Ofner Insurance

As you know the cost of everything is up!

Can insurance be a good hedge against inflation?

Firstly, lets clear up a few things.

Inflation. What is it exactly?

Well, in economic terms it is the general increase in the prices of goods and services in a particular country. It refers to an overall increase in the Consumer Price Index, (CPI,) which is a weighted average of prices for different goods.

What are those goods? Each country could be different, but basically it’s goods that are a representation of what the average person in a country would buy.

Inflation, in layman’s terms, its when things cost more. The “inflation rate,” is the rate or how much general goods and services have increased over the past year.

When things cost more the residents of a country have less disposable income or less money that they can use on other items that aren’t really necessary for day to day living.

What does inflation have to do with insurance and vice versa? BTW, The insurance I’m speaking about here is an IRP.

I will do another post later in more detail, but basically an IRP, (Insurance Retirement Plan,) it’s a strategy, that I describe in my book, (Download it here for free,) that uses life insurance with an investment portion which can have significant tax benefits, create an investment for retirement, (or other uses,) all the while protecting you and your family with life insurance. And because of the investment, you basically get your insurance for free.

So, is an IRP a good hedge against inflation.

Well, typically when inflation starts to increase, stock prices come down. People are buying less because their money doesn’t go as far. Companies don’t sell as many goods and services and, theoretically, the stock prices will then come down.

With an IRP, your investment portions of the strategy are invested in funds that can be a mix of many different financial instruments, one of which can be stocks.

With monthly premiums being paid and stocks falling, you are essentially buying more when the stock prices are down.

Warren Buffet is famous for his, “Buy on the dips,” mentality which means when stocks are down, buy them! Why? Because when they go back up your investment will increase!

And, if you understand the concept of dollar cost averaging, if you are buying each month (when your insurance premiums come out,) you will inadvertently be practicing dollar cost averaging.

So yes, an IRP strategy can be a good hedge for inflation.