Insurance investment price

It is well known that standard whole and universal life insurance policies provide tax-deferred growth of the policy’s cash or investment value. The cash value of a standard policy, however, is part of the general investment fund of an insurance company. Growth of cash value within the policy is generally relatively low, usually a few percent annually. Also, the policy is only as secure as the insurance company. Policy funds are generally commingled with the insurer’s general fund, and the policy owner or beneficiaries basically are unsecured creditors of the life insurance company. In case of bankruptcy of the insurer, policy assets could be lost.

Private placement life insurance (PPLI) is a privately negotiated life insurance contract between insurance carrier and policy owner. PPLI offers several advantages compared to standard policies. Policy funds are held in segregated accounts that protect the funds against the carrier’s creditors. PPLI enables a wider range of investment opportunities managed by a professional investment adviser selected by the policy owner. Finally, policy costs are transparent, negotiable and typically lower than off-the-shelf insurance products. A problem with domestic insurance companies offering PPLI in the U.S., however, is that they typically require a minimum insurance premium commitment of $10 million to $50 million.

Offshore PPLI policies are more favorable than domestic PPLI based in United States. Offshore insurance companies are not subject to strict SEC and state insurance regulations in the U.S., which limit the types of investments available to domestic insurance policies. Further, offshore PPLI policies are not subject to the state premium taxes charged by the various states. Although a policy issued by a foreign insurance carrier is subject to a 1% U.S. excise tax, this is balanced by not being subject to the federal deferred acquisition cost (DAC) tax. One of the major benefits of offshore PPLI is that it is offshore, meaning that the offshore life insurance carrier can be selected so that it is not subject to the jurisdiction of U.S. courts. Offshore PPLI typically has a minimum premium commitment of $1 million or even less over five to seven years, and fees associated with offshore PPLI are typically about 1.5% to 2% of premium load.

An offshore irrevocable life insurance trust (ILIT) optimizes tax free wealth building and the financial security of PPLI beneficiaries, as well as providing protection of policy assets and other trust property against the claims of beneficiaries’ creditors. An offshore trust is not subject to the jurisdiction of U.S. courts and other U.S. government agencies. A number of offshore countries have adopted legislation specially designed to protect trusts registered in their jurisdictions against attack by outside courts and governments. An offshore trust jurisdiction typically requires that a trust pay an annual government registration fee and use the services of a local trustee. Since trust business is an important revenue source and contributes to the local economy, offshore jurisdictions are motivated to protect the integrity of locally registered asset-protection trusts against outside creditors of trust beneficiaries.

In a hypothetical example, a U.S. taxpayer establishes an irrevocable offshore asset protection trust, for example, in the Cook Islands (South Pacific) or Nevis (Caribbean). Initially or over the next five to seven years, the individual irrevocably contributes to the trust assets having a value equal to the current lifetime exemptions for estate tax and generation skipping transfer tax (GSTT), for example, $1 million. The U.S. taxpayer allocates his lifetime exemptions to the trust contributions, thereby creating a dynasty trust that will be free of U.S. estate and GST taxes perpetually. If the trust assets are not invested in life insurance, then U.S. income tax and capital gains tax are paid on investment growth in the trust. On the other hand, if and when trust assets are invested in a life insurance policy, investment growth is not taxed.

Also, when policy proceeds are paid to the trust (as policy beneficiary) upon death of the insured, no income tax, no estate tax and no GST tax are payable. The overall result is that trust beneficiaries benefit from tax-free life-insurance investment growth and tax-free wealth transfer perpetually. The tax advantages of life insurance are available with conventional policies, not just through PPLI. An advantage of PPLI is greater investment flexibility, which allows greater investment growth potential. An additional advantage of a preferred structure including a self settled, irrevocable life insurance trust is that the settlor (the person establishing and funding the trust) may benefit from the trust during his lifetime through tax free insurance-policy loans, at the discretion of the trustee. Initial professional fees (legal and accounting services) for setting up a preferred structure are typically in a range of about from $20K to $50K. Annual trust and trustee fees are generally about $5,000.

Full compliance with U.S. tax law is an important characteristic of a preferred structure that includes an offshore asset protection trust owning offshore PPLI. In fact, the preferred structure recommended here is tax neutral, that is, there are no tax advantages or disadvantages resulting from being offshore. Formation and administration of the offshore ILIT structure is slightly more complicated and expensive than a domestic trust. But, unless there are creditor problems, the trust is administered and treated as a U.S. trust for U.S. tax purposes. Although a few extra forms must be submitted to the IRS annually, the tax situation is the same whether onshore or offshore. The offshore advantages are very secure asset protection, lower insurance costs, and greater investment flexibility.

The greater investment flexibility of offshore PPLI, especially compared with conventional life insurance, is the ability to invest policy funds in high-growth assets, such as hedge funds or start-up companies. As a formality, policy assets are held in segregated accounts owned and managed by the insurance company. Typically, the insurance company directly or indirectly hires an asset manager recommended by the policy owner, often the same manager who manages the settlor’s other non-trust assets. Some of the same benefits of a preferred structure can be achieved using less preferred structures. For example, a conventional (non-private-placement) offshore life insurance policy owned by an offshore life insurance trust provides asset protection and favorable tax treatment (i.e., no taxes on income, capital gains and estate), but policy assets would be held in the insurer’s general fund and investment returns would be lower.

