subject: Richard Meyer Cayne On 10 Key Reasons To Hold Life Insurance [print this page] Richard Cayne having worked as financial consultant in Asia for over 17 years both in Tokyo Japan and Bangkok Thailand explains that whether youre an expatriate worker or a national living in your home country you should consider the benefits of an international life insurance account.
At Meyer International in Bangkok Thailand all consultants there usually point out that most people fall into one or more of these top ten life cover uses.
1. The Income Producer
The death of a married income producer with children could cause severe hardship for the surviving family members. Surely, all income producers in this situation should arrange that sufficient funds are in place, in the event of death, for the wellbeing of the family.
2. Property Mortgages And Other Debts
Banks and financial institutions used to insist on borrowers taking out life insurance to cover loans. In recent years, this was often not a condition of the loan. However, whilst related to the first point, no one would want to leave the surviving members of the family with debts at a particularly stressful time.
3. Primary Key Man Insurance
Many small to medium sized businesses often rely heavily on one or two key employees, the key men. Consider what would happen if one of them left the business, there would undoubtedly have been a notice period and a few months to arrange a replacement. Death does not often give notice periods and the sudden loss of a key man could cause big financial problems for a business. The key man is an asset and is probably the only asset in the business that is not insured but certainly should be.
4. Shareholder Protection
Shareholding of a business has value, but there may not be a ready market for these shares in the case of a small company. Upon the death of a shareholder, it is likely that the surviving family members would want the share of the equity paid out to them. One method to ensure that the shareholders family is protected and funds are available to buy those shares is to arrange a shareholder agreement with each shareholder being insured to the value of the equity held within the business.
5. Business Loan Protection
Banks do lend money to a business, by securing guarantees on the assets of the business. However, again related to key man insurance, the death of a key man could give rise to the bank calling in the loan and the guarantees, with severe consequences for the business.
6. Estate Tax
For most individuals, estate tax is not a top consideration but certainly should be if you want to succeed assets onto your family members. Taking out a policy having tax free benefits to your loved ones can certainly assist in paying any estate taxes due.
7. Creation of Wealth
Life insurance is a way of leveraging your assets because the insurance company will usually pay out more on your demise then you put into the policy and creates more wealth for your family. This says Richard Cayne at Meyer Asset Management Ltd while in Tokyo Japan was one of the biggest reasons elderly Japanese looked to international life cover.
8. Minimizes Tax Consequences To Your Estate
If you have cash, stocks, bonds, real estate or any asset this will be taxable by your estate. Why not convert some assets that would be taxable into assets that wont be taxable? Life Insurance benefits are usually not taxable for your beneficiaries. Though says Richard Cayne living in Bangkok Thailand they can be depending on the insurance payout as some countries do tax this so some tax planning here is necessary.
9. Replace Death Benefits Without Losing Guarantees On Pension
Richard Cayne explains how many thousands of people with deferred occupational pension benefits will have had up to four times their salary as death in service benefits while they were employed. Once employees move on, the cover stops but are often not replaced.
For those with deferred pensions in Defined Benefit schemes (final salary), the pension payable upon the death of a deferred member to the spouse/dependents is usually very low.
People might choose to transfer these pensions so that the cash equivalent transfer value and future growth, is available to the family. However, for a large percent of these cases, moving benefits from a final salary scheme is going to mean a reduced income in retirement and additional risks and costs. In the majority of cases, it would be far more cost effective to maintain the final salary scheme benefits and purchase a simple life policy. Thus ensuring the shorter term needs of the family are catered for as well as the longer term needs at retirement.
10. Spouse Insurance
Richard Cayne at Meyer points out - What would the income producer do with the children if the housewife/husband died? Consider a young family and the cost of employing someone, almost full time, to look after the children. The cost may be greater than available from net income each month. This would leave the surviving breadwinner with a difficult problem to solve.
Insuring the non-working spouse is something that is often overlooked, but it may be extremely important.
Richard Cayne is Managing Director of Meyer Asset Management Ltd and like Meyer International forms part of Asia Wealth Group Holdings a UK stock market listed financial services holding company.
by: Richard Cayne
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