In the early 80's interest rates were forced up to 21%.....while the BoC 'wrestled inflation to the ground'.
Universal life (UL) entered the Canadian marketplace via the USA. The industry 'unbundled' the protection and investment elements for greater product transparency. Buy term and invest the difference was the mantra.
In the 90's interest rates dropped to very low levels.
UL fell out of investment favour with investment focussed individuals.
Term to 100 (T 100) emerged as a solution.
The investment tail wagged the life insurance dog.
Life insurance in any form is not an investment within the context that securities are investments.
It has one purpose: to preserve capital.....either accumulated or expected throughout a lifetime.
The accumulation of capital requires time.
Life insurance underwrites the time we may NOT have left to protect the capital we may have or may not yet have accumulated.
To make decisions about a complex life and health related financial instrument based on its comparison to financial instruments designed to accumulate capital for future use is to have allowed the investment objective tail wag the life insurance protection objective dog.
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