Key Things to Know
The term “investment grade life insurance” is a marketing tactic used by agents to sell whole life insurance policies.  While some whole life policies may be better suited for cash value maximization, there is no official designation for “investment grade” life insurance.  Ultimately, it’s important to understand that “investment grade life insurance” is just a marketing gimmick and not a legitimate financial product.

Investment Grade Life Insurance: A marketing term used to promote whole life insurance, not a recognized financial designation.
Purpose of the Term: To divert focus from negative perceptions and create intrigue about the potential benefits of whole life insurance for retirement planning.

Investment Grade Misnomer: The term “investment grade” for life insurance is misleading and unnecessary, as it’s simply a life insurance policy.
Whole Life Insurance Variations: While whole life contracts can target different objectives, such as maximizing death benefit or cash value; labeling them as “investment grade” is problematic.

Potential Harm: There is a beg difference between harmless marketing and potentially harmful practices.

 
Investment grade life insurance, much like the 7702 Private Plan, is not a thing. It’s a marketing label clever agents put on their efforts to sell whole life insurance. The idea is to separate you from your traditional bias against life insurance.
The logic looks something like this:
Agent: Mr. Jones, looking at your current financial situation and plans for retirement, I think you could benefit greatly from owning a whole life insurance policy.
Mr. Jones (with a wary look on his face): I’ve heard that I should avoid whole life insurance because it’s a bad investment.
Agent: There are many bad whole life policies, Mr. Jones, but I will show you the unique opportunities to be had with investment grade whole life insurance.
Mr. Jones (with a look of intrigue): investment grade whole life insurance?
Agent: Yes Mr. Jones. You see, I wouldn’t suggest you buy just any old whole life policy. No no. For you, you need a special type of life insurance that is more suited to your needs to use the whole life insurance policy for retirement.
Mr. Jones: Well that sounds interesting, I’ll need you to tell me more.
Just a Way to Divert Focus
The hope is that using the term investment grade attached to whole life insurance–or any life insurance type really–will diffuse the dismissive thoughts brought on by various financial talking-heads who traditional steer people away from whole life insurance. Or, if the individual has no preconceived notion about whole life insurance, build intrigue.
But there are no types of life insurance that have any special designation for “investment grade.” At best, we might argue that certain approaches to designing a whole life policy, or specific types of life insurance products (ones designed to have a higher early cash value) could fit the idea of “investment grade.”
But the term is a marketing designation.
Attempt to Legitimize the Life Insurance Sale
The use of the term “investment grade,” much like referring to life insurance as if it were some specialized plan, further seeks to impress the idea that something special is about to take place with this life insurance purchase.
It’s not.
If an agent attempts to sell you investment grade life insurance you are simply buying a life insurance policy. You are essentially doing the same thing anyone could do.
You might ask, “but if using life insurance as a low-risk asset is a good ting, and the agent is in fact using a policy that is a good match for that objective, where is the harm in calling it investment grade?”
My answer is simply why not call it life insurance?
But Aren’t there Different Types of Whole Life Insurance?
Whole life contracts can target different objectives. Some focus on maximizing death benefit while others target maximizing cash value. Given this fact, labeling the ones that target cash value maximization as investment grade seems reasonable–at least on the surface. This would at least help general consumers identify the available products when seeking out a whole life purchase they intend to use for its cash value.
While I understand this logic I see a gigantic can of worms being opened from a regulatory standpoint. I don’t wish to sidetrack this with what is an incredibly long discussion on what exactly constitutes an “investment” in the United States. I’ll simply say that I highly doubt the current paradigm would offer much space within which this idea could operate.
But semantics aside, I do think it would be perfectly fine if companies were a bit more direct in identifying their products and their targeted objectives. In some cases, they do. But it isn’t always clear at every life insurance company which product does what. Ultimately, I’m only one person and I can only attempt to solve so many problems at one time. This particular one, while slightly annoying, doesn’t cause enough trouble to warrant industry-wide regulation.
Marketing Gimmick
At the end of the day, this is just one more marketing gimmick. You might think, how is it any different than the sensationalized names some companies give color options these days.
While I don’t wish to go on an anti-marketing rant here, I do think there is an easily identifiable difference in the potential harm between sapphire-ice and investment grade whole life insurance guiding your purchasing decision.