Life insurance is a crucial safeguard for several people. It’s an extremely essential safe guard that is needed for families, as it ensures financial well-being of the family. Of recent though, there have been policies that are often viewed as good investments with a significant volume of growth and return.
The common structure of such life insurance policies is that the person insured goes on paying premiums to the insurance company, which are then invested and reinvested into well underwritten and fantastically analyzed investment destinations which include anything and everything, right form stock markets to currency markets or money markets.
The returns are then shared with the insured people, over a time period with payments being made at specified time intervals. Often, you might come across news such as some rock star got his voice insured, or some millionaire got a life insurance cover of a few billion dollars, etc. Well, this is exactly what is private placement life insurance. Such an insurance policy is connoted to be a variable universal life insurance.
About Variable Universal Life Insurance
A variable universal life insurance policy, often shortened to VUL, is exactly like a mutual fund. That is the premium paid by the insured person, is invested into various investment destinations by financial experts to obtain maximum rates of return. The word universal signifies that the investment can be anything under the sun, right from gold markets and mines to oil wells.
Secondly, the word variable holds a greater significance. In case of any standard and normal policy, the insurance coverage, premium and periodic returns are fixed and disciplined by a legally bonding document. However, in case of variable universal life insurance, the monthly and yearly payments can be quite flexible, with the company demanding a maximum and minimum coverage.
The coverage and the periodic returns on the other hand depends, and is calculated, on the basis of cash value that has accumulated in the policies account. This policy is a whole life insurance policy with the coverage extending for a lifetime. Apart from that, the death benefit that is given to the family is also in proportion to the cash value. In some cases, the death benefit and returns also depend on the performance of the cash value.
The definition of this insurance is exactly like variable universal insurance, the only difference being that the private placement insurance, is the nobility of life insurance policies. These policies usually, have no formal securities’ registration and are granted to customers who provide massive annual or one time premium, and in return have unimaginable death benefit plus huge return rate, making it almost a quasi-investment fund.
This is basically a custom-made policy of the variable universal life insurance policies. The agreement of the policy is often independently drafted out, hence the coverage, premium, returns and other such features are decided within the company and the insured client. In several cases such insurance coverage run over a couple of million dollars. The potential of this policy is such that it is often made to be an offshore investment, leading to two types of private placement policies, namely, offshore and domestic. The offshore ones are often connoted to be more profitable by the virtue of rate of returns. However, there is a bit of debate with regards to statutory implications and even the profitability of the same.
These policies nowadays are being eyed quite uneasily by certain governments due to the fact that they can be used for tax evasion, and also to hide out untraceable accounts. The private placement insurance, however, today remains a policy of the rich and famous.