Guaranteed Acceptance Life Insurance

Life insurance is extremely important for everyone. It is one of the most overlooked but nevertheless vital part of a good financial plan. Just like getting car insurance under 25 when you are young, getting this kind of coverage will give you peace of mind. People may not give much thought about it, opting instead to buy a big house, designer clothes and several flashy cars.

However, one should plan ahead and think ahead. This coverage provides financial resource to a spouse and children should the unthinkable happen. Today’s economy is full of ups and downs; it is very uncertain and unpredictable. Finding the best coverage is clearly a must. There are many kinds of coverages, including joint term life insurance and no physical life insurance.

It is true that as the person gets older, it becomes more difficult to get the proper coverage. This is because old people are very vulnerable health-wise and most already have sickness or disabilities. This is where guaranteed coverage comes in. This kind of insurance coverage offers protection for individuals who are considered high-risk. People aged between 50-85 are guaranteed acceptance for this life insurance. There are no health questions to answer and physical exams or medical tests to take. Furthermore, the insurance cannot be canceled as the individuals grow older and the premium does not also increase.

Disadvantages of Guaranteed Acceptance Life Insurance

Guaranteed acceptance life insurance is often thought of as the answer to the needs of most elderly and sick people. However, there is also a downside to it. Insurers are taking bigger risks when they offer this type of insurance so what they do is to limit the benefits that an individual gets. Most companies do not offer more than $20,000. If this does not fit the needs, there is an option to purchase from multiple insurance companies. The bulk of guaranteed life insurance policies are priced in terms of “units”. A unit is equal to $1,000 of life insurance coverage. It is essential to know this so that evaluation of different policies from various companies will become easier and more efficient. Make it a point to request for information through mail. The Internet is notorious for disappearing policies of polices which change at later dates. The benefits for guaranteed acceptance life insurance may also be limited for the first few years of the policy.

Most companies increase the amount of the total benefit if the policy stays active for longer than the period indicated by the company.

How to get Guaranteed Acceptance Life Insurance

1. Determine the type of guaranteed acceptance life insurance you need. Once needs are determined, search for more information online. There are numerous companies that specialize in this type of policy, including ones that specialize in over 70 life insurance.
2. Compare rates. Do not make the mistake of signing up with the first company you see or hear. Shop around. Compare premiums. There might be other companies out there that are offering lower premium rates. Each company uses different internal accounting procedures and profit methodology, the cost for the same insurance coverage may vary from one company to another. Know each company’s rates and always take note of differences with premiums.
3. Ask for more information. If there is something that is unclear about the policy, do not be afraid to ask for someone to explain it to you. Before signing up with any company, it is a must to understand everything so that decisions are made intelligibly. If a suitable policy is found, ask questions about it.
4. Make sure to sign up with a company that is financially solid. Insurance companies are also given a rating by agencies. Make sure to choose one that has a high rating. It is particularly important that the company you sign up with has financial strength. Companies with a rating of “A” are very good choices. Keep in mind that there are certain insurance companies which are in financial trouble and they will often offer their policies at discounted rated so that customers will be enticed. Be aware.
5. Only apply when you are sure that policy meets your needs. Rethink your decision before finally signing up. Remember that insurance is crucial in life. Make sure that the policy meets your needs and that the terms are suitable for you.

Examine the life insurance contract. After application has been processed and approved, a formal life insurance policy will be sent. This policy is a legally binding contract between the individual and the insurance company. Most states in America allow a 30-day period wherein clients can examine the contents of the actual life insurance contract. If you are unhappy or unsatisfied with the policy, the contract may be returned with no further explanation and a refund of the premium payment will be sent.

Estate Planning: Irrevocable Life Insurance Trust Isn’t So Crummey

The tax loophole referred to as “Crummey Power” is named after Clifford Crummey who created a trust in order to transfer his assets with the intention of avoiding estate and inheritance taxes upon his demise. The Internal Revenue Service was not pleased and in 1968, took Crummey to court for what they termed as an illegal tax loophole. Crummey’s victory in court created a precedent making the trust an acceptable tool in estate planning.

WHAT ARE THE BENEFITS OF A LIFE INSURANCE TRUST?

Life Insurance Trusts have benefits while you are alive by allowing you to make premium payments through gifts to the trust. In 2013 and 2014, you can make up to $14,000 gift payments to the trust per beneficiary. Thereafter, the trust makes the payments for the life insurance policy or policies.

