I am learning as much as I can about how to properly structure life insurance as an investment vehicle, to provide low-interest loans and retirement income when needed. I like the idea that I can fund a policy using proceeds from real estate investments, and accumulate and transfer wealth in a tax-favored environment. I am fortunate to have counsel of some very smart financial advisors in this arena.
The big unknown is how will a whole life insurance policy perform in an era of hyperinflation? Books like AfterShock: Protect Yourself and Profit in the Next Global Financial Meltdown are quite gloomy about the prospects for the future of whole life insurance policies.
While it is true that cash value life companies invest heavily in bonds and commercial real estate (deeds and loans), they are not at all restricted to those classes, and can (and do) diversify when the markets shift.
Further, bonds are actually a ‘derivative’ market… because they are effectively loans to other companies or governments. The bond (loan) may be made to a government, blue chip stock company, upstart tech company, bricks & dirt construction company, medical manufacturing company, etc. etc. etc…. diversification is endless.
Further, when inflation rages, interest rates flourish… which is directly beneficial to mortgage lenders, loan investors, and bond owners.
So perhaps the most solid of companies will find a way to return a level of security to policy holders that are seeking a safe haven in the coming post-bubble economy.
Any other thoughts or comments on this?
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