With an uncertain future for the economy, is life insurance the smart move? Usually during troubled times and a falling stock market, investors would retreat into the bond market for safety.

However, the bond market may be the last place to seek shelter right now. Trouble in the bond insurance market and the downgrading of some the largest firms in the industry has not only put a damper on new issuance but has devalued all of the bonds they currently insure.

The insurance industry has been doing fairly well amidst the chaos currently embroiling most of the financial sector. John E. Girouard, the founder of the Institute for Financial Independence, say’s that whole life insurance is the way to go in the article ‘The Investment Bomb Shelter for Scary Times’.

“Few people know that the life insurance industry was one of the few economic sectors to survive the Great Depression intact. It was one investment that kept its promises.”

“Buying a policy from a mutually-owned company, you become an owner instead of a customer. It’s like becoming your own bank.”

Whole life is just one aspect of life insurance that is doing well, annuities are also staging a strong comeback as sales grew in the third and fourth quarters last year.

The characteristic that makes life insurance attractive right now is their ironclad guarantees, not to mention their favorable tax shelter implications. While they may not offer the highest returns that other investment vehicles might, there is no fear of loss like in the stock and bond markets.

Last week the Florida Insurance Regulatory Commission suspended Allstate’s right to write new polices in the state.  The reason given for Allstate’s suspension was their failure to comply with subpoenas issued by the state’s insurance office back in October.

The Florida First District Court of Appeal’s however granted a stay on the suspension earlier today.  Florida Gov. Charlie Crist was critical of the court’s decision, releasing this statement.

“For too long, insurance companies have ignored the needs of their customers and unfairly taken advantage of Florida homeowners.  I am disappointed by the recent action by the First District Court of Appeal to stay Allstate’s suspension. I urge Commissioner McCarty to act as early as Tuesday to show why the order suspending Allstate’s license should remain in effect.”

Florida’ government has been involved in an ongoing dispute with the insurance industry concerning rates in the state, some of the highest in the country.  The battle has become increasingly bitter in recent months as many companies sought to raise rates after a very quiet hurricane season.

It has reached the point where the governor has been looking into initiating a class action lawsuit against the insurance industry.

The insurance industry has been taking some heated criticism from consumers, the government and the media over their high profit levels since the disastrous hurricane season of 2005.  A spokesman for a leading industry group released a statement detailing that financial strength in the industry is good for the economy and consumers.

“A stable and competitive insurance market is absolutely critical to our nation’s economic health.”

“Policyholders need to know their insurance companies will be there when there are claims because of natural catastrophes. The continued financial strength of the insurance industry assures this will be the case.

“Auto and homeowners insurance rates have declined in most areas of the country. Coastal regions have been the exception, but even in many of these higher risk areas, rates are leveling off, primarily in those states that have adopted responsible mitigation practices.  Florida, of course, is the exception.”

Florida’s governor has been inquiring into a possible class action lawsuit against some companies over rates that possibly violate state laws.

There is some truth to the claim that the profit levels are necessary.  The 2005 hurricane season was a benchmark for the industry on what level of claims paying ability it would need for a worst case scenario.  Damages from Hurricane Katrina have shown that the industry needs to be prepared to pay out $50 Billion for any given catastrophe.

Recently released figures have also shown that while profits have been high, only a small percentage of it comes from the underwriting of actual policies.  The majority of the industry’s profits have been from investment income and with the market now entering a volatile phase there’s no guarantee that those profit levels will continue in the future.