The life insurance industry has developed in complexity and diversity over the years. When life insurance policies were originally created, they were insurance vehicles but over time, they’ve also become investment vehicles. Ultimately, all of this leads to a complex tax structure.
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A life insurance policy is a financial asset, which needs to be reviewed on a regular basis to ensure you are getting the value you expect, in exchange for the premium dollars you pay to the life insurance company. Your policy could be affected by a change in personal preference, the issuing company’s financial condition or increased competition in the insurance industry. In some instances, replacing your pre-existing policy with another one may be more beneficial for you, but it is a very big decision to make.
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“More than a third (35 percent) of households would feel the financial impact within one month, if the primary wage earner died,” reported LIMRA blog Key Findings for the 2018 Insurance Barometer Study published April 10, 2018 by Maggie Leyes regarding the findings from the LIFE Foundation (Life Happens) and LIMRA International Inc (LIMRA), two associations who work to further the advancement of insurance and financial servicing matters.
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Donating a life insurance to a non-profit or charitable organization is fairly common. The donation of a life insurance policy to a charity favors both the donor and the recipient. A gift of this magnitude will typically results in an income tax deduction for the donor.
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Life insurance policies have evolved into complex financial instruments that no longer simply share risks between an insurance company and the insured. Policyholders now have more control over the policy, which they can use to satisfy new needs and desires. In times of need, a policyholder can use their life insurance policy as collateral to take out a loan issued by their insurance company – known as a policy loan. However, policy loans are one…
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Declared Interest Rate – for any traditional, non-variable policies – is the amount that the investment committee of a life insurance company determines how much can be credited towards in-force life insurance policies, which the policy owner must accept. Interest is usually credited on the accumulated value after policy expenses (mortality/risk charges and overhead expenses) have been deducted, so the actual return is less than the credited rate. Life insurance companies generally adopt one of…
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Life insurance replacement simply means discontinuing one life insurance policy to purchase another one. And, since life insurance is a complex financial tool, policy replacement is a very involved decision-making process. People in the life insurance industry are typically against policy replacement because they believe it does more harm than good. However, there are circumstances where replacement has benefited the policy owner. However, there are circumstances where replacement has benefited the policy owner. Since this…
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Overhead and administrative expenses include all the operating costs that a life insurance company incurs in the course of doing business.These costs fall into four basic categories, which are the cost of facilities, data processing, employees (labor), and sale expenses (commissions, marketing costs, sales offices, etc.). All of these expense factors will vary greatly from one company to another. Commissions are a significant part of the overhead expense factor primarily in the first year or…
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A beneficiary is a person, who will receive the funds in your life insurance policy when you die, which will vary depending on your personal situation and on the laws in your state. You can name a primary and a contingent beneficiary, as well as naming multiple primary and contingent beneficiaries.
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Any person selling life insurance and/or annuities must be licensed with their state’s Department of Insurance, which can vary greatly from state-to-state. Contact information for each state’s insurance department can be found here. With insurance departments, the resources and compliance can sometimes be more relaxed in some states than others. An insurance department’s website can be a valuable source of information. On most websites, you can research whether or not an insurance representative is licensed…
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Selling one’s life insurance policy for a life settlement is a good
Every adviser, financial columnist, and relative has his or her own,
