Bear Market

What Does Bear Market Mean?

A bear market is a downturn in the market where the prices of securities decline over a period of time. Typically, for a market to be considered a bear market, the price of securities must drop by at least 20%. In the context of insurance, bear markets can reduce the cash value of life insurance policies that include an investment component. This mainly affects policies like indexed universal life insurance, where the cash value growth is tied to the performance of a market index.

Insuranceopedia Explains Bear Market

Many life insurance policies include an investment component to help the policy’s value grow over time. However, if a bear market occurs, the value of the investments associated with the life insurance policy can decrease significantly. This represents the risk for individuals who opt for life insurance policies with an investment component. Anyone buying a permanent life insurance policy that includes a savings or investment feature takes on this kind of market risk, which is one reason some buyers weigh the trade-offs in the term vs permanent life insurance decision before committing. Bear markets are the opposite of “bull markets,” where security prices rise.