Why Life Insurance Looks Good During a Recession?

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With the Toronto index losing 9% in just the last three sessions and the dow shaving off 635 points in one day, the recent economic turmoil has caused many Canadians to re-examine their investments and assets.

However, life insurance can look very attractive during volatile markets or recessionary periods and doesn’t need to be re-evaluated. The reason being, when life insurance is compared to other no risk or low-risk investments, the internal rate of return can be favorable.

Texas Life Insurance has an Internal Rate-of-Return Calculator, which measures the internal rate-of-return of permanent life insurance policies. Many permanent life insurance policies in Canada offer guaranteed premiums and the proceeds are paid out tax-free. The only variable is when the proceeds will be paid.

The internal rate-of-return on many permanent policies can range from 5% to 11% and many life insurance companies have recently raised the premiums, or are the process of raising the rates, on these policies in response to historically low interest rates.

However, a few companies have still kept their premiums level and this offers a very favorable environment for purchasing a fully-guaranteed, non-participating whole life policy.