Posted by Leverage is a common thing in our daily life. It usually refers to leveraging a large amount of money with a small cost.When we buy a TV with a credit card, or when we buy a house with a mortgage, we are using leverage.
As shown in the picture above, a person uses "leverage" to move a huge amount of money with a small amount of money.
The life insurance product is a typical "leveraged" product.And what we call "safety lever", which is Leverage in English, refers to the ratio of small to big.
What is a "safety lever"?
We can understand the "bumper lever" as a tool or a product.it represents "Premium"with"Claims (insured amount)"betweenratio.
As an example in the picture below, the family can buy a whole-life life insurance for Mr. Li with global claims.A $50 payment was made, and the insurance company promised that when Mr. Lee died, the family would receive a payout of $500 million.
In this case, death is an inevitable event. Mr. Li invested $50 in insurance premiums and the claim amount was $500 million. Then, the insurance leverage ratio of the insurance policy here is 10 times the leverage. The calculation method is as follows:
$500 ➗ $50 = 10
Benefits of Leverage
From the point of view of Mr. Li's family, this policy has played a leverage role of "small and big", providing a wealth to the family. The 10x leverage ratio, coupled with the tax-free provision of claims, also helps families achieve effective transfer and inheritance of wealth between family members or between generations*.
Having said that, the next question is,
How to choose a suitable insurance lever?
As a global resident with international vision and status, when purchasing life insurance products,In fact, it is to choose and compare the insurance leverage ratios of different countries and regions.
Let's take Mr. Li's family above as an example.Assuming that in the market of country A, Mr. Li's insurance premium is a one-time expenditure of 50 US dollars,The claim is $500 million.In the country B market, Mr. Li's premium is also $50.But the payout is $2000 million.
How would you choose?
The above example is exaggerated and extreme, but the actual principle is probably the same.The leverage ratio of life insurance products, from top to bottom, from macro to local, is determined by"Country", "insurance company" and "insurance product".
- Choose a country: choose the country system, jurisdiction and insurance dividend regulation system
- Buying an Insurance Company: Buying Company Credit and Brand History
- Buying Insurance Products: Buying a tailor-made insurance plan
And we often see or hear the following statement, is this true?
The leverage ratio of similar US life insurance claims is about 2 times that of Taiwan and Singapore life insurance, 3 times that of Hong Kong life insurance, and 5 times that of mainland China life insurance.
This statement is true.
If the distinction is made solely by "country/region", insurance claimsThe relationship between the leverage multiples is as follows:
United States>Taiwan>Singapore>Hong Kong>Mainland China
The reason is also very simple. The first commercial insurance company in mainland China was born in 1985. The construction and development of the legal system and the corresponding supporting supervision system took 40 years.
As for the top US or offshore commercial insurance companies, first of all, these countries are based on the protection of private property, and the company history is similar to that of the United States. Second, in such a competitive market environment, in free market countries, the competition between companies is very fierce, without unique performance and premium advantages, it is difficult to be in thousands of insurance companies survive market competition.
Therefore, in terms of claims leverage,Life insurance in the United States has the lowest premiums and the highest leverage in the world.
Can the bumper be added and customized?
Can.Through customized life insurance policy accounts, claims leverage can be 1:20 or even 1:30.Although residents all over the world can apply, the professional requirements for life insurance financial advisors are relatively high, and the application threshold is relatively high. Generally, there are at least $300 million in short-term liquid assets in the family asset portfolio.
Leverage is an effective everyday financial tool.Design, assess, and manage insurance levers well and make it work for our wealth. ——Heather Xiong, CFP®️
Also, please keep in mind that high insurance leverage is not the only goal we pursue. Insurance has many other uses besides claims. (End of full text)
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