Investment insurance is a range of financial products and strategies designed to safeguard and/or enhance investments and categorized into:
1. Financial Insurance (Derivatives)
2. Commercial Insurance (Business Insurance)
3. Life Insurance
- Each investment insurance category includes sub-categories to hedge and/or monetize a specific set of risks for a specific investment structure.
- Investment Structures can range from publicly traded investments to private equity, whether in a passive or active capacity.
- Managing insurance for investors is part of comprehensive investment protection or investment risk management.
- Risks that can be hedged through investment insurance are broadly categorized into: physical, financial, cyber.
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Lowest cost is contractually guaranteed for similar protection that is tailored to your investment goals, otherwise we pay the difference. Applicable Worldwide.
References and Testimonials
DeshCap is referenced by Global Finance Magazine on reducing a company's operational risks through insurance, which directly impacts investor returns.
“In 2022 our public equities portfolio registered -7% vs. the S&P's -18% — giving us lots of firepower entering 2023 and taking advantage of great returns in the following years. We also avoided various underperforming private investments thanks to the risk due diligence and insurance provided by DeshCap’.” — CIO, Family Office (AUM > $1 Billion)
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Investment Insurance Products
Here's a sample of various types of investment insurance, and the associated cost benefits. These insurance products and strategies aim to hedge and/or monetize risks associated with investments, such as market fluctuations, economic downturns, or operational events that could negatively impact a financial portfolio.
A. Structured Products: a type of financial insurance combining traditional investments with derivatives. They offer a degree of downside protection or guaranteed minimum returns, but their cost and complexity can vary. One example is our strategy to invest in the right covered calls etf.
B. Business Insurance Products: a type of commercial insurance providing protection to the operations of a business as well as protection to its Management, Board, and Investors (example: D&O Insurance).
These products can be tailored to maximize compliance with contractual and regulatory obligations, enhance operational protection, or enhance financing and valuations such is the case with private equity insurance.
C. Government backed or Guaranteed Investment Certificates: a type of financial insurance that are low-risk investment products offered by banks and credit unions, or directly by branches of government in certain jurisdictions. They provide a guaranteed return over a fixed period, typically 1 to 5 years. Example: GICs in Canada are insured by the Canada Deposit Insurance Corporation (CDIC) up to certain limits, providing protection in case the financial institution fails.
D. Variable Annuities: a type of life insurance that combine aspects of insurance and investments. They offer a variety of investment options within an insurance contract. The insurance component provides a death benefit to beneficiaries, while the investment portion can grow based on market performance. Variable annuities often come with fees and charges, so their cost-effectiveness depends on the individual's needs and goals.
E. Fixed Index Annuities: a type of financial insurance providing a guaranteed minimum interest rate combined with the potential for additional returns based on the performance of a stock market index. They are considered relatively low-risk, making them attractive to investors looking for some protection against market downturns.
Learn more about our investment insurance process, which combines financial insurance and commercial insurance for the benefit of businesses and investors.
Cost-Benefit Analysis of Investment Insurance
a. Risk Tolerance: The cost benefits of investment insurance depend on your risk tolerance and financial goals. If you are risk-averse and prioritize capital preservation, products like GICs and fixed annuities may be appealing due to their lower risk profile, but they may offer lower returns compared to riskier investments.
b. Diversification: One of the most effective ways to manage investment risk is through diversification, which involves spreading your investments across various asset classes. While insurance products can provide a safety net, diversifying your portfolio may offer a more cost-effective approach to risk management.
c. Insurance Costs: Many insurance products come with fees and charges that can erode returns. It's essential to carefully evaluate these costs to ensure they don't outweigh the benefits of protection. For some investors, the cost of insurance may be well worth the peace of mind it offers.
d. Long-Term vs. Short-Term: Your investment horizon also plays a crucial role in cost-benefit analysis. Some insurance products may be more suitable for long-term investors who want to protect their assets for retirement, while others may work better for short-term risk mitigation.
e. Tax Implications: The tax treatment of various investment insurance products can impact their cost-effectiveness. Consult with a tax advisor to understand how these products will affect your overall tax situation.
In summary, investment insurance products can provide valuable protection and peace of mind for investors, but their cost-effectiveness depends on the investor's financial situation, risk tolerance, and investment goals. It's important to assess the costs, benefits, and alternatives carefully before incorporating investment insurance into any financial strategy. Consulting with independent risk experts is often a prudent step to make informed decisions about investment insurance.