You’ve worked hard throughout your life and managed to amass considerable wealth. (In the millions or more)
Your financial concerns are thus different from everyone else’s – it is no longer about securing against financial loss, it is now about securing the financial future of your descendants.
At this point in your life, you realize that there is no way that your wealth can be handled just like any other and so you start looking for options that cater to your very special needs. You do your research, appraise a great number of policies and cannot seem to decide on the one that suits your purpose.
Enter the Universal Life Plan. We introduced it some time ago on this blog, and now would be a good time to examine more of its little-known characteristics that make it so beneficial to people of a certain income bracket.
Enlargement of your Estate
We don’t mean increasing the size of your housing grounds, but rather, the amount of wealth you leave behind upon your passing.
Although mileage varies from person to person, every dollar of Universal Life Insurance purchased translates to 3-5 dollars worth of Death Benefit. This means that a dollar invested in a Universal Life plan can translate up to 5 dollars worth of Estate. While this might not seem like much, Universal Life policies are usually bought to the tune of millions – generating quite a bit of chump change for your children.
Let’s take a look at a practical example. Mr Kenny Koh is retired and has a total cash base of 10 million, with 4 children. He wants to leave each child with a legacy of at least 4 million each, but cannot do so right now based on his current cash base.
Knowing that he has enough for daily expenses and the occasional golf game in Paris, Mr Koh purchases a Universal Life Plan for a premium of 2 million, and a death benefit of 8 million. He sleeps better at night now knowing that upon his passing, his children will have a total legacy pool of 8 million in cash, and 8 million in insurance proceeds from the plan – 16 million in all, divided up nicely among the 4 children.
Mr Koh then proceeds to hit a hole in one.
Full Control And Transparency of Funds
Want to change your sum assured mid-way in the plan? Want to know exactly how much the insurer charges you on a monthly basis?
These are the hallmarks of any Universal Life Insurance policy. Using Mr Koh as an example, after buying his 2 million dollar plan, he receives a monthly statement showing him exactly:
- How much money his plan is generating for him (increase to his cash value)
- How much money the insurance company is charging him for fees and mortality charges (decrease in his cash value)
Such transparency is welcome because Mr Koh knows exactly how much is cash value in the plan is worth at all times.
Should he decide to increase or decrease the sum assured of his Universal Life Policy, he can also do so by arranging the details with the insurer. These plans get this sort of preferential treatment due to their large investment cost by a single individual (as opposed to a regular term or whole life plan)
Due to his children doing well individually, Mr Koh decides to decrease his sum assured by 4 million, thus paying less in monthly mortality charges.
He then celebrates by hitting another hole in one.
Lesser Age Restrictions
Most insurance policies have a restriction when it comes to age. This is especially more for the elderly whom most insurance plans are usually not ready to cover. (The usual age limit for most policies is 65)
However, in the case of Universal Life plans, the age restrictions are less stringent and allow people up to age 75 years old to be covered. So using our golf loving Mr Koh as an example for the last time, he decides to purchase yet another Universal Life policy on his 71st birthday, this time to the tune of 1 million dollars. The policy is active the day Mr Koh hands over the cheque.
Once again, he celebrates, but this time with a birthday cake and with his children around him. (You thought it was going to be a hole in one again?)
Universal Life Policies are one of the most powerful and flexible policies around today. As such, it would be useful to get accquainted to its functions and capabilities – who knows, you might just hit a hole in one after getting such a plan yourself!
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.