Many pre-retirees and retirees alike seek guarantees in an uncertain world. Whether these guarantees mean a guaranteed rate of return, insurance in the case of accident, or the assurance that their assets will last a lifetime, investments alone cannot provide the certainty that many seek. Too frequently do brokers, planners, and investment advisors overlook the benefits that guaranteed products can provide to their clients. At Sentinel Financial, our advisors do not disregard the offerings of insurance products, but rather educate our clients of the benefits, as well as pros and cons of these concepts, so that an educated decision can be made. As a licensed insurance agency and registered investment advisory firm, you can be assured that advice provided to you is comprehensive and well-rounded.
Insurance-Based Investment Vehicles
An insurance-based investment is one that underwritten and issued by a life insurance company. An example of the two most frequently used insurance-based investment vehicles include life insurance and annuities. As with any savings strategy, it is critical to consider numerous factors prior to allocating funds, including the different options available, the pros and cons of each, the taxation of these vehicles, and the goals for the assets being saved. When working with Sentinel Financial Advisors, we aim to provide clients with the best options to achieve their goals, using our proprietary software to analyze hundreds of the top insurance to provide a variety of solutions where guaranteed products are necessary.
Choosing An Insurance Provider
When deciding on an insurance carrier, it is critical to pay close attention to the financial strength of the insurance company being considered. There are four major independent rating agencies: A.M Best, Fitch, Moody’s, and Standard & Poor’s. Each of these companies has their own rating processes and standards, so it is important to consider all ratings available. Sometimes an insurance carrier will promote a higher rating from one rating agency, but ignore a lower one from another. These ratings are important because the guarantees of an insurance company rely on the financial strength and claims-paying ability of the issuing insurance company. If an insurance company in question is not financially sound, there is the possibility that they may not be able to meet their obligations in a time of financial turmoil. For these reasons, it is important to only work with advisors that focus on providing clients with insurance products from high-credit quality providers.
Transfer Risk to the Insurance Company
The transfer of risk to an insurance company is the fundamental concept behind purchasing insurance or annuity contracts. In doing so, a policyholder is insuring themselves to various risks, including longevity, death, accidents, illness, disability, flood, fire, or tornados. Insurance companies are large financial institutions that are in a much better position to manage the financial burden that these risks present to an individual. By using actuarial tables and other factors to calculate premiums for insurance coverage, the insurance company agrees to pay certain benefits for a certain loss or circumstance. By doing this with all policyholders and pooling risks in this manner, the insurance company is able to profit off of the law of averages, since not all policyholders will needs the same benefits or coverage.