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Life Insurers Clock 37% Rise In New Premiums In March 2022

As the pandemic subsides, the life insurance sector limps back to normalcy.

Over the last few years, the Indian life insurance sector has grown at a compound annualised growth rate of more than 11%.

The Indian life insurance sector has been growing substantially at a compounded annualised growth rate (CAGR) of more than 11 per cent over the past few years, which is substantially faster than the average global growth rate, according to a recent report released by CareEdge.

The prime drivers of this growth include a substantial increase in group insurance products coupled with innovations, customisation, and the development of strong distribution channels in the individual insurance segment. The gap between India’s insurance density and penetration levels and the average for Asian economies indicates a substantial growth opportunity.

Life insurance continues to dominate domestic insurance premium collections.

Globally, the share of life insurance in total premium was approximately 50 per cent, while it was nearly 75 per cent for India, according to the CareEdge report.

Indian life insurance has a top-heavy market structure, with the top five players holding over 85 per cent market share, and the remaining companies making up a long tail. This, along with public sector banks being required to reduce their stakes in some insurance companies due to their mergers, is likely to trigger consolidation in the segment.

The primary focus of the life insurance industry in FY21 and a significant portion of FY22 was on the Covid-19 pandemic, but it’s now expected to focus more on the growth story.  Companies are expected to simplify the life insurance purchase experience and overall digital enablement further across the distribution channels. CareEdge expects the life insurance industry to continue to grow at 12-14 per cent over a three-to-five-year horizon, driven by group products, individual pension, and life cover products, along with supportive regulations, rapid digitalisation, effective distribution, and improving customer services. However, frauds and lapse ratio remain some of the key challenges.

Insurance Premium Sees Strong Growth In March

In March 2022, private insurers’ new-business premiums (NBP) grew 13 per cent year-on-year (y-o-y), and LIC’s NBPs grew a strong 51 per cent y-o-y, according to a recent research report released by Anand Rathi.  In March-end 2022, the total NBP grew 37 per cent yearly to Rs 59,600 crore (from Rs 43,400 crore in the previous year). The private sector’s annual-premium equivalent (APE) grew 11 per cent annually at March-end 2022. The APE for LIC, the sole public entity, grew 51 per cent y-o-y. At March-end 2022, the total APE was Rs 21,100 crore, up from Rs 16,200 crore in the previous year.

LIC’s Market Share Increased

In terms of NBP,In terms of NBP, LIC’s market share for March 2022 increased to 71 per cent (from 64 per cent the month prior, 47 per cent in December 2021), according to the Anand Rathi report. In terms of APE, LIC’s market share for March 2022 increased to 55 per cent (up from 47 per cent the previous month, and 35 per cent from December 2021). Over the last few years, the Indian life insurance sector has grown at a compound annualised growth rate of more than 11%.

APE: SBI Life Occupied Top Place

In terms of APE, SBI Life, with a 17.3 per cent market share, occupied the number one position in the private space, although y-o-y, it declined 130 bps. HDFC Life, with 14 per cent share, took the second position. Occupying the third slot was I-Pru with 11 per cent market share.  Others, such as Bajaj Allianz Life (up 150 bps y-o-y), Tata AIA Life (up 80 bps y-o-y) and Kotak Mahindra Life (up 40 bps y-o-y) gained market shares, whereas Reliance Nippon Life (down 80 bps y-o-y) and Exide Life (down 20 bps y-o-y) lost market shares.  Max Life’s market share was steady at 10.2 per cent y-o-y.In terms of APE, SBI Life was the clear leader in the private sector, with a 17.3 percent market share.

NBP: The top-three accounted for a 47.4 per cent market share.

In terms of NBP, HDFC Life, with an 18.3 per cent market share, was number one; y-o-y it declined 120 bps. SBI Life, with 16.5 per cent, held the second position; it declined 30 bps y-o-y, according to the Anand Rathi report. Occupying the third slot was I-Pru with 12.7 per cent, declining 140 bps y-o-y.Private insurers, such as Bajaj Allianz Life (up 120 bps y-o-y), Tata AIA Life (up 90 bps y-o-y) and Max life (up 10 bps y-o-y) increased their market shares, whereas Kotak Mahindra Life (down 40 bps y-o-y), lost market share.

