Cryptocurrency has brought both excitement and frustration to the world of investing. Its potential for both explosive, short-term growth and slow, long-term growth has made it an exciting option for a wide range of investors. However, there are also investors who are frustrated with the industry’s reluctance to provide a wider range of crypto-based investment products.
Insurance is one industry that has lagged behind when it comes to embracing cryptocurrencies. A 2021 survey by NYDIG, a technology and financial services company that assists other companies in developing Bitcoin-based products, suggests it is time for that to change. The survey found that life insurance clients want to see their carriers offer crypto solutions.
Four out of five who participated in the NYDIG survey expressed at least some interest in life insurance and annuity products that provide indirect Bitcoin exposure. More than half said that they would prefer to receive interest, income, and other insurance payouts in Bitcoin. More than one-third said they would consider switching to an insurance company that offered Bitcoin products.
For those who are looking for insurance products already on the market that leverage the earning potential of crypto, Private Placement Variable Universal Life Insurance policies (PPVUL) and Private Placement Variable Annuities (PPVA) may fit the bill.
Insurance investments that embrace cryptocurrencies
Generally speaking, PPVUL policies and PPVAs are investment vehicles that allow for tax-deferred investment growth. With PPVULs, a death benefit is paid to the owner’s beneficiaries after his or her death, much like an insurance policy. With PPVAs, tax-deferred investments provide an income stream after retirement.
PPVUL policies and PPVAs differ from traditional variable life insurance policies and annuities because they are not offered to the general public. Rather, they are offered only to “qualified purchasers” who are required to meet certain income and net worth requirements. That special characteristic of PPVULs and PPVAs makes them exempt from registration under the Securities Act of 1933 and the Investment Company Act of 1940. As a result, they can include among their assets cryptocurrencies and other investment alternatives not available with traditional life insurance and annuity products.
“PPVUL and PPVA, when combined with a nontraditional investment option like the Castle Digital Index Fund, represent a unique solution for high-net-worth clients who expect institutional pricing and seek alternative investment options on a tax-favored basis,” explains Peter Eberle, President and CIO of Castle Funds.
Castle Funds is an investment firm that has been managing funds invested in Bitcoin and other digital currencies since 2017. They specialize in providing secure and compliant solutions for adding digital currency exposure to investment portfolios.
“As the digital ecosystem matures, the top crypto tokens may simultaneously serve many functions, either foundationally or through incremental layers,” Peter explains. “We believe that Bitcoin and other top-tier digital assets provide an opportunity to generate substantial returns as it is embraced by investors as a store-of-value, while also serving as a hedge against excessive debt issuance, currency devaluations, central bank interventions, and negative real interest rates.”
Using PPVAs to empower charitable giving
In addition to providing a more versatile vehicle for post-retirement income streams, PPVAs can also serve as an avenue for charitable giving that provides higher flexibility and lower tax obligations. Unlike donor-advised funds or charitable remainder trusts, PPVAs ensure that the funds deposited remain under the control of the giver during that person’s lifetime. The beneficiary can be changed at any time, and funds can be removed.
PPVAs also allow for investments to grow tax-deferred. Upon the owner’s death, the funds can pass to a charity tax-free. Optionally, the fund can pass to the owner’s spouse to enable the investments to continue to grow in a tax-exempt vehicle.
For affluent individuals and families who want to include charitable giving in their estate planning, a PPVA is an option that gives greater control over the management of their investments. It not only allows access to a wider range of asset types, but also gives the flexibility to restructure portfolios as markets dictate.