HOW THE CRUMMEY POWER WORKS

In order to avoid gift tax, a check for under $14,000 is written to the Life Insurance Trust for each beneficiary as a “gift.” In order to be in compliance with tax code and receive the gift-tax break, each beneficiary must have the right or power to withdraw the gift money.

Thereafter, the trustee creates a “Crummey Letter” which is sent to each of the beneficiaries informing them they have the option to withdraw the money within 30 days. In essence, the power provided in the Crummey Letter grants the beneficiary the power to receive the money and as a result, the beneficiary received the gift.

Essentially, the objective is for the beneficiaries to not withdraw the money in order to make the gift the property of the trust. If the beneficiaries choose not to withdraw the money, a portion of the money will be used to pay the life insurance premiums. Any money left over remains in the Irrevocable Life Insurance Trust (ILIT) and is given to the beneficiaries upon your demise.

At all times, it is imperative to maintain a sufficient amount of money in the ILIT to cover the life insurance premiums. Keep in mind that the settlor must be certain that each of the trust’s beneficiaries will take no action upon receipt of the Crummey Letter by withdrawing any money gifted within the 30-day time frame. Any misunderstandings should be addressed with the client emphasizing the importance of the beneficiaries named in the Living Trust to fully understand the significance of not exercising their right or power to withdraw the money gifted in the ILIT.

DESIGNATING A TRUSTEE WHO UNDERSTANDS DUTIES

Designating a trustee is an important choice. Before selecting a trustee, ensure the trustee understands his or her responsibilities by emphasizing the necessity to notify the beneficiaries with the Crummey Letter each time a gift is made to the trust. Also, emphasize the importance of making the life insurance payments. To ensure the trustee remains objective, the ILIT may have a provision granting the trustee the power to dictate the exact amount each beneficiary is to receive.

If for some reason the trustee fails to perform his or her duties, you still have the option to request that a judge appoint another trustee. Also, legal recourse is available if a trustee fails to perform the duties required by the trust.

CANCELLING THE LIFE INSURANCE POLICY

You reserve the right to cancel the life insurance policy held within the Life Insurance Trust. You may cancel the policy by no longer making gifts to the Life Insurance Trust and allow the policy to lapse. Whatever cash value has been built up in the whole life insurance policy, if any, may be converted to a term life policy.

Therefore, the creation of ILIT for your estate plan is complex and should be handled by an attorney to ensure the maximum benefit of an ILIT is achieved by the insured.

FULL DISCLOSURE

This article only reflects my personal views in my individual capacity. It does not necessarily represent the views of my law firm, and is not sponsored or endorsed by them. The information contained in the article is based solely on opinion, and is provided only for educational purposes and is not intended to provide specific legal advice. No representation is made about the accuracy of the information posted in the article. Articles may or may not be updated and entries may be out-of-date at the time you view them

International Medical Insurance for Individuals and Companies

Health problems are on the rise nowadays due to the excessive stress that people are forced to face. The chances of getting ill may increase when one is traveling abroad in a new climate and environment. Illness abroad can not only be a great mental and emotional strain, it can also drain your pocket. This is the reason why it is necessary to be protected against such circumstances with proper international medical insurance.

Nowadays illnesses are on the rise due to unhealthy lifestyles and increases in stress levels. This is one reason that many people like to take out good health care. Some policies can be expensive and difficult to afford for many individuals and families. However by shopping around you may be surprised how much savings you can make. With a good health insurance plan, you can get proper medical treatment at the right time, which can sometimes mean the difference between life and death.

International medical insurance is of two types – Individual insurance and company/group insurance. While individual insurance is bought privately by people, company insurance is bought by an organization to protect its employees. Such insurance cover while traveling abroad will ensure that you get proper medical attention in a foreign country. Specialist and doctor fees, tests conducted, private hospital rooms etc are the expenses covered by international medical insurance.

There are many insurance companies providing international medical insurance, but you need to shop around before you actually settle on one. You need to ascertain your requirements and choose an insurance company that provides customize insurance policies to meet these requirements. You also have to ascertain that the insurance premiums are affordable and that you are happy with the terms and conditions of the insurance companies in the market.

