Investment insurance (ILI) is a combination of insurance and investments. Savings are divided into two following parts:
• guarantee part will ensure the return of your money if the situation on the stock market is unfavorable. The amount of your savings covered is stipulated in the contract.
• investment part can provide additional return but it is not guaranteed. The insurer will offer you several investment programs to choose from.
Savings within a life insurance policy grow on a taxable basis, meaning no interest or income taxes are paid until they are withdrawn or paid out.
The amount of the insurance benefit paid upon the death of the policyholder is passed on to the beneficiaries tax-free. This makes investment life insurance an effective asset transfer tool.
When withdrawing funds from the policy (for example, by borrowing against the value of the policy), taxes may be withheld. If the loan is not repaid before the policyholder’s death, the amount owed is subtracted from the insurance benefit, and taxes may be due on the balance.
Investment life insurance is a complex financial product, and potential policyholders should review its terms and conditions carefully, preferably with the assistance of a qualified financial advisor or tax professional.
