Wealth planning with life insurance has a long tradition in Liechtenstein, as well as in cross-border services. The right choice of product is crucial, and the potential is far from exhausted.
By Daniel Koller, President of the Liechtenstein Insurance Brokers Association (LIBA)
The possibilities for successful wealth planning are many and varied. The first step is to define customer needs, taking into account the immediate environment. The realisation includes the coverage of own concerns as well as the entire family coverage.
Structuring for the next generation is central to this. Genuine life insurance policies are particularly suitable. What is the recipe for effective wealth planning?
Concrete use cases
It is crucial to consider your own pension provision and insurance cover in the event of illness, disability or death at an early stage. In addition to personal wealth planning or survivor protection, life insurance also effectively covers intergenerational concerns such as gifts and inheritance matters.
Comprehensive advice
Customer concerns differ from one another due to different life circumstances such as financial means, state of health, age, purpose, needs, willingness to take risks, etc. Every family situation is different and must be assessed on a case-by-case basis.
A clear and careful assessment plays an important role in the selection of suitable insurance products. This is where the broker comes into play with its professional knowledge and experience. As part of his advisory services, he is committed to ensuring that the market is competitive and that competitive prices prevail in the best interests of the customer.
Liechtenstein has a wealth of specialised insurance brokers who are well versed in all facets of life insurance.
Diverse product range
“Life insurance” is a generic term for three main categories.
1. “endowment insurance”: payment of the capital benefit in the event of survival or death at the agreed time to contractually stipulated beneficiaries (example: payment of the insurance benefit on reaching an agreed date or in the event of the death of the insured person).
2. “Pension insurance”: After the contractually defined deferral period, pension payments are made to beneficiaries in the agreed amount (example: monthly pension benefit from retirement).
3 “Term life insurance”: This only covers the risk of death. Benefits are paid during the term of the policy when the insured event occurs (example: guaranteed death benefit for an agreed sum in the event of the death of the insured person during the term of the policy).
Ideal framework conditions for the Liechtenstein financial centre
Liechtenstein offers unique advantages such as guaranteed political, legal and economic stability. Furthermore, cross-border trade in services in the EU/EEA area and the customs treaty with Switzerland are unique.
In addition to traditional life insurance policies, existing legal and regulatory principles explicitly permit the design of specialised products such as unit-linked life insurance.
In addition to premium payment by cash transfer, these products expressly allow premium payments in kind. This makes the diverse insurance landscape incomparable.
Transfer of securities and other benefits
The possibility of a securities transfer is central, according to which the transfer of an existing portfolio into a life insurance contract can be effected as a premium payment without prior sale of the securities. The securities portfolio can generate value growth through successful asset management.
With positive performance, the annual costs for the policy are often far exceeded by the capital gains tax saved. When the insured event occurs and the benefit is paid out to the beneficiaries, correctly structured life insurance contracts in many countries around the world often apply reduced rates at the customer’s tax domicile or even full tax exemption.
One of the reasons for the significant growth in life insurance in Liechtenstein was the introduction of the “Automatic Exchange of Information” (AEOI) with corresponding data exchange with other countries.
Difference between genuine and non-genuine life insurance policies
The correct use of “real life insurance” is of crucial relevance. In contrast to a non-genuine life insurance policy, a genuine life insurance policy fulfils the legal and tax requirements in the customer’s or beneficiary’s country of residence and therefore qualifies as a genuine life insurance policy for tax conformity reasons.
The correct content and language of the product and the correct applicable law are key criteria. On the other hand, fake life insurance policies – also known as “insurance wrappers” – regularly pursue other objectives, as history teaches us.
A representative example is tax avoidance. Insurance wrappers have had their day.