Frequently Asked Questions

Whole life insurance is a type of permanent life insurance and is suitable for a person wanting life insurance cover in place for the rest of their life. A whole of life policy is guaranteed to pay out the death benefit (sum assured) as long as premiums are paid on time and for the rest of the insured's life. Premiums are paid monthly, quarterly, half-yearly or yearly. The guarantee of a payout on death by the insurer makes whole of life insurance the most expensive type of policy to buy. Some permanent life policies have a cash surrender value, whilst others are designed to have no cash value.

Universal life insurance is a type of permanent life insurance, also known as jumbo life insurance, because of the large amount of life cover it provides. A universal life insurance premium is used to pay for the life cover of the policy, with the rest going towards the savings part of the policy which has a cash value.Universal life policy premiums are typically paid in one lump sum upfront, but most insurers offer a multi-pay option which allows the cost of the insurance premium to be spread over several years. Insurance companies will often allow multi pay premiums to be paid over 2 to 30 years. The life insurance company will charge a higher overall premium if the multi-pay option is chosen to compensate for not receiving all of the premium upfront. Premium financing for universal life insurance allows the policy owner to finance up to 100% of the policy value. Universal life insurance policies are usually bought by high net worth individuals who want greater choice and flexibility in the investment part of their permanent life insurance policy.

Universal life insurance started in 1979 in the United States of America. The first universal life contract was issued by the Life Insurance Company of California. By the end of 1983, all major American life insurers offered universal life insurance. Today, universal life, or UL as it is also known comes in a variety of different forms and is a major part of the life insurance market.

Universal life insurance (ULI) is a whole-of-life insurance policy that pays out a cash lump sum upon death.

It is a form of permanent life insurance and is designed to provide a death benefit payment.

Indexed universal life insurance is a type of permanent life insurance policy that offers life insurance coupled with a cash account that is linked to stock market returns. The policy premium is invested in an insurance company strategy that is designed to capture the upside potential of stock market investing. Policyholders who choose this option have their policies credited with the growth of a mix of indices selected by the insurance carrier. For example, the S&P 500 and the Hang Seng indices are popular choices for insurers to use. Unlike variable universal life policies, indexed universal life policies are designed to never fall in value simply due to stock market conditions.

Most insurers also offer built-in guaranteed minimum interest rates to these types of policies which add a degree of certainty for buyers of indexed universal life insurance policies.

Like an other permanent life insurance, Indexed universal life insurance has pros and cons. Here are some of the key benefits and disadvantages of indexed UL as its often known as.

Pros

1. Indexed universal life insurance is typically cheaper than standard universal life insurance or traditional whole of life insurance.
2. Exposure to stock market index returns like the S&P 500, Hang Seng and Eurostoxx 50 typically give higher returns than conventional universal life insurance policies.
3. 100% expsoure to market returns gives transpareny on investment returns. Also known as the participation rate.
4. No stock market losses with life insurers providing policyholder with a 0% floor to protect their policy cash value.
5. Minimum guaranteed returns, typically 1% to 2% a year, for the life of the policy offered by the insurer protects policyholders.
6. Annual reset means your policy starting value begins at zero each year. You do not have to make up for stock market losses before benefiting from index gains.
7. Premum payments are flexible meaning policyholders can delay payment of premiums without their policy stopping and leaving them without cover.

Cons

1. Indexed universal life does not offer the same guarantees as some types of whole of life insurance policies. Performance is linked to the indicies the policy tracks which is not guaranteed.
2. Stock market returns are capped by the insurer meaning policyholders don't get all of the index upside. The cap is typically between 7% to 9% per year which is the maximum amount of interest the insurer will credit to your indexed policy.
3. Cap rates can vary from year to year meaning the life insurance company can lower the amount it credits to your policy from the stock market returns it receives.

A guaranteed universal life policy (GUL) is guaranteed to last for the whole of your life. The policy has a cash value which can rise and fall, but a no-lapse guarantee is offered by the insurance company. This means that if the investment performance of the policy reduces the cash value to zero, the policy will continue to provide the death benefit.

Variable universal life insurance is a type of permanent life insurance policy that offers life insurance coupled with an investment account that allows the policy holder to invest in a wide variety of funds and securities. Part of the policy premium is invested into an investment portfolio belonging to the policy with the remaining premium being used to pay for the life cover.

