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Life Insurance Gets Better With Age

The rate of return of a person on cash life insurance is sometimes highly debated. This is especially true when opinions grow. On the one hand, we have a bunch of people who think it’s small and a stupid financial move, because you – allegedly – can do better by simply investing in the major US stock markets.

On the other hand, there is an argument that the monetary value of life insurance products – with the exception of product variables – is not designed to compete with the return on high-risk investments, such as US stocks. Instead, they are intended as low-risk savings plans that seek to achieve high returns with a much higher level of predictability. In this light, and compared to similar savings / investment options, life insurance is much clearer.

You will often find comparisons that try to “analyze” the rate of return on life insurance starting in year 1 and continue at any time in the future. Because we want the whole thing and even numbers, it’s usually 20 years into the future. These scenarios are quite common because some of the people who want to talk about this topic have real experience with these types of products, so they do not rely on data that allows them to assess whether the policy is actually implemented. .

We are, of course, an exception in this. We have many clients who took out life and indexed universal life insurance years ago. And we could look at the policies and notice how open they were since the original purchase.

We talked about the results a bit before. Now I want to focus on the return on this policy, which can be done now that several hours have passed.

Increasing the rate of life return insurance – life insurance

I look at a lot of policies that we are implementing. These policies represent different groups of people of different ages, policy sizes, sex of the insured and planned maturity. Everyone has something in us. All are designed with best practices to optimize money growth for their specific purpose.

I took the current valid data on this policy and calculated what the effective return would be for their next year. The average is less than 5%. This means that these policyholders have an average cash position, which earns about 5% next year. Some are a little higher than this, nothing lower than this. Yeah, and they’ve all been implemented in at least five years.

But after five years of implementation, these policyholders now have something in their portfolio that will grow by almost 5%. Today, it is very difficult to buy something that has the same risk profile as whole life insurance, which can do the same. Indexed rate of return on growth of universal life insurance
I performed the same assessment of active force indexed by a universal life insurance policy with the same behavior above. We have small indexed universal life fuses, so the sample size is small. The return for the coming year is therefore on average the same, 5%. All of these policies have also achieved an interest rate index over the past year above the cost of the policy – something we didn’t expect to happen at the beginning.

Life insurance increases with age

As life insurance ages and money costs rise, the accumulation of monetary value through guaranteed and unsecured mechanisms is enormous. There are some who want to question the return viable and note that this year there are less than 5% to reach these people – they are usually right. But what? We can no longer go back in time and change where they put the money. Five years ago, we did not know that the US stock market would fall sharply in early 2020 and then return to new records. We didn’t know that bonds were once close to zero. We didn’t know that cryptocurrency would play a role like it does today – 90% of the cryptocurrencies that people commonly sell today know nothing or obviously don’t know about it.

The point is, people make many different decisions with their money, which can reduce returns. We don’t have to worry about what happened. It’s over and it can’t be returned.

I fit in and don’t invest now, because if I had invested three years ago, my return next year would have been different. The truth is that those who bought life insurance for cash – in our country – now have assets that produce 5% year on year. It is even harder to beat this market with the same risk profile option.

In addition, life insurance does not work in a vacuum. As fixed rate options improve, so does life insurance. This means that the relative position of life insurance within assets of the same risk profile will remain constant. As interest rates rise and other asset options begin to yield higher returns, life insurance is likely to follow suit.

Posted by on March 26, 2022.


Categories: Life Insurance

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