Credits: Outlook Money Team

Date: 21 APR 2022

Source: https://www.outlookindia.com/business/life-insurers-clock-37-rise-in-new-premiums-in-march-2022-news-192417

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How to tell if your life insurance beneficiary is trying to kill you

You need a beneficiary for your life insurance policy. Most times your life insurance beneficiary will be another person.

This makes sense. After all, the whole point of life insurance is to provide financial support to loved ones after you’re gone.

But what if your beneficiary tries to murder you? There can be hundreds of thousands of dollars on the line when it comes to life insurance, and we’ve all seen more than one true crime show about a husband or mistress dying, and oh look someone just happened to be the beneficiary of a million dollars. In a fishy-smelling situation, the beneficiary is always the main suspect.

Life insurance beneficiaries are a critical part of any policy and something you should choose wisely. So here are three surefire ways to tell if your beneficiary is trying to murder you and benefit from the death benefit.

They take out a huge life insurance policy on you

There are a lot of legitimate reasons why someone might take out a life insurance policy on you. They have to prove that they have an “insurable interest” — that is, your death would impact them in a way that life insurance would mitigate — but that covers a lot of people:

Business partners. Say you’re in business with someone. Whether it’s just the two of you, or you both play a vital role in a small-but-growing company, your death would probably affect the company. Your business partner can take out a policy on you to ensure that there’s enough cash to cover a transition period as the business adjusts.

Adult children. If you’re a grown child and your parents co-signed your student loans, they may take out a life insurance policy on you so they can cover that debt since it would transfer to them if you died. Life insurance can help financially provide for children if a parent dies, but sometimes the parent needs that protection.

Siblings. Do you take care of elderly and/or sick parents with your siblings? If one of you died, would the other be able to continue doing so alone? Without a sibling’s support, the survivor might need to transfer your parent to a facility or hire someone to help take care of them, and an insurance benefit could help shoulder the burden.

Partners. Probably the most common reason why someone would take a life insurance policy out on you: that “someone” is your partner, and they’re taking out a policy to protect your family. Whether you’re the sole breadwinner or a stay-at-home spouse who keeps up with the kids, your partner has an insurable interest.

If you’re worried about one of these people becoming a murder, here’s some things to keep in mind.

First, even though other people can take a life insurance policy out on you, you still have to sign the forms. So don’t consent unless you truly trust the person and they actually have insurable interest.

Second, take a look at how much the policy is worth. Calculate the life insurance need of the policyholder by looking at debt, expenses, and future plans. Since the policyholder should be someone whose life you’re fairly involved in, it shouldn’t be hard to at least ballpark this number. Then, compare the policy value with the insurance need.

Their internet search history is full of “slayer rule” lookups

The slayer rule “prohibits inheritance by a person who murders someone from whom he or she stands to inherit.” That means that if your adoring husband stands to profit from your death, he’s out of luck if he decides to murder you (and is caught, obviously).

There are some interesting caveats, though. For the slayer rule to take effect, there doesn’t need to be proof beyond reasonable doubt or even a conviction. There are also different rules for different states; in Texas, there isn’t a slayer rule that’s as broad as in other states, but a person still can’t stand to inherit from their victim.

So check out your suspect’s browser history and see if they’ve been doing a lot of googling for slayer rules, and the applicable conditions in different states. If they’re a little too concerned about whether or not a murderer can receive money from their victim, they’re out to kill you (or they’re writing an informative-but-educational blog post on the topic).

They’ve already killed off your other beneficiaries

Did you know that you can have more than one beneficiary on your life insurance policy? If other beneficiaries start to die, it could serve as an early warning sign.

You can set up multiple primary or contingent beneficiaries in a few ways. You can name multiple beneficiaries with an equal stake in your death; four beneficiaries get 25% of the death benefit each. If one dies, they each get 33%, and so on, until only one remains (also known as the Highlander rule). This gives you ample time to realize something is up.

Or you can set up a primary beneficiary with secondary beneficiaries also named in the policy. The primary beneficiary gets the entire death benefit, but if they die, the benefit is split amongst the secondary beneficiaries. This puts a big target on your primary beneficiary’s back, and it probably wouldn’t be a bad idea for them to read this article, too.

