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Actual use of life insurance abroad

Have you chosen an insurance company and a suitable plan for universal life insurance (ULI), estimated all the risks and learned got acquainted with exceptions? Let's see how it works, and what you will get investment income from. In this article, we show specific examples of cases and life insurance programs abroad.
Actual use of life insurance abroad

Case 1. “Qualifying”

You make the minimum allowable contributions. The client is a man of 30 years old, a non-smoker. He contributes $ 8,820 annually.

You make minimum allowances annually; if you decide to terminate the agreement in 15 years (the minimum term of life insurance agreement), then the company insuring you will be able to pay out full amount of your savings (or a little more – it depends on profitability and age upon reaching of which you have entered into the policy). And throughout this period your funds will be reliably preserved by the terms and conditions of the insurance policy.

In the first 5 years, the balance amount, including all commissions and fees, will be $ 32,810, in another five years, that is, when the client reaches the age of 40, the amount will be $ 77,898. Upon reaching the age of 50, the insured client will have a capital amounted to $ 229,673.

Taking into account the guaranteed preservation of capital in 1%, and returns amounting to 6-7% per annum, in average, the universal life insurance agreement abroad looks much more attractive than any deposit.

The insurer guarantees that + 1% of income will be added to the total amount of your funds in an extreme situation - market disruption during a crisis. At the same time, the average returns are 6-7% according to the statistics data over the past 25 years. And this is provided not to mention the fact that if accident or death occurs, you have a thick financial airbag in the form of life insurance.

Insurance coverage for payment (life insurance coverage) in case of death, starting from the first year of the agreement validity, remains unchanged and amounts to one million US dollars in addition to the accumulated capital, i.е. in the event of a client’s death in 50 years, when he has $ 229,673 on his account, the company will pay 1,229,673 US dollars to his heirs.

Case 2.  “Optimized”

You can specially focus on savings and make contributions of 3-4 times more than the minimum allowable amount. In this case, you will be able to increase your capital significantly and get a significant profit in 20-30 years.

A man of 30 years old, a non-smoker, contributes $ 26,500 annually. The total amount of contributions for 30 years will be 795,000 US dollars. Capital, growing due to investment income, within the same period will amount to $ 2,522,578, and the client will be able to use this amount at his discretion.

If a person dies in 30 years, then, upon the insured event occurrence, his family (beneficiaries) will get 3,522,578 US dollars (accumulated capital plus one million US dollars (life insurance coverage) of benefit from the insurance company on hand.

How profitable is it? 

Universal life insurance plan can be compared with a bank deposit. If you deposit funds for thirty years with the rate of 6%, your accumulated capital will amount to $ 2,229,000. The universal life insurance agreement provides 2.5 mln, i.e., the returns are higher. Net capital gain over 30 years will be about 6.3% per annum, including all commissions and tariffs for life insurance.

Certainly, you will not find 6% per annum in currency in bank deposits of reliable banks. Another main advantage of this plan is a guaranteed 1% of income; the average return is 6-8% per annum, capital upside may reach 30-40% per annum. But even in the worst case, you will get a minimum income of + 1%, and this amount will not be decreased by fluctuations in the market.

Case 3, which can be headed as: “Pay once and for all”

This variant can be uses if you have a few dozen (30-40 thousand US dollars) to several hundred thousand US dollars and more, and you are able to afford investing of a part of this amount or the entire amount in insurance policy.

Insured: a man of 30 years old, a non-smoker. He contributed USD 126,091 by a lump sum per the first year.

Policy year

Capital

Benefit in the event of death

1

126,091

1,000,000

5

154,857

1,000,000

10

203,374

1,000,000

15

277,159

1,000,000

20

381,136

1,000,000

25

542,390

1,000,000

30

766,231

1,026,750

35

1,114,230

1,359,360

There is a significant difference in this case from the examples described above. Benefit payment in the event of death remains fixed for 25 years and amounts to 1,000,000 US dollars. And another ten years later, that is, in 35 years of the agreement term, the amount of benefit payments in the event of death will be $ 1,359.00, which is on 250,000 more than the accumulated capital.

The rate of return in this case is 7.06 percent per annum, and the net annual capital gain on invested funds is 6.1%, excluding all commission and life insurance costs. It is a quite good indicator.

A characteristic feature of this case is the ratio of accumulated capital and the amount of insurance benefit payment. Up to the thirtieth year of the agreement term, the amount of the insurance benefit payment remains unchanged and is up to $ 1 million, while capital is growing for the whole period specified due to regular contributions and investment income.

After 30 years of the agreement term, the insurance benefit payment (payment in the event of death) starts to increase. This increase is due to requirements of the laws of Texas and the laws of the United States, which do not allow the accumulated capital of the client exceeding the insurance benefit payment.

Case 4. “Maximum”

You make a large one-off contribution, and then in 5-6 years, you contribute $ 26,500 annually.

A man of 30 years old, a non-smoker, make a large one-off contribution and starts replenishing the account annually since the 5th-6th year of the agreement term.

 

Policy year

Capital

Benefit in the event of death

1

126,066

1,126,066

5

160,735

1,160,735

10

365,582

1,365,582

15

672,543

1,672,543

20

1,116,952

2,116,952

25

1,773,934

2,773,934

30

2,718,016

3,718,016

35

4,108,483

5,108,483

One-off contribution within the first year after entering into the agreement amounted to 126,066 US dollars. Since strict restrictions regarding the amount of life insurance policies replenishment are applicable in the US, it is impossible to make new contributions to the account from the second to the fifth year - this is a way to avoid possible tax evasion (since the funds in life insurance policies abroad are not subject to taxation in the process of accrual, and in the event of death of the client, the insurance benefit payment is also shall not be taxed).

Further, the total amount of contributions is calculated depending on the cost of life insurance, and it is proportional. During the first year, a contribution in amount of $ 126,066 has been made. Starting from the sixth year of the term of the agreement, the client invests $ 26,500 annually. In 30 years, he will have a capital in amount of 2.718.000 US dollars - return to the invested funds is 7.47% per annum or 6.77% net, net of commissions.

Universal insurance programs have become a materialization of the life-long dream of many people who tried to earn on the growth of the index and not to lose anything in its fall - a unique combination of insurance guarantees and investment opportunities has become very popular within the last 15-20 years.

Source: https://ilyafinance.ru/blog/prakticheskoe-primenenie-straxovaniya-zhizni-za-granitsej-kejsy-i-primery-raboty-polisa-szh-za-rubezhom/

 

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