Life Insurance

[bertsllcMember]

in a total economic collapse insurance companies will no longer exist. if you have a long policy you can take what you can now.

[AGXIIKMember]

Insurance companies are as subject to the FIAT system as brokerages and banks..  They take in funds to invest and hopefully they get a decent return with this income float.  It is extraordinarily profitable to the insurance firm since they keep this float until claims require a return of some of this capital.  Buffett is worth $50 billion as a result of using this float to buy interests in other firms that produce large free cash flow returns.  An insurance firm is subject to a currency collapse or  hyperinflation.  Their returns can either collapse to nearly zero and go negative or their investments become nearly worthless.They may have fixed return of premium policies that are greater than their returns.

 In this era of ZIRP their returns are very low so they must pursue more risky investments and in these uneasy economic times these risks could come back and harm them, their investors and the insureds, the last link in the insurance company food chain.  The insurance firms might be involved in CDS so in the event of a maor claim these could bankrupt an insurance firm.  AIG was a classic case where derivatives nearly put them ouf of business.  Insurance firms can be leveraged to the banking system as they are closely allied.  Both are subject to the laws of economics and debt as we are seeing in Europe. 

 Hyperinflation might increase the value of an asset held by an insurance firm but if they are rate sensitive investments the massive increase in rates will crush the value of the bonds or other debt instruments.  Increases in the value of the assets or boost in raturns will never keep pace with inflation thus ruining the value of the income stream of the insurance firm, reduce the spending value of an annuity that retirees rely on or make the life, health, auto and home insurance coverages vastly below the inflationary increases of what these insurance policies are required to cover.

In other words, insurance firms will suffer remendous blows to their capital, ability to serve client much less keep up with the rapidly dropping value of the fixed premiums they receive.

[silverbullionMember]

AG What do you say, would it be wise to cancel life insurance now? What if one cancels and something happens before the system collapses? I don’t want my wife and kids to be out on the street.

[2 OZ.Member]

I’m no expert by any means. Personally, I would treat the life insurance similar to the “got to have cash in the bank to pay bills” scenario. It could be needed at a moments notice. While stacking all you can is highly important,you need a good balance at the moment. I would keep a close eye on the Euro-zone and if you think it will totally tank within a few weeks, then cash out your policy and buy phyzz along with a safety cash stash. It’s been said (I concur) when the Euro crashes you may as little as two weeks to get out of all paper assets.

Another way could be to cash it out now (Whole Life) but take out a Term policy. You would still have coverage but also have the cash in hand.

Good luck and hope this helps.

[silverbullionMember]

2 OZ. Thank you for your answer. It is not really a life insurance policy that can be cashed out. They only pay out once claimed under the conditions specified. I can stop the monthly payments which will forfeit our life cover, but like you say, we need to maintain a balance.

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