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Insurance

  1. I went to a financial advisor presentation last night (free dinner) and took in a persuasive sales pitch on LIRPs.

    Does anyone here have a working knowledge of insurance products (e.g. life insurance, whole/term life, variable/universal, etc.)? I'm weak in this area but I'd be interested in getting into a discussion about it as long as it doesn't sail too far over my head. :)

    As a starting point, I'll volunteer my novice theory that a lot of promises/objectives of different types of insurance policies can be better duplicated by the self-directed options trader.
     
  2. Free dinner means that advisor is getting fat fees for the products presented. If you need life insurance then get term insurance. Any other type of insurance is more an investment and you can almost surely do better with something else that avoids those fees.
     
  3. ACS is right, I came out of college working for an insurance /financial planning company. In a nutshell, the fees inside those products kill the returns and you are almost always better off with term insurance unless you have a special situation.
     
  4. I think I was unclear with my original post. I'm not looking to debate whether I should purchase insurance. That decision is made.

    I'm more interested in discussing how we might re-create the supposed benefits of certain insurance products by trading options. A few years ago I reached a point in my thinking where I perceived index annuities to be very similar to a naked puts strategy, for example.
     
  5. If you want to separate out the "investment" portion of non-term insurance then yes you can do that with a long Delta position in the index of your choice. My preference would be something like The Bull Trade that John Locke uses which is selling a 30 point put spread in the RUT for at least a $250 credit with the short strike at about 10 Delta and 65 DTE. Exit at $250 loss or when the next month is 65 DTE. Rinse and repeat. Simple and a great long term track record.