Do Not Invest In Asset Protection Insurance

Asset protection insurance means to ensure that your heirs are not left with a busted investment portfolio. But some things are better in theory than in real life and asset protection insurance , which supposedly protects your investments in case you die at a time when your investment portfolio has declined in value, falls into this category.

If you want long-term investment returns that exceed what you can get from money market funds or bonds some risks need to be taken. In other words, you should not make an asset protection insurance and put your money in non-guaranteed investments such as individual stocks and mutual funds. The problem is that many people get scared when they see that the value of their portfolios expands and contract and get them asset protection insurance.

This intolerance for market risk offers a breeding ground for questionable products by salespeople playing off people's fears. When there is a perceived need for asset protection insurance , products to meet that need are not far behind. Asset protection insurance guarantees that if your investment account does not do well, your beneficiaries will at least get the amount of money you originally invested. The insurance company will even kick in funds equal to a small annual interest rate on your account, usually 5% a year.

The reasons for not getting an asset protection insurance are various. First of all it's too expensive and it is a low-risk game for the insurer, because if you think about it, the chances of your losing your entire portfolio to bad investments are pretty small. If you are planning to have your investments for 10 years and you are not a day trader or investing in options, you should be fine. Next the asset protection insurance only pays for the amount of money that you lost. Asset protection insurance only pays for the difference between your initial investment and how much it has fallen in value and you can get a better deal purchasing term life insurance. Term insurance can accomplish essentially the same thing as asset protection insurance at a much-lower premium rate.

Insurance is the most common asset protection technique. By transferring the risk to an insurance company you can usually protect your assets. A good insurance agent will work with you to have the best possible protection for your situation. It is important to have a balanced plan.

But even if you buy asset protection insurance, it might not cover all possible risks that you face, or the amount you buy might not be sufficient or the insurance company may be able to deny the claim and become insolent. You should know that only a few insurers offer asset protection insurance. That may be because asset protection insurance seems designed for the benefit of the salesperson, not the customer. It not only offers a quick commission, but also may help entice an otherwise reluctant person to invest in stocks. You can just hear it "I have some terrific stocks and mutual funds that are just right for you, and I can really pick winners, but just in case they go down I can even get you an insurance policy against the loss to your heirs. It's a win-win situation."

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