Most clients I talk to find quite astonishing the number of ways life insurance contracts provide nearly unique features to benefit from, such as financial security and asset protection. These are the two significant risks facing everyone today.

While they may think that more exotic or sophisticated legal and financial planning is necessary for safety, for many situations, if not most, a well-designed life insurance or annuity structure will efficiently and effectively — on balance — solve the safety and protection problems at low costs and high benefit.

It is no secret that a major financial security risk is the government's constant changes in tax law. Fortunately, insurance is a contract blessed with decades of well-established tax advantages, such as the tax-free build-up of income inside the policy. And the payout of the proceeds or borrowing the cash surrender value can also be tax free. 

For as long as I have practiced law, the taxation of life insurance has been steady. It is understandable. Politically, the insurance industry is one of the strongest influences on governmental policy. From Wall Street to Main Street, Congress understands that messing with the insurance industry will impact the flow of campaign contributions and constituent votes.

Life insurance companies have a single top priority when it comes to regulation. The regulators, which are done state by state, primarily focus on maintaining solvency over long periods. Actuaries draw on decades of experience to calculate the maintenance of financial reserves to meet contractual obligations.

Just take our recent experiences in financial upheavals of the last 25 or 30 years. The one financial industry that has steadily paid out as projected has been the larger mutual companies and nearly all the stock insurance companies. In mutual companies, the company's owners are the policy owners.

Considering the tax benefits, life insurance policy contracts and annuities are challenging for any money manager to beat steadily. After all, what counts is the money you receive — the cash paid out after tax. And with insurance, the payout is both at the time and to the persons — you, your family, or business — who may need it. 

Insurance companies have great statistics on their year-after-year payouts. A policy owner will not hit the moon financially, nor will they hit bottom. But regardless of the financial circumstances of the markets at any one moment, there will always be a steady payout because the investments are designed precisely for that purpose. The payout history for each company can be checked before acquiring and buying into the insurance program chosen.

For asset protection against lawsuits and other financial predators, holding the ownership of the policies through irrevocable life insurance or annuity trusts is exempt from creditors, retirement plans, limited liability companies, foundations, and other forms of entities can, with confidence keep the insurance contracts and the money they represent safe.

Last week, three people, all friends, came into the office to form a new business. It was easy enough until they discussed what would happen in the event of a disability or death. After some discussion, the answer was a trusteed buy-sell agreement funded with life insurance — a financially secure way to protect the continuation of the business and provide protection from liability.

Life insurance and annuity contracts in the right structure might be the most effective and efficient solution for people looking for a well-established means to obtain financial security and asset protection.     

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Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.