How UL Works
To use UL, the client concludes an agreement with an insurance company and pays an initial fee. After buying a policy, the money is credited to a personal account with the insurance company.
Thereafter, the insured investor gets access to stock market assets: stocks, bonds, foreign exchange market, precious metals, mutual funds and others through an intermediary, without opening a brokerage account.
The investor can manage the portfolio himself by choosing assets to receive investment return. The life insurance company, in turn, invests his money in investment funds. The contributions received under the agreement are converted into ownership units, in other words units, or shares of the selected funds.
Over time, the capital of the client of the insurance company grows.
The insured client receives a lump sum payment upon the agreement expiry. And in case of death, all earned funds can be transferred to the heir’s account. The unit-linked contract allows specify beneficiaries.
The insurance company takes a certain commission for its work, it is usually 2-3% per year. An early exit from the program implies a high penalty, that is why the tool is used for long-term investments.
Tax preferences are probably the most attractive thing in this type of insurance. The return is not taxed; but the declaration still needs to be sent to the tax authority upon receipt of money.
- Cumulative effect
The effect achieved through the gradual accumulation, concentration of factors and their subsequent blasting effect, that is, the longer you save, the greater the growth of savings.
Habit to savings
Insurance products, in general, are a great way to develop the habit of saving for young investors. UL teaches not only to save but also study various capital markets.
Tax incentives
Tax preferences are probably the most attractive thing in this type of insurance. The return is not taxed, but the declaration still needs to be sent to the tax authority upon receipt of money.
- You can independently change investment portfolios.
The investment landscape around the world is constantly changing and UL certainly adapts well to any environment.
Photos are from open sources.
#life insurance #return on investment