A little research on the internet will give you a comparative analysis of the rates and policies of different insurance companies. As an alternative you can also take the professional help of insurance brokers who have agencies with a large number of insurance companies. These insurance brokers will be able to help you whether you require individual or group insurance. It is a good idea to use the services of an insurance broker that specializes in this field of insurance and they will analyze your requirements and recommend the right policy for you. Usually using these insurance brokers means a large amount of savings in terms of insurance premiums and your time. Most of these insurance brokers have internet presence and you can contact them through their user friendly websites.

Key Man Life Insurance and Taxation

If your company owns life insurance policies on your executives or any key people for that matter, you need to be aware of the potential tax ramifications and the requirements to avoid taxation of benefits. Important changes have taken place in the last few years that can significantly impact the taxation of corporate owned life insurance. The information below is designed to inform you of the IRS regulations that have been implemented over the last few years and what is needed to comply with these IRS requirements so that policy proceeds avoid needless taxation.*

Pension Protection Act of 2006 and Life Insurance Taxation

On August 17, 2006, President George Bush signed tax legislation containing provisions that significantly impact key man and other employer owned life insurance purchased after August 17, 2006. The legislation, known as the COLI (Corporate Owned Life Insurance) Best Practices Act (which is part of the Pension Protection Act of 2006), includes the proposed IRC Section 101(j). Under this proposed law, life insurance death benefits for business-owned life insurance policies issued after the effective date of August 17, 2006 are income taxable (to the extent the death benefit exceeds the employer’s premiums) unless certain requirements are met.

This new legislation applies to all employer-owned policies issued after August 17, 2006 and includes policies used for key man insurance, stock redemption plans, Corporate Owned Life Insurance and Supplemental Executive Retirement Plans (among others). It may also extend to collateral assignment (economic benefit) regime split dollar and split dollar loans. With this law, all situations where an employer will have full or partial ownership of a insurance policy that is issued after August 17, 2006, regardless of the purpose of the policy, will need to meet certain requirements and follow specific guidelines to avoid potential taxation.

Avoiding Taxation of Key Man Life Insurance

In order to prevent policy proceeds (death benefits) from being income taxable, both of the following requirements must be met:

1. Notice and Consent Requirements:

a) The employee must be notified (in writing), prior to the life insurance policy being issued, that the employer intends to buy a policy on his/her life and disclose what the maximum face amount that is being applied for on his/her life is;

b) The employee must provide written consent to being insured and agree that the employer may choose to keep the policy in force even after the employee separates employment; and

c) The employee must be notified in writing that the employer is the beneficiary of all or part of the death benefit proceeds.

Under the COLI Best Practices Act, unless the employer provides written notice and obtains the employee’s written consent prior to the issuance of the policy, the death benefit of the life insurance policy will be taxable from day 1. Notice and consent may not be obtained after the life insurance policy is issued to remove this taxable death benefit status.

2. Once the “Notice and Consent Requirements” are met, there are two “Exceptions” to the rule taxing death proceeds payable to an employer, one of which must be met:

a.) Exception #1:

1) The insured was an employee at any time during the 12-month period before the insured’s death OR

2) The insured was a Director or “highly compensated employee” at the time the contract was issued.

b.) Exception #2:

Any amount received by the employer as a result of the insured’s death is paid to:

1) A family member of the insured;

2) A designated beneficiary of the insured under the contract other than the employer;

3) A trust established for the benefit of a family member, other designated beneficiary, or the insured’s estate; or

4) A family member, designated beneficiary, trust, or estate in exchange for any interest they hold in the corporation / employer (i.e. buy-sell agreement).

If both the “Notice and Consent Requirements” and one of the “Exceptions” above are met, Corporate Owned Life Insurance proceeds would be received income tax free if the policy death benefits would otherwise be eligible for favorable tax treatment.

COLI Best Practices Act- Reporting Requirements

All employers are required to report annually all corporate-owned life insurance policies to the IRS. The annual reporting requirements imposed under the IRC Sec. 6039I include:

1) The total number of employees at the end of the year;

2) The number of employees insured under COLI arrangement at the end of the year;

3) The total amount of insurance in force on all insured employees at the end of the year; and

4) The employer’s name, address, tax payer identification number and type of business, and

5) A statement of valid consent for each insured employee (or, if all required consents are not obtained, number of insured employees for who consent was not obtained).

The IRS requires this reporting annually on Form 8925 ” Report of Employer-Owned Life Insurance Contracts.” It is a simple form and must be completed to comply with IRS Code. You should consult your CPA or professional tax advisor immediately for more information on Form 8925 and the IRS reporting requirements.

