What are Insurance-Based Investments?
Insurance-based investments are investments that can only be provided to clients by an advisor with a insurance license. There are three primary insurance-based investment solutions that our team offers to clients: segregated funds, guaranteed interest annuities (GIA's), and regular annuities.
Segregated Funds:
Segregated funds (AKA: "Seg" Funds) are insurance contracts that invest in mutual funds. Like mutual funds, they offer the growth potential of the underlying assets. Unlike mutual funds, they also provide a principal guarantee (usually between 75 and 100% of the invested amount), a guaranteed death benefit, and the potential for creditor protection. They also come with higher fees, lock in periods, and potential penalties for early withdrawal.
Guaranteed Interest Annuities (GIA's):
GIA's are similar to Guaranteed Investment Certificates (GIC's) in that they are interest bearing investments with a specific term to maturity. They differ in that they can carry longer terms to maturity (1-10 years), and offer the potential for creditor protection if set up properly. Because they are insurance products, GIA's must name an owner, an annuitant (income recipient), and a beneficiary (on death).
There are myriad options available for GIA's including redeemable, non-redeemable, laddered, daily interest, and market growth.
Annuities:
An annuity is an insurance contract that obliges a life insurance company to deliver an income stream, for life or for a fixed term, in return for an original lump-sum deposit. These contracts can be useful for investors looking to set up a fixed income stream that is uncorrelated to other investments and markets.
There are many issues to consider when entering into an annuity contract. These issues are: illiquidity, the unknown life expectancy of the annuitant, and unknown future interest rates.
We’re here to Help:
If you are in need of proper insurance-based investment analysis as part of a broader wealth plan, we’d love to speak with you. Please feel free to contact our team (contacts below) to arrange a complimentary, no commitment consultation. Please refer to the "Annuities and Retirement" overview attached below.
