> Financial instruments are assets that can be traded. [0]
> Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. [1]
And my point about about life insurances being financial instruments:
> The asset classes are cash, vehicles, real estate, business, directly held equity, indirectly held equity, fixed income, pension equity, pension fixed income, cash value life insurance. [2]
> Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments. [3]
[0]: https://www.investopedia.com/terms/f/financialinstrument.asp
[1]: https://en.wikipedia.org/wiki/Financial_instrument
[2]: https://www.sciencedirect.com/topics/social-sciences/financi...
Regular insurance doesn't accumulate cash-value and therefor is not a financial instrument.
Here’s what the Financial Accounting Standards Board says: (https://www.fasb.org/cs/ContentServer?c=Page&cid=13510272100...)
Imposes on one entity a contractual obligation either:
A) To deliver cash or another financial instrument to a second entity
B) To exchange other financial instruments on potentially unfavorable terms with the second entity.
Conveys to that second entity a contractual right either:
A) To receive cash or another financial instrument from the first entity
B) To exchange other financial instruments on potentially favorable terms with the first entity.
Sounds like insurance fits in this category. I die next week, you pay me a million dollars, and I’ve only paid you $100 (or whatever small premium)
Furthermore, any agreement can be traded if someone sees an advantage in the trade and can rely on the agreement to hold. Just because someone’s not doing the trade doesn’t mean it’s not trade-able. I guess it could be explicitly prohibited but even then I could see a Dane in the above insurance example securing a home loan because they have this insurance, and would be able to pay out upon death (for example) as a normal thing.
Just because the insurance companies have higher capital requirements and treat customers differently doesn't mean it's not a financial instrument.