You can also distribute the death benefit per stirpes, or by branch. That means your son and daughter get 50/50 stakes in the death benefit; if your son dies, his piece of the pie is split equally between his two kids, and so on.

If you have multiple beneficiaries who are dying under mysterious circumstances, look at any beneficiaries who are still alive. They could be working their way through their rivals like a video game character making their way to the final boss: you.

So … what now?

Think your life insurance beneficiary is going to murder you? The good news is you can update your policy at any time to add or remove beneficiaries. In fact, it’s a good idea to sit down every year or two or when you have big life changes like when you get married, your kids have kids, or you’ve dispatched a former beneficiary who showed their hand too soon. It’s as simple as calling up your insurer.

Sure, a life insurance policy can put a target on your back. But for sociopath-free families it’s a critical piece of financial protection — well worth the risk. Visit our learning center for everything you need to know about finding a policy that’s right for you (and your sound-minded beneficiaries).

If you end up getting killed, you may wonder what happens next. We’ve got a guide for you.

Credits: Colin Lalley

Source: https://www.policygenius.com/life-insurance/news/is-your-life-insurance-beneficiary-trying-to-kill-you/

Date: December 19, 2019

[mariamajesticblogs]

Should you pay extra for your employer’s group life insurance?

CNN Underscored reviews financial products such as credit cards and bank accounts based on their overall value. We may receive a commission through Policygenius if you apply and are approved for a policy, but our reporting is always independent and objective.

The best life insurance companies offer policies that can provide your family with a crucial income source after you pass away. However, before you move forward with the purchase of a life insurance policy, you should first check for any group life insurance coverage you might be able to qualify for, either through your employer or another organization.

Why? Because group life insurance comes with serious benefits for those who can qualify, and it may be cheap or even free depending on how you receive it. Let’s take a look at exactly what group life insurance entails and if it might make sense for you.

What is group life insurance?

Group life insurance is a term used to describe any life insurance policy that covers an entire group of people. Commonly, this type of life insurance is offered within an employee or labor organization’s benefits package, so the coverage can cost far less than the market rate. In some cases, it may even be offered for free, or there may be both free and paid options.

Most importantly, group life insurance policies are offered to a group within a single contract, so there are no medical questions or medical exams required. The life insurance company assesses risk based on the entire group instead of the individual, so it doesn’t need to know your personal medical history.

How much life insurance do you need?

This means you can qualify for group life insurance coverage (if you’re offered it) regardless of your medical history. You can even get group life insurance when you can’t get life insurance coverage separately on your own.

But remember that group life insurance coverage may not be sufficient to cover all your life insurance needs. If the group life insurance plan you’re offered has a death benefit that comes up short of what you think you need, you should consider supplementing it with a separate life insurance plan you buy on your own.

Expert Tip: You can have more than one life insurance policy at the same time. Many people who receive group life insurance through work also purchase a separate term life insurance policy.

Another reason to buy your own life insurance policy is that group life insurance is tied to your employer or the organization that offers it. This means if you leave your job, you’ll lose your group life insurance coverage from that employer. Your employer can also decide to stop offering group life insurance as an employee benefit.

Like other types of life insurance, group life insurance can come in many different forms. The details of the coverage offered will depend on the life insurance company, the employer or organization’s budget and other factors.

Group term life insurance

What is term life insurance?

Most employer-offered life insurance coverage comes in the form of term life insurance. This type of life insurance is offered for a preset term, usually 10 to 30 years, and features a premium amount that never changes. Some employers will provide a basic group life insurance policy to all of its employees for free as part of the benefits of employment.

Group life insurance can be a nice perk of your job, especially if it’s free. However, in most cases, employer-provided policies are relatively small compared to what you’re likely to need overall in terms of life insurance, so you probably won’t want to rely solely on it to cover you in case the worst happens.

Supplemental group life insurance

Often, employees who are part of a group life insurance plan can pay to add additional coverage. This type of additional coverage, known as supplemental group life insurance, lets employees pay the difference in premiums to achieve a higher death benefit and additional perks.

Depending on your situation, getting supplemental group life insurance can make sense if the cost is lower than you’d otherwise pay for a similar individual policy. Again, though, your coverage is tied to your employer, so if you leave your job, you’ll lose your coverage.

Dependent group life insurance

You may be able to cover your spouse and children with dependent group life insurance. iStock

Some employers that offer group life insurance might also extend supplemental coverage to spouses and dependents on the condition that the employee pays additional premiums. Often the premiums are reasonable, and no medical exam is necessary for your spouse or dependents.

However, like all group life insurance, this supplemental coverage is still tied to an employer or organization, so you can lose it if you switch jobs or if your employer decides to cut the benefit.

Permanent group life insurance

While not as common, it may be possible to get permanent group life insurance coverage as a benefit through an employer or organization. Permanent life insurance is intended to last an entire lifetime instead of for a specific term. It can come in different forms, such as Group Universal Life (GUL) or Group Variable Universal Life (GVUL).

Like other permanent policies, group life insurance that lasts a lifetime builds cash value that plan participants can rely on later in life. However, because it’s permanent, it can also be expensive, so you’ll need to decide if the extra cost is worth it to you.

Accidental death and dismemberment

Many employers and labor organizations also offer accidental death and dismemberment as part of their group life insurance plan. This type of coverage provides an additional cash benefit if the plan participant dies as the result of a covered accident or if they are dismembered during a covered event.

Veterans group life insurance

The US Department of Veterans Affairs offers veterans group life insurance coverage that allows eligible veterans to extend their life insurance benefits after they leave the military by continuing to pay the premiums themselves.

With veterans group life insurance coverage, you do have to meet specific criteria to qualify, and policies are available in amounts from $10,000 to $400,000.

According to VA.gov, you can initially sign up for veterans group life insurance coverage in the amount you had during your military service, but can then increase your coverage by $25,000 every five years thereafter until you reach the age of 60 (and up to the $400,000 coverage cap).

Group life insurance: What to consider

Group life insurance can be an affordable piece of your financial planning needs.

For those who can qualify for group life insurance, signing up for the basic policy offered by your employer almost always makes sense. After all, group life insurance offers financial protection for yourself and your family, and it can be very cost efficient based on the amount of coverage you receive.

Just make sure you’re not relying on group life insurance as the sole coverage to protect your family. While group life insurance can be an important part of your financial planning, you should make sure you have enough life insurance to replace your income and cover your family’s needs if you unexpectedly pass away.

Credits: Holly Johnson

Date: March 31, 2022

Source: https://edition.cnn.com/cnn-underscored/money/group-life-insurance

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6 life insurance tips for people in their 40s

Your 40s usually comes with some pretty important milestones, like having a family and fully establishing yourself in your career. You might even be done paying off student loans for good (hey, one can dream). And maybe you’re finally at a place where you can afford the type of lifestyle you’ve always wanted — one filled with travel, leisure and financial freedom.

Before you get too cozy, however, make sure you have the proper insurance policies in place. While everything may be going great at the moment, all it takes is an unfortunate series of events to turn your world upside down.

In addition to making sure you have the right auto insurance, homeowners insurance or renters insurance (to protect your possessions), and disability insurance in case you can’t work, you should make sure you have the right amount of life insurance as well. If you don’t, you could leave your family in dire financial straits. And, who wants that? Obviously not you, which is why you’re reading this article to begin with, right?

##Life insurance tips for people in their 40s

If you don’t have life insurance or you know your current policy is lacking, now is the time to do something about it. Here are six tips to consider as you search for the perfect policy for this stage of life.

##1. Don’t assume it’s too late to buy meaningful life insurance coverage. While turning 40 might make you feel old on the inside, you’re still young enough to buy a policy that can protect your family in the event of your death. Actually, most insurance companies that write term life insurance policies will insure people up until their 60s! Still, time is of the essence. Because life insurance rates tend to rise as you age, the cheapest time to buy a policy is now. You can find tips for getting best life insurance rates in your 40s here.

##2. Your life insurance coverage at work is probably not enough. If your employer offers life insurance as part of your compensation plan, you might be left with little more than a false sense of security. Because workplace policies are typically only worth less than $100,000, relying on this coverage alone could leave you drastically uninsured.

Keep in mind that most people need five to ten times their annual income in life insurance, and potentially more if they have kids and lots of financial obligations. There’s nothing wrong with finding value in your workplace policy, but you shouldn’t rely on it as your only form of coverage.

##3. Rates for term policies can be inexpensive — even in your 40s. While it’s easy to imagine life insurance rates are pricey once you reach your 40s, that couldn’t be further from the truth. Precluding any major health issues, term policies are notoriously inexpensive, even if you’re in your 30s, 40s, or 50s when you buy. Don’t assume life insurance is out of reach. You can compare life insurance quotes on PolicyGenius so you’ll know for sure.

##4. You can buy more coverage now — even if you have a policy already. A lot of people in their 40s still own life insurance policies from years ago. Maybe you purchased term insurance when you had a child in your late 20s and haven’t updated your policy since — and had more kids along the way.

While having an older life insurance policy isn’t a problem, it’s not too late to purchase more coverage in your 40s. Chances are good your income and liabilities have changed over the last decade or more. If so, your life insurance needs have also changed whether you’ve been paying attention or not. If you’re earning more money or have more liabilities, buying more life insurance coverage isn’t just inevitable — it’s necessary.

##5. You can also lower your coverage if the opposite happens to be true.

Believe it or not, most life insurers let you lower your coverage at least once during the life of the policy — even if you didn’t opt for adjustable life insurance. There is usually some sort of waiting period associated with lowering your death benefit (and subsequently your premiums).

For instance, your policy might have to be in force for one to three years, but if you’ve had coverage since your 30s, you’re likely in the clear. In other words, if Junior got a high school scholarship or you paid down debt a lot faster than you thought you would, call your insurer up to see if you can adjust your policy (more here).

##6. Shopping online eliminates a lot of the friction. Sure, we’re biased — but we know from experience most people dread the very thought of shopping for insurance. The prospect of speaking to an insurance agent makes us squirm, and our busy schedules make it difficult to find time for an appointment no matter how bad we want one.

Fortunately, shopping for life insurance has changed dramatically over the years. These days, you can do it all online and from the comfort of your own home. You’ll never have to step into an office, nor will you have to worry about “being sold” by a salesman who might not have your best interest at heart. There’s also no reason to go to several different insurance firms and fill out multiple applications either. You can compare life insurance quotes across companies on Policygenius to find the right policy for you.

Credits: Holly Johnson

Source: https://www.policygenius.com/life-insurance/news/6-life-insurance-tips-for-people-in-their-40s/

Date: August 24, 2017

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Overfunded Life Insurance: Why It Really Pays Off

Overfunded life insurance can help you quickly grow wealth, especially when utilized with whole life insurance as part of a Wealth Maximization Account™. In this article, we’ll explain what overfunded life insurance is and how it works, why overfunded life insurance is used by the wealthy (and large corporations), and how to use your own overfunded life insurance policy for tax benefits, cash flow, liquidity, asset protection, and more.

WHAT IS OVERFUNDED LIFE INSURANCE?

Often when shopping for life insurance, it becomes all about finding the cheapest quote. Getting the most coverage for the least amount of money seems like the best deal, right? Well, not necessarily. Depending on your financial goals and the type of life insurance you buy, sometimes it makes sense to pay more.

Term life insurance provides coverage for a predetermined time period, or term, and 100% of the cost of your policy goes toward its death benefit and administrative fees. If you pass away within the term, your policy pays out to your beneficiary. If you outlive your term, there is no payout and any money paid in premiums belongs to your insurance company. This is the cheapest type of life insurance and it comes with no living benefits — its sole purpose is to fund a death benefit.

Permanent life insurance policies are more expensive, but they come with several living benefits. These types of policies provide coverage for the lifetime of the insured. A portion of the cost of your policy goes toward its death benefit and administrative fees. The remainder goes into a built-in savings account called cash value. When you pass away, regardless of when that may be, your policy pays out to your beneficiary. But before that day comes, you can utilize the cash value of your permanent life insurance policy for personal loans, business capital, retirement income, or anything else you choose. On top of that, permanent life insurance policies grow your wealth by earning interest and some earn potential dividends.

When you take out a policy loan (borrow from your cash value), any interest or dividends you’ve earned can be borrowed tax-free. Unpaid policy loans are deducted from your death benefit (plus interest) when you pass away. Paying back your policy loans can be done on your own timetable and interest rates charged by your insurance company are typically lower than those found with banks or private lenders. In fact, using policy loans from a permanent life insurance policy essentially allows you to be your own bank.

If you’re interested in private banking with life insurance, it makes sense that you would want to have as much money in your “bank” as possible. After all, the more cash value you have in your insurance policy, the greater interest and dividends you can potentially earn, and the more money you can borrow (or withdraw). This is accomplished by overfunding your life insurance — paying more into your policy and/or structuring it in such a way that it is supercharged to grow wealth faster and accumulate more wealth over your lifetime.

WHOLE LIFE VS. UNIVERSAL LIFE

Perhaps you’ve heard that whole life insurance earns low rates of return or that it takes a very long time to grow wealth inside a policy. It’s true — typical whole life insurance policies aren’t structured for optimal returns or rapid growth. But when you properly structure your whole life policy to be overfunded, you can maximize your earning potential much faster.

Properly structured whole life insurance offers several guarantees and options not commonly found with other types of permanent policies. Plus, whole life insurance policyholders assume less risk than with other types of insurance like indexed universal life or variable universal life.

Here are 5 reasons why whole life insurance is ideal for overfunding:

Whole life insurance earns a guaranteed rate of return.

Whole life insurance from a mutual insurance company earns potential dividends.

Whole life insurance guarantees level policy premiums for life.

Whole life insurance policies aren’t subject to market volatility.

Whole life insurance policies can utilize a paid-up additions rider to optimize growth.

This last benefit, a paid-up additions rider, is a type of supplemental life insurance key to an overfunded life insurance policy. Its primary goal is to allow you to contribute the maximum amount to your policy allowed by the IRS to still receive tax benefits and front load your policy in the first several years for optimum earning potential and lifetime growth.

THE MODIFIED ENDOWMENT CONTRACT

The IRS regulates how much you can contribute into an insurance policy over a certain time period and still retain tax advantages. Overfund your policy by too much, too quickly, and you run the risk of it becoming a modified endowment contract (MEC), which falls under less favorable tax rules.

A paid-up additions rider, in conjunction with a whole life insurance policy, is designed to help prevent a policy from becoming a MEC by increasing your policy’s death benefit as you continue to contribute toward its cash value, maintaining the minimum required ratio of death benefit to cash value required by the IRS over any 7-year period.

This 7-year period can be viewed another way: as a 7-pay test. In fact, since 1983, all life insurance policies have been required to meet the 7-pay test to avoid becoming MECs. Prior to 1983, people were purchasing life insurance with very small death benefits, making substantial up-front payments instead of annual premiums, and enjoying the increased tax benefits applied to their accumulated interest and dividend growth. Realizing the policies were essentially tax shelters, the IRS modified its tax code to measure the amount of premiums paid into a policy over 7 years relative to the amount of the death benefit.

Every policy is different as far as how much cash value is considered “too much” by the IRS, as each policy has a different face value and premium, based on age and health. An ideal whole life policy structured for growth will overfund just under the 7-pay limit, as it pertains to the individual policy. Typically, the cash value should be around 80–90% of the premiums paid within the first 7 years for optimal growth, with very little premium going toward the death benefit.

Should you have temporary insurance needs, like outstanding loans, a mortgage, or business obligations that require additional financial protection, it’s possible to add an inexpensive term policy onto your whole life insurance policy, giving you the temporary coverage (additional death benefit) you need now without any long-term commitments or drain on your cash value accumulation.

HOW OVERFUNDED LIFE INSURANCE IS USED BY THE WEALTHY

While you don’t have to be wealthy to utilize private banking with whole life insurance, the wealthy typically use overfunded insurance policies to accomplish these goals:

Traditional role of death payout. The original purpose of insurance, dating back to the 1800s. If something unexpected happens, there’s a payout.

Liquid assets in case of emergency. Money withdrawn or loaned against the policy can be used for an unexpected event, such as a medical emergency or job loss, and there are no age-related penalties for accessing funds.

Asset protection. As a private contract between you and your insurer, your policy and its cash value are protected from creditors and legal action in most states.

Guaranteed loan provision. You can borrow against the policy to take advantage of any purchase opportunity — including business, investment, or personal — that requires liquidity and fast action.

Retirement savings. Without the contribution caps of 401(k)s or other qualified savings plans, overfunded life insurance is a safe option for retirement savings that is protected from market volatility and is accessible for early retirement before age 59 ½ without penalty.

Tax-advantaged wealth. Life insurance, compared to alternatives, has some of the most lucrative tax benefits, as follows:

Beneficiaries. The payout of life insurance to a beneficiary is income tax-free. It is also estate-tax-free if the overall estate falls under a certain level.

Cash value. The growth of cash value is tax-deferred and can be used tax-free in some instances.

Policy loans. The funds received from a policy loan are not subject to income tax.

Withdrawals. Withdrawals of cash value, called partial surrenders, are tax-free up to the basis (overall amount contributed to the policy).

In fact, overfunded whole life insurance is held as a Tier 1 Asset by nearly every major bank in the USA and has been used by the likes of McDonald’s and Walt Disney as a source of business capital.

SETTING UP YOUR POLICY

Provided you have a steady income, are in reasonably good health, and can commit to your long-term financial goals, overfunded life insurance may be a key part of your financial portfolio. If you’re a business owner, overfunded life insurance is nearly essential to securing the longevity of your company. And if you’re currently maxing out other retirement savings options or are looking for more reliability than Wall Street, a properly structured whole life insurance policy is almost certainly the way to go.

At Paradigm Life we can customize a policy to fit your financial situation. Our expert Wealth Strategists are available to answer your questions and show you customized illustrations, outlining an individual plan of action to help you achieve your goals. Request a free virtual consultation, no strings attached.

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Credits: PARADIGMLIFE

Date: July 5, 2021

Source: https://paradigmlife.net/blog/overfunded-life-insurance-why-it-really-pays-off/

[mariamajesticblogs]

Life Insurance: Beyond Just Estate Planning

When it comes to life insurance, many folks don't think they need it, if they consider it at all. In fact, it's a versatile financial tool that can help to build financial wellness now and for the future.

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If you’ve never said, “I do,” or live on your own and don’t have any children, you probably think you don’t need life insurance.

Most people may not realize that life insurance can provide benefits well beyond paying for funeral expenses. You’ll want to consider life insurance if someone depends on your income for any number of reasons. That, of course, includes providing for children, but you could also use it to ensure your debts are paid or that loved ones receive the care they need.

No matter your personal circumstances, chances are you haven’t yet put life insurance to work for you. According to LIMRA, a financial services research and consulting organization, only 59% of Americans have life insurance, and about half of those are underinsured.

Beyond just estate planning, life insurance continues to be a versatile cornerstone of financial planning strategies, offering everything from potential retirement income to policies that offer investment value. Here are six ways to use life insurance:

Provide money to help the people you love

In its most basic form, when you die, life insurance provides a sum of money to people you care for. You may want to use the death benefit for final expenses or to pay off a mortgage. Even in your 20s, you might want to think about life insurance if you’ve co-signed a student loan with your parents or others, so that your debt doesn’t become their financial burden. Or you may want to make sure there’s enough money for your children’s education or parents’ long-term care, for example.

For these kinds of goals, many people turn to term life insurance, which provides protection for a specific amount of time, typically from 10 to 30 years. So, if something happens to you during that time, your beneficiaries will receive a payment from the policy.

Create another source of retirement income

If you’re looking for a way to supplement your retirement income, a permanent life insurance policy — like whole life or universal life — might do the trick. Essentially, permanent life insurance allows you to use the policy to accumulate cash value, which is especially useful if you’ve maxed out your 401(k) or have too much income to contribute to a Roth IRA or make a deductible contribution to a traditional IRA. You can use that cash value any way you want — for yourself, to pay for a child or grandchild’s wedding or to cover an unexpected expense.

You can also take tax-free loans from the cash value of your permanent policy, giving you access to cash for any use or emergency you may have. You do have to pay interest, which can range from 5% to 9%, according to current information from Bankrate.com. Still, most loans have lower rates than a bank or credit card loan and they don’t impact your credit score. And while you don’t have to pay it back because the loan could be deducted from your death benefit, you do need to be sure the interest gets paid. Otherwise, your policy could lapse if the loan plus interest exceeds your policy’s cash value over time. It’s also important to understand that unpaid loans and withdrawals will reduce policy cash values and death benefits and may have tax consequences. If your policy does lapse with an outstanding loan, the gain in the policy becomes immediately taxable.

There is also a limit to how much you can put into a life insurance policy to take advantage of this strategy. Over certain funding limits, the policy becomes classified as a Modified Endowment Contract (MEC), which has fewer tax perks. This means your first withdrawal from the policy — even if it’s a loan — is considered taxable income. On MECs, there’s also a 10% tax penalty if you take a distribution prior to age 59½.

Have access to money in case you get sick

With longer life expectancies, people rightly worry about the costs of chronic care. According to a study published in The American Journal of Medicine in 2018, more than 42% of 9.5 million diagnosed with cancer from 2000 to 2012 drained their life’s assets in two years. In the case of a disease like cancer or other qualifying illness, some permanent life insurance policies offer options called riders that, for an additional cost, allow you to use a portion of your death benefit while you’re still living to pay the costs associated with a terminal or chronic illness.

It’s important to understand these types of riders have specific definitions for a chronic illness that need to be met in order to qualify for benefits. Note that these accelerated benefits don’t provide an adequate substitute for long-term care or disability insurance, but are supplemental. Accelerated benefits are also often counted as income when it comes to determining Medicaid benefits.

Finally, long-term care benefits, by definition, only cover costs associated with specific care provided. Life insurance riders that offer living benefits usually do not have limits on how you can use your benefits, whether you need to make accommodations at home, buy groceries, or pay travel expenses for visiting family. However, using these benefits may reduce or eliminate the amount your beneficiaries receive.

Protect your business and business partners

If you own a business, you not only care for your family, but you also care for any business partners and employees. If something happens to you, a partner or a key employee, you can ensure there’s as little impact to the business as possible. Among other things, life insurance can be used to facilitate the transfer of business ownership, fund nonqualified retirement plans and keep a business going during any transition after the death of an owner or key employee.

Leave a legacy

You want to leave a meaningful amount of money to people you love and causes you care about — all while minimizing taxes. Many planning strategies use a part of the death benefit from a life insurance policy as a funding source to pay any taxes due on an estate. Typically, your beneficiaries won’t have to pay any taxes on the money they receive from your life insurance policy (per IRC 101(1)(a)). This benefit can also provide a meaningful donation to a charity or organization you care about, as well as loved ones.

Keep the tax bill down to leave more for your beneficiaries

If you’re wealthy, you can give your heirs a bigger gift after a smaller estate tax bill by creating an irrevocable living trust that owns your life insurance and holds death benefits for those named in the trust to receive the money. The federal gift and estate tax threshold is pretty high—$11.4 million per person in 2019 (or $22.8 million for a married couple) — but some states collect taxes on much smaller estates (See 9 States with the Scariest Death Taxes) and your heirs may benefit from tax-planning strategies using life insurance.

Some people may be at a stage in life where life insurance doesn’t seem necessary. You may have accumulated enough assets, savings and income to cover anticipated expenses, including at the end of life. Your children may be self-sufficient adults and don’t need an insurance payout to protect them from financial difficulties. You also likely don’t need life insurance if your estate is too small to owe estate taxes or has enough liquidity to cover them.

But when it comes to life insurance for the rest of us, too many folks don’t think they need it — until they do — and a key element of building financial wellness is ensuring financial protection for the people you care about most. In fact, 59% of Americans say one of their top financial priorities is ensuring they can maintain a standard of living for their family and loved ones, yet only 57% are confident they can reach that goal, according to Prudential’s 2018 Financial Wellness Census.

Life insurance can provide value across all income levels, and far beyond a simple death benefit. Whether term or permanent, it can help to build your own financial wellness and a financial foundation for those you care about.

Credits: Salene Hitchcock-Gear Date: September 13, 2019 Source: https://www.kiplinger.com/article/insurance/t034-c032-s014-life-insurance-beyond-just-estate-planning.html

[rk24040-blog]

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