If proper record keeping and reporting is not maintained, any and all key man life insurance policy proceeds or other corporate owned life insurance death benefits may be subject to income taxation

In Conclusion

Corporate Owned Life Insurance Policies including key man insurance policies issued after August 17, 2006 may have death benefits that are subject to income taxation if certain requirements are not met. The Pension Protection Act of 2006, which includes the COLI Best Practices Act, includes provisions that have significant consequences for key man and other employer owned insurance purchased after August 17, 2006. You need to understand the Notice and Consent requirements and well as the Exceptions and Record Keeping and Reporting requirements and comply with the IRS so that key man insurance policy proceeds avoid needless taxation. Unfortunately, if you have a key man policy issued after August 17, 2006 and you have not been compliant, your best bet to avoid potential income taxation may be to scrap your current policy and start over!

* All of the above tax information is for information purposes only and is provided to explain the basic tax treatment of life insurance based on the Internal Revenue Code. Any individual or entity considering any life insurance policy should consult with their own CPA or tax/legal advisor that understands their particular tax circumstances and the rules governing their state. In no way is this information intended to be tax or legal advice.

Speciality Insurance: From International Schools Insurance Policies To Military Insurance

All men and women serving in HM Forces, whether they serve with the Army, Navy or Royal Air Force, should consider getting life insurance for the financial security it provides to family members. There are special policies available not only to those in HM Armed Forces, but also international schools, teachers and expatriates.

Both international schools insurance policies and expats insurance policies provide cover that suits the requirements of those markets, which makes them more suitable for these situations than domestic insurance policies would be. However, if you are a serviceman or servicewoman you are probably more interested in the military insurance policies available. If you do not already have life insurance then perhaps it is time to take a look at some military life insurance policies. This is very important as it provides financial security for your entire family, especially if they depend on the money you bring into the household. If anything were to happen to you, your family would be left without an important source of income, so it is always better to prepare in advance for such situations.

If you know you are going to be deployed to a high risk area in a matter of weeks, or months, life insurance could be a good idea, but unfortunately most companies have limitations when it comes to insuring personnel preparing to deploy to such areas. Most life insurance companies will not provide cover if the person looking to get insured is aware of the fact that he or she will be deployed to a high risk area within the following 6 to 12 months. The solution is to get insurance way before any deployment plans start being formed, so it is better to act immediately and get insured while you are eligible.

Besides life insurance policies, there are also other insurance policies available, such as critical illness insurance cover. This policy covers both life-threatening and non-life-threatening conditions such as strokes, cancer, heart attacks, etc., and also covers debilitating conditions such as loss of limbs.

It should be noted that no insurance company is required to insure someone, so insurance companies can decide for themselves if they want to insure a certain individual or not. If the company feels the risk is too high, either due to the lifestyle of the individual, or his or her health, they can refuse to provide cover.

Those looking to get insured have the option of doing it online. Checking policies from different companies is also much easier to do online, as most of the information can be found on the website of each insurance company, and it is simply a matter of analysing which insurance company offers the best terms for a specific policy. Ordering online is simple and fast and usually it is simply a matter of filling out a form and waiting for the paperwork to arrive via email. You can also find a specially trained insurance broker who will help you find the most suitable policy for you.

Most insurance companies offer a discount if a policy is ordered online and that is a benefit that everyone should take advantage of. Discounts can get quite high and while the money saved on one trip travel insurance, for example, may not be a lot, things certainly change if you are looking at an annual insurance policy for the entire family. The money saved can be substantial, so it would be a shame not to look for the best offer and take advantage of the discount.

As previously mentioned, members of different organisations or communities may also have special discounts available just for them, like the policies for International Schools community members and their international schools insurance policies, or expatriates with their expats insurance policies. Since these policies have several advantages over domestic insurance policies, it is always better to get such a policy as opposed to a policy designed for the local population. It is not simply a matter of money, as some may think, as most of the time such insurance policies are not cheaper. It is a matter of benefits provided, and in many cases the portability of the policy from country to country. For example, military personnel looking to get military life insurance or travel insurance have cover that reflects their particular requirements.

Travel insurance policies have cancellation cover for members of HM Forces, in case the trip they were taking was cancelled due to being posted overseas or emergency and unavoidable duty. Just remember that accidents can happen and sometimes there is just no way of preventing them, so it is better to be safe than sorry, so get insured as quickly as possible.