Universal Life Insurance: A Comprehensive Solution for High-Net-Worth Individuals

Universal life insurance, also known as Long Term Life Insurance (LTI) by the DFSA, provides high coverage amounts in excess of $1 million. It is designed for high-net-worth individuals and integrates seamlessly with your wealth management strategy to address estate planning, wealth transfer, and other financial goals.

How is Universal Life Insurance Different from Traditional Life Insurance?

Traditional life insurance typically offers lower coverage limits. In contrast, universal life insurance goes beyond a pure death benefit, functioning as an investment vehicle with the potential to grow your premiums over time.

What are the Benefits of Universal Life Insurance?

• High Coverage Amounts: Ensures your beneficiaries are well-provided for.
• Investment Potential: Grow your wealth alongside your coverage.
• Estate Planning Tool: Covers estate taxes for a smooth inheritance.
• Flexible Payment Options: Choose a payment plan that fits your financial goals.
• Wealth Management Integration: Seamlessly integrates with your existing strategy.

Where your money is invested depends on the kind of universal life insurance policy you choose:

1. Fixed universal life insurance: When you sign up for this, you agree to the insurer’s fixed rate of return. Your cash goes into an account that earns this fixed rate of interest year after year.
2. Index universal life insurance: The invested premium in this kind of policy goes into an account. The returns from this account are linked to stock market returns through popular high-performing indexes. One of the most remarkable features of this kind of policy is that you are guaranteed against stock market losses – but your gains are capped at a pre-determined rate as well.

HNWs are typically the target market for these policies because of the high premium amount, and also because of the kind of gains and wealth structuring advantages it offers.

As a high-yield investment opportunity, universal life insurance policies can be attractive. However, it is important to consider your goals and objectives and choose the right kind of policy for your needs. Not every policy is created equal, and depending on your appetite for risk, you need to carefully consider which type of insurance is suitable for your portfolio.

Qualification depends on factors like your income, net worth, health, and desired coverage amount.

There are many benefits a universal life insurance brings – but depending on your portfolio and need, you need to be discerning in the policy you eventually choose.

1. Creates liquidity
2. Compensates for inheritance tax
3. Provides security to complex cases of succession planning
4. Presents a valuable option for diversifying your portfolio

The advantages are clear – it’s an exclusive opportunity for high levels of death benefit whilst also having your money working for you in a safe and secure environment.

There’s always a minimum guaranteed annual return, and universal life insurance is an easy road to premium financing. In fact, private banks often finance these policies because of the guaranteed payout at maturity.

For portfolios that need more liquidity but have enough assets, the universal life insurance policy gives an additional benefit as it is paid out in cash.

The risks here are those inherent to any high-value investments. Policies require stringent underwriting, and on the basis of various checks, the policy offered to you may not be as attractive as you initially thought.

Overall, universal life insurance policies are a great option to diversify your portfolio, structure your wealth and plan your estate – as long as you are cognisant of the changes it will bring, and whether it will get you closer to your goals.