Despite considerable losses due to the financial crisis in 2008, a recent press release ( http://www.conning.com/pressrelease-detail.aspx?id=3508 ) from Conning Research estimates 2009 industry net income at $16 billion.
Based on the report, the growth in life insurance products has remained stable while annuities have been the industry stepchild posting $4B in losses.
What makes life insurance an attractive product these days? Well, the safety and guarantees are definitely getting a lot of attention. Guaranteed tax-deferred growth of cash values, guaranteed premiums that won’t rise, a guaranteed death benefit and dividends that are guaranteed once declared are all very assuring. Sexy, high rates of return in the securities markets sounded great a few years ago but the volatility over the past few years has left many looking for higher ground. Would you prefer to hope that your child’s education is paid for or do you want to know that it’s covered? If you weren’t here tomorrow what would your family lose? Are your plans for them guaranteed to be fulfilled without you?
The many tax benefits are very enticing to those planning their retirements. They’ve seen their 401k’s and IRA’s cut in half. The ones that have deferred their tax liability are realizing that their accounts still have a large haircut awaiting them from the IRS. So, they are still looking for the tax-deferred growth but now want the tax-free distribution that a life insurance policy can provide. How would you feel if your nest egg was cut into 3 equal pieces and the IRS took one away from you? Are you happy to give away this money?
Liquidity, use and control are another big benefit that my clients are talking about. They want more control 0f their funds. They want to use these funds in any manner they dictate without having the IRS dictate how and when they can use these funds…and still get taxable benefits. How do you feel about having the IRS as your financial partner?
These benefits are being sought by individuals, families, professionals and business owners. But they are also being sought in large quantities by banks and corporations. The 2009 numbers for bank owned life insurance (BOLI) and corporate owned life insurance (COLI) are not out yet but I expect an increase similar to last year of about 5%. Banks alone purchased $126.1 billion in life insurance in 2008.
The past few years have been tough for many people. Many questions have been raised, perspectives have changed and financial courses have been altered. Through it all, as was the case during the Great Depression, the life insurance industry has once again remained strong. It’s the night-light on a dark stormy night! It may not be the only tool you’ve got in the box but there are many reasons why it should take up a good amount of room there.
Best wishes to you and yours in the New Year! May it be filled with hearty laughs, fond memories and tremendous personal achievements.
SCOTT STORACE
Tags: cash value, guarantee, liquidity, safety, tax benefits, tax-free, whole life
