Life insurance product trends at FPA of Massachusetts annual conference

Life insurance products tend to move from one end of the heavy-thin pendulum to the other, according to Ken Nordstrom, vice president, John Hancock, speaking at the May 12, 2006 annual conference of the Financial Planning Association of Massachusetts conference.

What do "heavy" and "thin" mean in a life insurance context? At one end of the pendulum lie heavily funded life insurance, which serves as a vehicle for asset accumulation. At the other extreme is insurance that's funded only at the level necessary to provide insurance protection.

The early 21st century has seen people despair of using insurance for asset accumulation, said Nordstrom. The emphasis has switched to protection at the thin end of the pendulum.

But don't count on the pendulum staying in one place. It could shift back to the heavy side as money rates rise and clients realize they're foregoing upside potential with their thin policies, said Nordstrom.

During the Q&A, Nordstrom commented on variable annuities. The hottest trend is offering guaranteed withdrawal benefits without annuitizing. In such a case, the investor could, for example, draw out 5% for life with step-ups every three years if the underlying portfolio rises in value.