Perhaps I should start a section on the Insurance Pro Blog called “Dumb Agent Tricks,” and it could be a new home for information on 7702 Private Plans and Investment Grade Life Insurance.
I realize the life insurance business is a tough one. What with all the talking about death and dying I realize just how popular an agent/broker can be at a family get together, cocktail party, etc. So, in a desperate move to spice things up, the industry has been concocting snazzy sounding marketing names for the sale of life insurance for a long time. And maybe…just maybe…the means are justifiable insofar as they accomplish an end that places a client in a better place by making the pill easier to swallow (clients are people, too–dumb just like the rest of us from time to time). But I'd sooner suggest that the financial services/insurance industry needs a good dousing of bleach in its gene pool before it goes out embracing this sort of thing.
Using the phrase investment grade life insurance is a sign of weakness. Hate me all you want for that if your an agent, but deep down you know you what you're doing. Just like the suggestion that there is a special plan created by U.S. tax code in an attempt to avoid having a serious discussion about the fact that you are using cash value life insurance as a means to accumulate wealth, referring to the product as investment grade is just as disingenuous.
Despite the fact that I don't like this phrase, there are–admittedly–cash value life insurance products that are more suitable for the purpose of accumulating wealth than others. For this reason, it seems reasonable to suggest that maybe this phrase–investment grade life insurance–isn't completely wrong.
For the purpose of driving a wedge between products that are death benefit focused and products that are cash value accumulation focused, I'd be marginally on board with this phraseology.
Unfortunately this is more a case of not what you but how you say it.
What I mean is those that use the term investment grade life insurance do so to bring greater legitimacy to the idea of owning cash value life insurance. In other words, they are stuck on the us vs. them debate in an attempt to pull you away from other investment choices.
I'm not saying you shouldn't make the substitution.
What I am saying is that the discussion over why you should use cash value life insurance as an asset in your portfolio should be a discussion focused on how the product can be properly structured to achieve this goal, and not littered with useless marketing buzzwords that help no one.
In other words, telling you that there is a form of life insurance that is “investment grade” to get you hooked, is a sign of dishonesty that should immediately signal to you a warning and that you should proceed with caution.
At the end of the day, this is just one more marketing gimmick.
If it got you to at least stop and start to take note of the fact that you can use cash value life insurance as a comprehensive foundation to your financial plan, then good for it. If, on the other hand, you met an agent who just wanted to sell some life insurance and told you to buy it because it was “investment grade” than shame on him or her.
To be clear, there are certainly big advantages behind owning cash value life insurance as a means to accumulate wealth and provide for retirement income.
If, however, we want to start labeling products as investment grade life insurance we're going to see far fewer products making the cut in my opinion.
Brandon launched the Insurance Pro Blog in July of 2011 as a project to de-mystify the life insurance industry. A specialist in the design and application of life insurance cash accumulation features, Brandon is one of the foremost authorities on the subject of coordinating life insurance cash values in a financial plan.