money and high leverage will have consequences. There is a paradigm shift in the markets that will take years to unfold.

Interest rates have been at the lowest ever levels for 14 years

Interest rates are rising

Inflation is the highest in 40 years

The first major war in 75 years

First world pandemic in 100 years

What are the consequences?

What do business owners and high-net-worth clients want the most?

Capital preservation, tax efficiency, and low volatility.

Most people see insurance as a risk mitigation tool. They look at it as an expense. A properly structured policy can create immediate enhanced estate values, expedited access to cash value in the policy, and increase retirement income.

A cash value feature in life insurance typically earns interest or other investment gains and grows tax deferred. With cash-value life insurance, your premium payments go to three places:

• Into the cash value.

• Toward the cost of insuring you.

• Toward policy fees.

You have several options if you want a cash-value life insurance policy. Each policy type accrues cash value differently, but in all cases, you can get to your cash value with a loan, withdrawal or surrender.

Dividends have been paid out EVERY year for over 150 years (including recessions, depressions, pandemics, wars, and market meltdowns). What is safe money? Bonds (fixed income) are considered safe money since 1980. They have been during a time of decreasing interest rates. Today is different. As rates rise (as they are expected to do) bonds will decrease. The insurance companies hold long-term private bonds to mitigate risk and a long-term (some up to 10 years) smoothing line to create slow, consistent returns to all stakeholders.

A properly developed insurance policy can be cash positive in about 8 years and guarantee insurance for the rest of your life. If you are looking for immediate higher estate values, high cash values that are always accessible, and corporately enhanced retirement income in a tax-free environment, this may be worth your time to explore.

To learn more about insurance as an asset class, please reach out. I’d be happy to book a conversation. You can reach me at 705.427.2006 or brenault@liahona.ca