An irrevocable life insurance trust (ILIT) and an offshore PPLI policy can be funded using various types of assets, basically anything to which a value can be attached: stocks, bonds, hedge funds, commodities, collectibles, real estate, business enterprises. Equity stripping of assets located in the United States through loans on real estate and business equipment can be used to generate cash for contribution to an offshore asset-protection life-insurance trust. Estate tax and GSTT exemptions can be leveraged by contributing assets to the life-insurance trust before high growth occurs. Promissory note sales and discounting of closely-held property can also be used to leverage estate tax and GSTT exemptions. A married couple can use both spouses’ lifetime exemptions to fund the trust.

The long-term outlook for the US dollar and the U.S. economy is bad. The U.S. manufacturing base is deteriorating and moving overseas. Services such as software development, technical support, accounting and legal work are migrating from the U.S. to low-paying developing countries. Consumption of imported petroleum and cheap manufactured goods causes a constant drain of dollars out of the U.S. economy, which are then borrowed back coupled with interest. The U.S. national debt of $13.3 trillion (August 2010) is insurmountable, unless it is paid down through inflation.

Federal spending on the military, foreign wars and domestic entitlement programs is seemingly uncontrollable, and the annual deficit will only be contained through draconian tax increases. The nonpartisan Peter G. Peterson Foundation reports that the federal government as of September 2009 faces a total $61.9 trillion in unfunded liabilities over the next 75 years that are not covered by expected tax revenue. The Government Accountability Office has predicted that the interest costs on the growing debt together with spending on major entitlement programs could absorb 92 cents of every dollar of federal revenue in 2019.

The individual states and local jurisdictions are sinking under the weight of ill-conceived and irresponsible compensation and pension plans for civil servants, as well as federally-mandated social engineering and entitlement programs. Whether through the anticipated Obama tax hike or by some other impetus, sooner or later, the U.S. Congress, states and local governments will drastically increase effective tax rates for U.S. residents. The U.S. economy will probably not disintegrate overnight, although it almost did in September 2008. Nevertheless, as a practical matter, earning money and keeping it will become much harder in the coming years. Further, any person living in the U.S. can be sued by anyone for almost any reason, and the cost of defending a lawsuit can be as much or more than simply paying to make it go away. An individual or business owning significant assets located in the U.S., or an individual trying to earn a living or run a business, is hostage to these realities.

The antidote, or vaccine, against these threats to financial well being is a self-settled asset-protection PPLI irrevocable life insurance trust (also known as a dynasty trust or GST trust). The preferred structure provides several significant benefits to the settlor and other beneficiaries. It moves substantial assets offshore, where U.S. courts or other government agencies cannot levy them. It allows tax free growth of a global, variable investment portfolio managed by a trusted financial adviser in full compliance with U.S. tax laws. At the discretion of the trustee, trust assets (including tax-free insurance policy loans) are available to the settlor during his lifetime. Upon death of the insured, policy proceeds are paid tax-free to the trust. The assets in a well-managed dynasty trust grow perpetually. Thus, the dynasty trust secures the financial well being of spouse, children and their descendants perpetually. These benefits are especially valuable in a world of punitive taxes, deteriorating employment opportunities, decreasing incomes, mismanaged economies, overpopulation, disintegrating societies, unnecessary wars and corrupted governments. Through creative legal and financial planning, the benefits of a private placement life insurance trust are now available to moderately wealthy individuals and families.

Reasons for Insurance

The past few years have witnessed tremendous changes in the product offerings. There are a variety of reasons why people opt for an insurance plan. An insurance cover helps in meeting unforeseen situations confidently. In many situations having a risk cover helps protect your family from any future economic loss in case of an unfortunate death or disability to you. It is also a long term investment plan that also provides with a large risk cover.

Life Insurance

Since life is quite unpredictable, there are certain things that you must know before buying an insurance plan. The best way to protect yourself as well as your family is through life insurance. A life insurance plan offers protection against any unforeseen circumstances and at the same ensures that there is no economic loss due to the unfortunate demise of the policy holder. There are different kinds of life insurance plans that not only offer protection but also provide returns on your investment. Life Insurance investment includes Endowment plans, Money Back Plans, Unit Linked Insurance Plans, Pension Plans, Children’s Plan, Whole Life Plans, etc. Most of these plans provide long term savings as well as systematic creation of wealth.

Non Life Insurance

Covering the risk for any thing else other than human life is referred to as non life insurance. Some of the popular non life insurance plans include Motor Insurance, Marine Insurance, Fire Insurance, Health Insurance, Personal Accident Insurance, Liability Insurance, Engineering Insurance and other non life plans. Irrespective of whether you are looking for a life insurance plan or a non life insurance plan, it is better to contact a reputed Insurance Broker who can help determine the best insurance plan for you.