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Life Insurance
Life Insurance as an Asset Class: A Value-added Component of an Asset Allocation
Publication authored by Richard M. Weber, MBA, CLU and Christopher Hause, FSA, MAAA
(Please contact us to get the complete publication.
Certain portions of this white paper are printed as separate publications. See the “Printable pdf” Documents.)
Summary
Life insurance is both a formidable economic presence and one of the most complex financial tools consumers must consider as they pursue financial well-being and family or business responsibility.
With the ability to leverage a relatively small amount of annual premium into a larger scheduled benefit at the death of the insured, that life insurance is a very unique asset. Permanent life insurance may be considered as any other major asset class, and both acquired and managed according to an asset allocation for long-term value and exposition benefits. In addition, after determining the uses for lifetime insurance protection, permanent life insurance can optimize the risk/reward profile of an investment portfolio.
This publication discusses the present and future uses of life insurance, in the context that consumers already manage their investment portfolios. However, with life insurance, buyers are usually not as interested in investment return as they are in seeking to ensure human life value the economic value of a lifetime of work.
Life insurance can be problematic for the typical buyer. The very consideration of life insurance implies death, a topic most people would prefer spending little time to ponder, and life insurance may be further discounted in the consumer’s mind when a tangible present benefit cannot be perceived. An insurance industry aphorism states that no widow ever regretted that her husband had purchased life insurance – only that it should have been more. Due to the veil of confusion and complexities surrounding the many new and sophisticated product offerings in the last few years, many individuals who have an objective need for life insurance, either take no action or do not completely insure their human life value.
Is the intention of this publication to look at life insurance objectively from the standpoint of the consumer and his or her needs in today’s world, and promote a clearer understanding of which life insurance choices may prove most suitable in a variety of circumstances.
