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November 16, 2008 at 02:00 PM
Right now, a lot of people are “freaking out” in the financial services sector.
Why? One of the largest insurance companies in the world has accepted a loan from the U.S. government as part of a bailout plan. Two other European insurance companies have accepted capital infusions from the Dutch government. Banks are folding right and left. Acquisitions are occurring on the turn of a dime. And consumers are worried; in just the past 24 hours, nearly 10 variable product investors called our offices, concerned about losing their money. Given that we only provide services to the insurance industry, those calls from consumers are sobering.
Is this a good time to look into offering indexed insurance products?
Absolutely. In fact, now is the best time to look into indexed products. In fact, distributors and manufacturers that don’t have indexed life in their toolbox are missing a great opportunity.
Here is why.
1) During a time when so many are concerned about losing money, an indexed life product can offer the value of zero. That’s right, zero.
Remember when everyone watched their account balances dive at the turn of this century? Well, if indexed life had been the accumulation vehicle rather than investments, the contracts would have been protected by zero interest credited for each year the index declined.
Example: take a hypothetical indexed life policy, “A,” issued on October 24, 2007. At policy issue, the S&P 500 index was about 1,516. Today, a year later, the S&P 500 is at about 877 (as this was being written), meaning the index declined by over 42% for the one-year period. However, policy “A” would receive zero interest crediting for the current one-year term.
Most consumers could definitely use zero any day of the week, as opposed to a negative adjustment on their account value.