Variable Universal Life (VUL) is a permanent type of life insurance policy, in which the cash value can be invested into shares, bonds and funds. The performance of these underlying investments will determine how good an investment into a variable universal life policy is viewed.

9 factors that decide the performance of a variable univsersal life policy:

1. Investment portfolio risk
2. Higher portfolio running costs
3. Active management of portfolio required
4. More exposure to portfolio volatility
5. No policy cash value guarantees
6. Lower loan to value (LTV) for premium financing the policy
7. Withdrawals and policy loans need more careful management
8. Cost of insurance charged by the insurer
9. Charges by the insurer to run the VUL policy

Money can be taken from the cash value of a universal life insurance policy by way of a withdrawal or a loan. Withdrawals from the cash value of the policy can help provide income in retirement or support other needs of the policy owner. Withdrawals are usually allowed within limits set by the insurer and do not always reduce the life cover. Policy loans can also be taken in order to access the cash value of a life policy. Any loan amount will reduce the death benefit of the universal life policy payout, if it's still in place at the death of the life insured. However, unlike withdrawals, policy loans can be repaid and the full death benefit restored to the policy.

With universal life insurance, you can take out a loan against the cash value of your policy. The policyholder pays back the loan with interest. A loan is typically taken out to cover large expenses such as a property purchase, investment opportunities or to provide liquidity for a business need. The loan can be paid back over time with a lump sum or with regular payments, or it can remain outstanding and interest accumulates within the policy. If the policyholder dies before the loan is paid back, the policy's death benefit pays off the loan.

Term life insurance is a basic life insurance policy that offers a cost-effective way of providing life cover for a fixed period of time. Term life insurance policies are typically taken out for between 1 and 25 years and used to insure a specific liability for a known timeframe. A term policy will pay out the sum assured (death benefit) if the life assured dies during the fixed term period. After the fixed term period ends, the life cover ends. Term insurance life cover has no cash value and accrues no investment value.

Decreasing term life insurance provides a declining level of term insurance cover throughout its fixed term. The sum insured (death benefit) reduces over the term of the life policy. Decreasing term life insurance is different to term life cover which provides a fixed level of cover throughout the term of the policy. A decreasing term life policy will be cheaper than a term life policy because the sum insured is reducing over the life of the policy rather than staying the same throughout the policy term. Decreasing term insurance reduces the risk of the insurer having to meet a claim for the initial sum assured because of the reducing cover.

Decreasing term insurance offers a cheap and effective way of providing life cover on a reducing sum assured for a fixed period of time. Decreasing term insurance is used to cover a specific debt that is itself reducing over time, with the policy paying out in the event of the death of the life insured. The term is usually selected to align with the associated debt or liability that the life insured wishes to cover.

Repayment Mortgages: Covering a repayment mortgage on a home loan can be achieved with a decreasing term insurance policy. The reducing level of life cover matches the reducing mortgage debt over a fixed period of time, typically up to 25 years. The decreasing term life policy should be selected to align with the mortgage term.

Potentially Exempt Transfers: Covering large financial gifts of property, investment portfolios or cash to friends or family may be considered to be Potentially Exempt Transfers (PETs) under United Kingdom tax law. Gifts made under this rule are subject to a decreasing level of taxation over a 7 year period. Decreasing term insurance can be used to cover the fixed period under which taxation could occur on the gift if the donor died during the 7 years after having made the gift.

A life insurance premium is calculated during the underwriting process. The price, or premium, that you pay for your life cover is determined by:

1. Age
2. Gender
3. Smoking status
4. Medical history
5. High risk hobbies
6. International travel
7. Country of residence
8. Amount of life cover
9. Type of life insurance policy

Life Insurers use these factors and base their premium calculations on acturial models, which determine the price they are going to charge you for the amount of cover you are asking for.

For example, a 50 year old male smoker will usually have a higher premium to pay for his life insurance policy, than a 50 year old female non smoker.

Reduced paid-up life insurance is an option that allows you to retain a death benefit from your life insurance policy without paying all your remaining premiums.

A reduced paid-up life insurance policy is usually a better option than surrendering your policy if you can't meet future premiums as they become due. Under a paid up policy, you won't have any additional premium payments to make, since the policy is now fully funded using your policy's existing cash value.

A reduced paid-up option is only an option for some types of permanent life insurance policies.

Life insurance premium financing is a loan made from a bank or premium finance company to fund the lump-sum premium payable on a life insurance policy.

