Q:
Can insurance protect me against investment loss?
Answer:
You can't buy insurance to protect yourself against investment losses. If you own things like art, collectibles, real estate, and antiques, you can buy an insurance policy that will cover your losses if something unexpected happens, like fire or theft, but it will not cover losses resulting from bad investment choices or a drop in the market.
If you own stocks, bonds and other securities, you might be able to use a fairly complicated plan called "portfolio insurance." It isn't really insurance. It involves the use of options and various other hedges, that when used right, can protect your investments.
Recently, a few financial companies have offered plans that safeguard the money you put in your mutual funds. Under the plan, you choose one of the company's mutual funds. By paying the company a premium, the original amount you put in the fund, plus about five percent a year, is guaranteed to your heirs when you die. The plan is really a life insurance policy but the amount paid to your heirs is adjusted if your mutual fund does really poorly while you're alive.