by Guest » Wed Feb 11, 2009 09:54 am
Our life is unpredictable. Often we are greeted by surprising events that leave a big mark on our lives. Death of a dear one can leave the family devastated, not just emotionally but also financially. Life insurance benefits help you protect your family from such a predicament. It helps you prepare a safety net for your family and provides financial security and peace of mind for your loved ones.
What benefits will be earned from life insurance depends on the type of insurance policy that you have chosen. However, the benefits from life insurance are largely categorized into 2 categories.
The core benefits of life insurance vests in the financial security that the policy holder's family receives. Few of the other life insurance benefits could be:
With a life insurance you can be at peace because you have made a good investment in the interest of your family. If you are the only earning member, your family will have a tough time if you cannot be around to provide for them financially. So, investing in life insurance will help you secure the future of your family even when you are not around.
What benefits will be earned from life insurance depends on the type of insurance policy that you have chosen. However, the benefits from life insurance are largely categorized into 2 categories.
- Who gets affected by the insured's death?
In the event of your death your family members may be disturbed not just emotionally but also financially. If your family members have depended on your income, it is going to be quite difficult for them to recover from the financial set back unless you have made prior arrangements for them like a life insurance policy. At the unfortunate event that you die, your family members may be left with the responsibility of funeral expenses, estate administration, mortgage payments, rents and debts. Your life insurance policy may help them pay for these expenses even in your absence. - Living Benefits
There are certain life insurance policies that offer benefits to the policy holder even when they are alive. A whole life insurance policy converts part of the premium amount into cash value that may be claimed by the policy holder. Whole life insurance guarantees death benefits; offers cash value and have fixed annual premiums as life insurance policy benefits.
The core benefits of life insurance vests in the financial security that the policy holder's family receives. Few of the other life insurance benefits could be:
- Tax concessions: If you own life insurance, you may be eligible for a tax concession. Many individuals invest in insurance policies to be able to enjoy tax benefits.
- Rise in standard of living: With the rise in the standard of living, insurance policies help with the unexpected expenses that may occur at times.
- Good option for the employed youth: Insurance helps in saving money for future needs. Young individuals who are earning full time or part time may see insurance as a good investment option. Not only does it allow them to enjoy tax benefits but also several others in the form of attractive programs that give them more returns on their investments.
With a life insurance you can be at peace because you have made a good investment in the interest of your family. If you are the only earning member, your family will have a tough time if you cannot be around to provide for them financially. So, investing in life insurance will help you secure the future of your family even when you are not around.
Related readings
- Term life Vs Whole life insurance?
- Revocable and irrevocable life insurance
- I have never had Life Insurance, nor has my wife.
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Hi guys,
I guess all life insurance death benefits are non-taxable.
If it's like that then what are these life insurance taxes that I come to hear of?
Purpleheaded08
I guess all life insurance death benefits are non-taxable.
If it's like that then what are these life insurance taxes that I come to hear of?
Purpleheaded08
Posted: Wed Feb 11, 2009 10:21 am Post Subject: Are life insurance benefits taxable?
I guess all life insurance death benefits are non-taxable.
If it's like that then what are these life insurance taxes that I come to hear of?
Life insurance death benefits aren't taxed as income to the beneficiary; however, life insurance death benefits are included in a person's estate for Federal Estate Tax purposes.
Federal Estate Taxes is where the United States Government confiscates about 50% of the value of your estate because you died. That's the triggering event. Mom or Pops finally died.
This would be a great topic for The Financial Power Hour, click HERE to listen to promotional details.
Posted: Wed Feb 11, 2009 10:31 am Post Subject:
however, life insurance death benefits are included in a person's estate for Federal Estate Tax purposes.
even though it is mentioned in the law,but all over the world the income coming from the death benefit of the person is not at all taxable;because the family has lost the earning member.
But what could be the reason for this exclusion of ''Federal Estate Tax'' law from this insurance law. :?: :?: :?: :?:
Posted: Wed Feb 11, 2009 11:35 am Post Subject:
But what could be the reason for this exclusion of ''Federal Estate Tax'' law from this insurance law.
Because the United States Federal Government says so!
But there are ways to mitigate this, first with an A-B Trust, if that's not enough with an Irrevocable Life Insurance Trust funded with a Second-to Die policy. That's when all the problems begin, when the "second" spouse dies.
No matter what the USA Gubment does the life insurance sector of the financial services industry has a solution.
Posted: Thu Feb 12, 2009 03:24 pm Post Subject:
Gary I rememner you were explaining this on another thread in detail. I myself found it to be really informative. Is there any chance you remember the thread and could direct Purpleheaded back to it? Also yes this would be an excellent topic for your radio show. Until I read the last thread on this topic you commented in I had no clue to any of this death tax stuff. I imagine there are plenty others that do not either.
Posted: Sun Mar 01, 2009 04:09 am Post Subject:
http://www.irs.gov/publications/p525/ar02.html#en_US_publink100098382
I don't think this is too complicated to understand.
Posted: Mon Mar 02, 2009 12:57 pm Post Subject: Are life insurance death benefits taxable at all?
hi there,
i too agree with amit, because life insurance is been insured so that after the insurees death, the loved one should not suffer any financial difficulties and because the only earning member have died, so it's not taxable as well.
Regards
Posted: Mon Mar 02, 2009 01:44 pm Post Subject:
Hi jacksonfinancial,
It was really interesting to go through the explanation. Would you kindly explain the Split-dollar life insurance a bit further? I'm more interested to know on what basis the owner and the non-owner are chosen!
Roddick
Posted: Mon Mar 02, 2009 02:39 pm Post Subject:
I'm not sure exactly what you are asking but I will try to answer.
In a spilt dollar arrangement there is a party who is paying all or a portion of insurance premiums and is able to collect the premiums paid upon the benefit being paid out. The person named as the policy owner is usually the owner and the non-owner is the person who is basically providing a loan to the owner. If two or more people are named as owners; usually the first person named is considered the owner. If they both have identical incidents of ownership then it would be considered two separate contracts and not a split-dollar arrangement. I hope that answers your question.
Posted: Mon Mar 02, 2009 03:17 pm Post Subject:
Split-dollar life insurance a bit further?
split dollar insurance is primarily a contract between the employee and employer to share the cost as well as benefits of the insurance.
here is the example.
suppose a person is about 43-45 yrs old and want to have an insurance cover of $ 1 million.then the premium for it will come about $32000.Now the employee will pay the cost equivalent to the term insurance of the $ 1 million and the remainder is paid by the employer.
thumb rule is employee shares equivalent cost of the term insurance.Remainder paid by employer :wink: :wink:
Posted: Sat Mar 07, 2009 12:14 am Post Subject:
roddick,
Split dollar is actually a lot more complex then the article implies. But to answer your questions the owner is usually and employee (or an employees trust) and the non-owner is usually and employer.
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