Premium finance life insurance loans typically cover up to 90% of the policy's cash surrender value. The loan interest rate is usually variable and renewed on an annual basis. Once the premium finance loan is in place, the high net worth individual or company taking out the loan typically pays interest-only to the finance company or bank providing the loan.

Financing the premium of a life policy is popular and attractive to high net worth individuals because a minimal amount of upfront capital is needed to buy a policy. This means capital can remain invested or used for other investments with the aim of generating higher returns than the interest being paid on the premium finance loan.

Premium finance life insurance quotes are available from Capital for Life. Email us at quotes@capitalforlife.com or visit our LinkedIn page and follow us for the latest loan rates and updates.

Apply for premium financing to buy a life insurance policy by emailing us at quotes@capitalforlife.com

There is a minimum loan size of $500,000.

There is no maximum loan size for our premium financing service.

Our premium financing loan service offers different types of loans for high net worth individuals buying life insurance, including:

• Variable-rate
• Different loan terms
• Multi-currency

Our premium financing loans service is available to high net worth clients through life insurance brokers, private banks, trust companies and wealth managers who work with Capital for Life. For the latest finance rates, speak to your professional introducer.

Yes, all our premium finance loans for buying a life policy are interest-only.

You can find our latest premium, finance rates on the Capital for Life Linkedin page or you can email us at enquiries@capitalforlife.com

Yes. Premium finance is available for new life insurance policies taken out through Capital for Life.

Yes, you can refinance an existing life insurance policy or arrange a loan for a life policy with no existing finance.

Capital for Life arranges finance for life insurance policies from the largest life insurance companies globally.

Contact us at enquiries@capitalforlife.com with details of the policy that you want to finance and we’ll be in touch.

No, the interest cannot be accumulated against the policy. Interest is payable in line with the terms of the premium finance loan and cannot be taken from the cash value of the life insurance policy.

Premium finance loans for life insurance policies are typically offered in US$. All interest payments must be made in US$ and repayment of capital (principal) will be made in US$.

However, loans in other currencies can also be arranged including Singapore Dollars, Hong Kong Dollars, British Pounds and Swiss Francs.

Some premium finance loans have an arrangement fee which is payable up front. This varies and depends upon the type of loan you are taking out. Capital for Life will inform you of any loan arrangement fee.

Yes, you can have more than one loan. Each loan facility will be subject to financial underwriting and acceptance.

The premium financing loan is a rolling facility which is typically renewed each year. In some cases, there is the option to transfer to a new rate before the annual review.

The borrower is responsible for making loan interest payments on time and maintaining the collateral requirements.

Capital for Life and its banking partners will monitor the collateral requirements for loan arrangements.

Yes, underwriting for your life insurance policy and a premium finance loan can be carried out at the same time. However, Capital for Life requires a valid and current offer of life insurance in order to execute a loan arrangment.

No, there is typically no penalty or fee for repaying your premium financing loan early.

A life insurance premium finance company is a lender of money to wealthy individuals or companies buying a life insurance contract. The premium finance company enters into a lending agreement, typically with the life insured of the policy to fund, in whole, or part, the premium of a life policy.

A life Insurance premium finance agreement is a contract in which a lender agrees to pay the premium of a life insurance policy taken out on a life insured individual.

In return, the borrower agrees to pay interest on the loan for the stated duration of the agreeement. The borrower also agrees to repay the loaned capital (principle) at the end of the term in order to conclude the finance agreement.

A life insurance premium finance company can accept interest payments on a monthly, quarterly, half yearly or yearly basis. Repayment of the outstanding loan (capital) is usually made at the end of the term. Both interest payments and capital repayments are usually made by wire transfer from the borrower's bank account.

Multi pay life insurance allows you to pay premiums for a limited period while the life cover you are buying is designed to stay in place the whole of your life. For example, you may choose to pay your life insurance premiums over 5, 10 or 15 years, but your cover continues for the rest of your life. Your premiums are level for the duration of the multi-pay period. Multi paying your life insurance is also known as limited pay.

Multi-pay life insurance quotes are available by emailing us at quotes@capitalforlife.com

Life pay is another term for the premium payment you make to a life insurance company for your life policy. The insurance premium can usually be made monthly or annually and the payment is made for the rest of your life.

Life-pay life insurance quotes are available by emailing us at quotes@capitalforlife.com