Five tax-time insurance savings

For many people, the first thought that comes to mind when they think of insurance is costly premiums. But as April 15 approaches, remember that some insurance products come with tax advantages that can save you money.

Consider these five insurance tax reminders by the nonprofit Life and Health Insurance Foundation for Education (LIFE). Some of the benefits include using various types of insurance to pay your estate taxes, helping you accumulate money on a tax-free or tax-deferred basis and even lowering your taxable income.

— Life insurance death-benefit proceeds are generally income-tax free. As long as your beneficiaries are specifically named, they won’t have to pay income taxes on the proceeds they receive from your life insurance policy.

— The premiums you pay for long-term care insurance may be tax deductible. Sixty-five percent of 65-year-olds will require long-term care services at some point in their lives. For the many who will require services for several years or more, the cost can be astronomical, so it often makes sense to consider long-term-care insurance. Depending on your age, adjusted gross income and other medical expenditures, the premiums you pay may be tax deductible on your personal income tax. If you are self-employed, there are even greater tax advantages by paying your insurance premiums through your business.

— Cash values that accumulate in permanent life insurance policies are income tax-free or tax-deferred. The annual gains you earn from traditional investments and savings vehicles must be claimed as income on your tax return. However, the gain in cash value that builds up over time in permanent life insurance policies can be tax-free or tax-deferred, depending on how you withdraw the money later on. What’s more, these gains are not subject to the alternative minimum tax.

Funds accumulated in a deferred annuity are tax-deferred until you withdraw them. An annuity can provide you with a guaranteed lifetime income and thereby deliver some much-needed stability and predictability to your retirement security plan. Moreover, with an annuity all gains are tax-deferred until you retire — at which point you may be in a lower tax bracket than you are currently. The portion of the funds paid out that are made up of previously taxed principal will be received tax-free. If you’ve hit maximum limits in other tax-deferred retirement savings accounts, an annuity can be an attractive option.

— An irrevocable life insurance trust (ILIT) can help minimize estate taxes. While life insurance proceeds at death are almost always free from income tax, they may be subject to estate taxes if they bring your assets over the exemption limit set forth by the IRS. An ILIT immediately removes new life insurance policy proceeds from one’s taxable estate by setting up an independent legal entity that is the owner and beneficiary of the policy. The ownership of an existing policy may also be changed to an ILIT, but the death benefits won’t be tax-free until three years have passed from the date the ownership was transferred to the ILIT.
source:http://www.timesrecordnews.com/news/2008/mar/14/five-tax-time-insurance-savings/

Life Insurance for Children

Some companies sell it. Others hate it. Is it ever smart to buy life insurance on your children's lives?

It's a tricky subject. In a Bankrate article, the chairman of Allianz (NYSE: AZ) Life said that he believes selling life insurance for kids is contemptible. But many other companies offer it.

The other day, on our Insurance discussion board, Community member SlayTheDragon shared a scary account of how his 17-year-old daughter barely survived a car accident. It shook him up enough to wonder, given his family's tight finances, if he should get some insurance on his kids' lives to cover funeral expenses, should it ever come to that.

My take has long been to say no, few people need insurance on their children. Life insurance is meant to protect an income stream that can disappear due to a death. That's why parents should consider carrying it -- because others are depending on their income.

Many good points were made on the board:

1 Kook79 noted that parents might face steep medical bills, too. He also noted that children don't have high mortality rates or any financial issues that need to be resolved upon death. I can't argue with that -- the odds of needing this insurance are extremely low. We should all make sure we're protected against more likely calamities before tackling this grim one.
2 EmbraceableEwe noted: "The true problem is that you have insufficient funds, period -- i.e. for any 'emergency' which comes up." Exactamundo. We all need to have emergency funds available. Learn more about them in our Savings Center.
3 Esbita, who sells insurance, pointed out that riders can be added to parents' policies, providing for children.

There were many good points made, so I encourage you to check out the whole discussion.

My bottom line remains that it's probably best to bypass this insurance. Instead, though, you might take the money you'd have paid in premiums for it and park that in your emergency fund. That's a good way to help your child no matter what happens.
source:http://www.fool.com/personal-finance/insurance/2008/03/14/life-insurance-for-children.aspx

Life insurance is essential for everyone

Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) either in case of a death of the person insured or after completing the maturity period of the policy. We must accept that all of us, in different walks of life have many needs to meet, families to be taken care of and dreams to be fulfilled. It is possible that we may be able to fulfil our responsibilities towards these during our lifetime.

But will our families be able to maintain a manageable standard of living in our absence? To ensure that a financial protection plan through life insurance comes handy.

Planned properly, life insurance can also provide for the unusual needs like higher education of children or their marriages. The add on benefits (riders) that come with life insurance at a little extra cost, can also take care, to some extent, of the loss of income due to disability or pay for the medical expenses in case of critical illness and can generate higher benefits in case the person assured dies in an accident. