In the 2008 financial crisis, tens of thousands of banks in the United States went bankrupt, but most of the assets invested in insurance companies were safe. In 2008, the life insurance cash value held by Bank of America in insurance companies reached 19 billion. At least these assets are safe and can be rescued.
Who is the largest buyer of whole life insurance? Some people say that he is a billionaire in Silicon Valley, California. According to Forbes magazine, a high-tech rich man in Silicon Valley, California bought an insurance policy with an insured amount of 201 million US dollars in 2014, which was jointly underwritten by 19 insurance companies, becoming the largest in history. Individual life insurance policy.
In fact, the biggest buyer of whole life insurance is not an individual, but a bank. You may be surprised when I say that big banks are the largest buyers of whole life insurance policies, and your reaction may be that banks are financial institutions, how can they invest their money in insurance companies? Banks have been trying to convince us With money in the bank, what they are doing is investing their money in a life insurance policy with a high cash value life insurance policy, how is that possible?
In fact, banks have purchased a large number of life insurance with cash value for nearly 40 years. Because banks have purchased so many life insurance with cash value, it has been given a special name, BOLI (Bank-owned Life Insurance), that is, bank-owned life insurance life insurance.
Although financial regulatory authorities have increasingly strict supervision on bank-owned life insurance, more and more banking and financial institutions still use BOLI as an important strategy for their asset diversification investment. According to the Equias Alliance/Michael White BOLI Holdings Report, as of March 2019, nearly 64.1% of banks and savings institutions own BOLI assets, compared with 54.8% in 2013. In September 2018, US banks and savings institutions owned The cash value of the BOLI policy exceeds $172.9 billion (not the insured amount, conservatively estimated that if the insured amount is 6 times the cash value, the insured amount exceeds $1 trillion!).
We all know that the banking industry is a high-profit industry, especially the investment banking industry. We all hope to open a bank to make money, or to imitate the model of making money from a bank. The banking industry itself is very profitable and rich, so why are they doing the bulk buying of life insurance that has a cash value? There are many reasons for banks to include life insurance in their asset allocation. One of the important reasons is that the investment of life insurance companies is more diversified, pays more attention to long-term effects, and does not use leverage, so it is more stable than bank investment. In the 2008 financial crisis, tens of thousands of banks in the United States went bankrupt, but most of the assets invested in insurance companies were safe. In 2008, the life insurance cash value held by Bank of America in insurance companies reached 19 billion. At least these assets are safe and can be rescued.
Another reason is that the growth of investment in a life insurance policy is tax-deferred and tax-free. Through reasonable arrangements, policy loans can be used to provide a stable source of tax-free funds for employee benefits and retirement plans. The cash value of policy investment will only increase but not decrease. It ensures the safety of funds and guarantees the minimum return on assets. Probably these are the fundamental reasons why banks purchase so many life insurances.
In our lives, individuals purchase life insurance with cash value based on the same reasons as bank purchases. Asset allocation is diversified, investment tax-free growth, and assets have a minimum guarantee. We are faced with many uncertainties every day. Health, wealth and even life are not completely under our control. What we can do is to eliminate as many risks as possible, and insurance is the best tool for risk transfer.
The existence of insurance companies and the complete business model they provide provide us with the best way to transfer risks. Why do we need to take risks that we are sometimes unable to bear? Inflation and taxation are the greatest enemies of wealth accumulation. We cannot avoid the fact, but tax planning can reduce the erosion of taxation on our assets. In addition, due to the isolation of insurance assets from other family assets, the allocation of insurance products can enable direct inheritance of assets to avoid inheritance tax, income tax, and The easiest way to do this is to allocate some of your assets in life insurance that has a cash value.
Learn how to use the cash value of your policy to create wealth throughout your life and pass it on to your children and grandchildren. That’s what we’ve learned from our bankers.
