Risk & Business Magazine JGS Insurance Risk & Business Magazine Spring 2018 | Page 25

BY: JOHN E. MCENERY
DIRECTOR COAST ADVISORS, LLC
FINANCE AND BUSINESS CONSULTANTS
Single-Premium Life:
An Innovative Solution For Businesses Succession,
Deferred Compensation, and Estate Planning
A
single-premium life
insurance is exactly what
it sounds like. You pay
a one-time premium
at the beginning of the
contract and you never have to pay
for it again. It may not sound all that
different compared to other forms of
life insurance, but if you take a deep
dive below the surface, you will find all
kinds of pleasant surprises.
or variable options, which may include
more aggressive selections, like mutual
funds, which are volatile and have a
risk of loss.
ULTIMATE FLEXIBILITY
•
Versatile payout options. Beneficiaries
can structure their policy payout
according to their needs, from a single
lump sum to a scheduled payout over a
period of time.
Single-premium life insurance is a great
way for businesses with excellent cash
flow or extra cash on their balance sheet to
provide a great life insurance benefit to top
employees without sacrificing the value of
that liquidity. These are some additional
benefits of single-premium policies. •
GREAT EARNINGS POTENTIAL WIDE RANGE OF APPLICATIONS
• Improved return on cash. If you are
looking for an alternative to your
bank’s low rate-of-return on cash
accounts, consider this type of policy,
which functions like cash but carries a
large payoff when invested wisely and
held long term. •
Range of return options. Whether you
are an experienced or novice investor,
it’s easy to customize your portfolio to
fit your individual risk tolerance level.
For example, you can select from fixed
options, like whole or universal, which
are correlated to interest rates; indexed
options, which are correlated to the
S&P with a floor and a cap for lower
volatility and which resets annually; •
•
•
Collateral value. You can borrow up
to 100 percent of the life insurance
premium, pledging the policy’s
cash surrender value as the primary
collateral. Your out-of-pocket cost is
the interest on the borrowed premium
rather than on the actual premium.
Succession planning. These types
of policies can be used to help meet
long-term business goals in cases
where there are multiple owners,
intrafamily succession goals, exit
planning concerns, and Employee
Stock Ownership Plans (ESOPs).
Supplemental retirement planning.
Single-payment policies are ideal in
situations where a company wants to
recognize key people that are critical
to its success but who are ineligible
to receive equity. This benefit can be
used to incentivize employees based on
performance and provide them with
significant retirement benefits.
Estate planning. Individuals and
families with significant net worth
and highly illiquid assets can benefit
from this versatile cash equivalent in
building a more balanced portfolio.
FEWER TAXES AND PENALTIES
• No surrender charge. Unlike many
other insurance policies, there is no
surrender penalty, which means you
are free to terminate your policy early
and cash it in for the value of your
investments.
• Tax-deferred investment. There are
no taxes due on this type of policy
until funds are withdrawn; because
it accumulates tax free, its value can
grow more quickly.
Contact us today to view a few sample fact
patterns that demonstrates the utility and
flexibility of this creative product. +
Disclaimer: These views are intended to provide an
overview of succession issues. This article is intended
to be for educational purposes only. Seek your own
legal, accounting, and insurance advice before
forming a succession plan.
John E. McEnery, Esq. - Director Coast Advisors,
LLC Finance and Business Consultants; Mr.
McEnery has been an attorney and Senior
Banking officer throughout his career. He
spent 14 years with First Union/First Fidelity
as Vice President commercial loans, he then
became Senior Vice President with Fleet Boston
Financial from 1997-2004. Jack has many
contacts in the banking industry and has been
instrumental in helping JGS Insurance create
and grow our Financial Services Segment.
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