Bitcoin life insurance is offering BTC hodlers new tax advantages

As interest in cryptocurrency has grown over the years, so too have the myriad applications for its use. The OG cryptocurrency, Bitcoin, is no exception, as evidenced by 2024’s explosion of interest in exchange-traded funds, Bitcoin decentralized finance and ordinals.

One such new use case for Bitcoin (BTC) is its role in the life insurance industry, pioneered by Meanwhile, which describes itself as the “first and only life insurance company denominated in Bitcoin.”

On Episode 14 of The Agenda podcast, hosts Jonathan DeYoung and Ray Salmond spoke with Danny Baer, Meanwhile’s director of wealth and asset management, to discover how Bitcoin-denominated life insurance works and learn about the tax benefits it offers BTC hodlers.

What is Bitcoin life insurance?

Baer said that Meanwhile offers a whole life insurance policy, meaning customers are covered for their entire lives rather than a limited term. The difference between Meanwhile and its mainstream competitors is that the company denominates its policies in Bitcoin — in fact, its entire operations are denominated in the asset.

“Rather than paying your premiums in dollars or having your life insurance policy grow in terms of dollars, or borrowing against your life insurance policy in dollars, or when you die, your life insurance policy paying out to your beneficiaries in dollars, all of that happens in Bitcoin,” Baer said.

This means that if a customer has a 10 BTC policy, its total value would be around $720,000 at today’s prices — but its future value in US dollar terms could be astronomical if Bitcoin continues its upward climb.

“What we’ve tried to do is take an asset that we view as a very low time preference asset in Bitcoin, meaning that people should own it for a long time, and marry that with one of the lowest time preference savings or investment or planning vehicles, which is whole life insurance.”

Related: Sam Altman-linked Meanwhile Advisors creates BTC private credit fund

Tax benefits of Bitcoin life insurance

Baer explained that a Bitcoin-denominated life insurance policy has several tax advantages for long-term hodlers. “A primary driver of why people are buying our Bitcoin-denominated whole life insurance policy is not even the insurance piece of passing on Bitcoin when you die — it’s the key living benefit, which is the tax-free policy loan,” he said. “You can borrow against the value of your policy tax-free.”

Source: Meanwhile

As Bitcoin continues to increase in value alongside a policy, customers have an increasingly larger pool of funds to borrow against. And because everything is denominated in Bitcoin, “you borrow Bitcoin against it, and when you do that, it’s like you get a new Bitcoin with a new cost basis.”

“Let’s just say you paid your premiums in at $63,000 today, and it’s 10 or 20 or 30 years from now, and Bitcoin has gone to $1 million a coin. You could borrow against the value of your policy, Bitcoin out, [and] its cost basis would be $1 million. So, you could sell it immediately and have no capital gains on that transaction because you’re selling it at cost.”

To hear more from Baer’s conversation with The Agenda — including how Meanwhile manages customers’ BTC, how payouts work and how the company is regulated — listen to the full episode on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. And don’t forget to check out Cointelegraph’s full lineup of other shows! 

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This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.