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One smart move can help protect your family and enhance your investment portfolio

Whole Life does double duty as protection and asset class

We all know that we need life insurance for our dependents. And we also know it’s crucial to build a solid investment portfolio that can withstand the ups and downs of today’s unpredictable economy. The challenge, however, is choosing the most effective and timely solution to both.

According to an independent study by Ibbotson Associates, a leading authority on asset allocation and capital market expectations, a portfolio that includes permament life insurance from New York Life Insurance Company can potentially have higher expected returns and potentially lower risk than a portfolio without life insurance.1

Fixed income is an essential part of any asset allocation strategy, and the cash value of a whole life insurance policy can be considered part of this asset class. “With all the uncertainty and volatility of the economy, it makes sense to put some of your money into a product that provides death benefit for your family, has a guaranteed cash value accumulation and can help diversify your portfolio away from some of the interest rate risk that can be found in the fixed income markets,2” explains Mark Scozzafava, a product manager with New York Life.

“Because of New York Life’s high rating for financial strength and dividends smoothing process—which takes into account past dividend performance as well as current earnings in determining dividends—we’re able to provide greater estimated expected returns and less volatility than other fixed income investments in your portfolio,” Scozzafava adds.

New York Life Whole Life insurance also provides you with a number of benefits that you won’t necessarily find in other financial products.

These include:

  • Guaranteed death benefit
  • Tax-deferred cash accumulation
  • The potential to earn dividends (which are not guaranteed)
  • A level premium guaranteed never to increase
  • The ability to borrow from the cash value on a generally tax-free basis via policy loans3
  • Guaranteed cash value accumulation
  • Protection from creditors (varies by state)
  • The option of purchasing a Disability Waiver of Premium rider to ensure your benefits continue to grow if you become disabled4

To understand how this insurance-in-an-investment-portfolio strategy can benefit you, however, you should first determine your total economic wealth. This includes your retirement plans, savings, investments and any real estate you own.

You’ll also need to consider your own personal value, or “human capital,” which consists of the following:

  • The present value of all your future labor income of earnings potential, including Social Security and pension income
  • Your profession, job situation, age, and savings rate
  • The volatility of your income and how capital markets affect your earnings

“While human capital is often the largest asset, it’s typically an under-appreciated component of financial plans,” says Peng Chen, president of Ibbotson.

If that’s true, then you should not only insure that asset but also strive to maximize its potential.

“The goal right now,” according to Scozzafava, “is to take a broader, more holistic view of how insurance can work for you; it’s about educating yourself and learning how to look at a life insurance policy in the context of your portfolio.”

He then adds: “If you’re spending less on term insurance in order to put more into other investments, then it makes sense to consider replacing that split with a whole life policy—particularly when that whole life policy can offer more value and decrease risk in the long run.”

It would also provide you permanent protection that you cannot outlive.

To aid in your decision-making, New York Life has partnered with Ibbotson to develop a set of tools designed to address both your insurance and investment needs. “The key is a questionnaire, developed by New York Life in cooperation with Ibbotson Associates, based on Ibbotson’s groundbreaking research on asset allocation strategies,” explains Craig DeSanto, vice president of New York Life.

Simply fill out the questionnaire, and a NYLIFE Securities LLC’s registered representative can offer you three different proposals based on your answers: investments only, insurance only, or an integrated investment and insurance solution.

“Working with the completed questionnaire, the Ibbotson modeling provides a tailored portfolio assignment for each individual client based on their human capital, financial capital, and risk tolerance,” explains Chen.

The financial crisis has changed the way people think about their wealth and risk-taking. “Now more than ever, clients are seeking a custom financial strategy that balances protection needs with goal achievement,” says Desanto. “Although human capital cannot be traded like a stock, it is a vital component of wealth that must be diversified and protected.”

To learn how whole life insurance provides death benefit and help improve the estimated expected return of your portfolio while reducing risk, contact a New York Life Agent / NYLIFE Securities Registered Representative.

There can be no assurances that any financial strategy will be successful. The actual results will vary based upon their individual situation and the actual performance of any products or investments you ultimately decide to purchase. You should review a complete illustration for the policy you are considering before making an insurance purchase decision. This analysis does not suggest the actual outcome of any specific New York Life product or imply that a personal investment into New York Life’s general account is possible.

1. Insurance in a Portfolio is based on “Estimating Expected Return and Standard Deviation of New York Life Insurance Company General Account for Investors”, Ibbotson Associates, 2009. Expected return figures do not include expenses or mortality costs. Actual returns will be reduced by fees and other expenses and are dependent in part on dividends declared by the issuing company. Estimated risk is measured by standard deviation.

2. All guarantees are based on the claims-paying ability of the issuing insurance company.

3. Policy loans accrue interest and reduce death benefit and cash value, thereby modifying the individual expected return/risk estimation.

4. Certain conditions apply. Please consult your agent for details.