Life insurance plays a very important role in safeguarding families against hard times. In fact, according to a survey conducted by Statista in 2021, 55% of the responding audience reported purchasing life insurance for protection to be provided to their dependents.
Life insurance is one source of money that essentially replaces income lost due to the occurrence of a specified event. Life insurance can be quite helpful in paying essential living expenses, educational costs, debt repayments, or mortgage payments in the face of losing one’s income. For many others, life insurance delivers peace of mind when it comes to planning for retirement or continuing the business.
The life insurance market in Singapore has seen continuous growth, and it is projected that from 2024 to 2028, the annual growth will be 6.4%, reaching $58.8 billion by 2028. As a matter of fact, this could turn out to be even higher than predicted as more and more people become aware of the all-rounded benefits of life insurance and its plausible significance as a strategic tool.
Life insurance is a strategic tool for HNW and UHNW clients as it provides a vehicle for the observance of inheritance
Today, life insurance for HNW and UHNW far exceeds the mere protection aspect but has evolved into a very strong tool with which to create a lasting legacy. For these rich families living internationally across many countries with their assets, the legacy planning had turned increasingly complex. In this regard, life insurance can help manage such complexity by bringing order and structure to family fortunes over generations.
Life insurance has facilitated flexibility in the distribution of the estate, such that inheritances will be balanced in cases where some assets are impossible to divide, such as real estate and businesses. Those family members who do not get the assets can be compensated with life insurance payments to work out an equitable division. That said, life insurance also could be implemented as supplementation to one’s wealth strategy, but part of a diversified investment portfolio. Policies can be used in some cases as collateral to underpin financial requirements or retirement income against exposure to market risks.
Life insurance is a complement to wills, trusts, and other structures in multi-generational planning, preserving wealth for future generations. It also supports philanthropic objectives through the funding of charitable contributions, thus leaving behind a legacy representative of an individual’s social values. In estate-tax countries, life insurance provides liquidity to pay estate taxes on real estate or other illiquids in order to avoid liquidation. Life insurance has become an increasingly important component of tax planning for the emerging generation of HNWs and UHNWs seeking diversified international investment exposure.
Types of Life Insurance
Life insurance has been tailored to meet the various individual needs, and it broadly ranges between permanent life insurance and term life insurance. The permanent life insurance covers the insured throughout his life. Subcategories within these include whole life, universal life, and indexed universal life (IUL). Whole life insurance will provide a fixed premium with a guaranteed death benefit, while on the other hand, universal life allows flexibility in premiums. Indexed universal life incorporates flexible premiums and an investment component linked directly to an equity index. The other key aspect of permanent cover is that, over time, cash value builds up, which can be drawn upon or invested during the lifetime of the insured, hence making the policy itself an asset in a person’s portfolio.
Term life insurance, on the other hand, is taken out for a specified period and pays death benefits but does not accumulate any cash value. Generally, it is less expensive and more straightforward. This type of insurance would be used when someone requires protection for just a fixed period of time. To find the right policy, the goals intended to be achieved should be clearly defined and have to require insight from the financial advisor in matching life insurance needs with overall wealth and estate planning.
Key Factors When Choosing Life Insurance Providers
In life insurance, the aspect of choosing an insurer has to be based on the element of financial stability. An insurance company that is financially able normally will be well set to meet its long-term commitment by assuring that the benefits are paid when need be. These indicators include credit ratings, asset-liability management capabilities, and proactive risk management.
Moreover, it would be worth considering whether the policy features, value, and pricing fit one’s needs and objectives. This would be further helped by seeking some professional independent advice to evaluate and make an informed choice.
A New Awareness of Life Insurance
From pure income protection to an advanced tool of wealth and legacy planning, life insurance has truly come into its own. Life insurance enables affluent families to achieve accumulation and preservation of wealth, attend to philanthropic goals, and ensure a continued family legacy well into generations. By recreating life insurance, it can help in securing one’s family’s financial future, making a difference in important causes, and fulfilling long-term financial and legacy aspirations.
Disclaimer
Every effort has been made to ensure the accuracy of the information provided, but no liability will be accepted for any loss or inconvenience caused by errors or omissions. The information and opinions presented are offered in good faith and based on sources considered reliable; however, no guarantees are made regarding their accuracy, completeness, or correctness. The author and publisher bear no responsibility for any losses or expenses arising from investment decisions made by the reader.
