Why do the rich buy Universal Life policies?

Universal life insurance is a type of permanent life insurance that combines lifetime coverage with a cash value savings component. It is mainly used for estate and legacy planning. We explore the key benefits that make it so appealing to high net worth individuals.

Estate Planning and Wealth Transfer

A UL policy provides an almost instant lump sum of cash upon death to cover immediate costs such as probate costs, funeral costs, debts and other miscellaneous fees associated with the passing.

This is crucial as these costs can be substantial, and the last thing you want to do is to force liquidate assets or deplete your cash savings to afford it.

UL policies help transfer wealth to the next generation in a tax efficient manner. For example, if you have a US stock portfolio of $1million, while Singapore does not have inheritance tax, foreign ownership of US equity has a foreign estate tax of up to 40% on $1million, meaning when you pass on, you lose $400,000 instantly holding on to your stock portfolio, leaving only $600,000 to your beneficiary.

A side benefit of UL is that it is private. Unlike Wills that are public knowledge, ULs are distributed privately, providing a confidential transfer of wealth.

Tax Efficiency and Asset Protection

Tax free access to cash. Through structured policy loans and withdrawals, you can access the cash value of your policy in times of need.

Assets held within a properly structured life insurance policy are protected from creditors, offering a huge layer of legal security.

Investment & Financial Flexibility

Flexible premiums and benefits.

Unlike a typical Whole Life Par Plan, UL allows for adjustments for premium payments and death benefits to adapt to your ever changing financial situations or economic environments.

You have the option of using premium financing, where banks lend money for you to pay your premiums, allowing for an arbitrage on your capital.

ULs have a portfolio that allow you to control the mix of assets to grow your wealth.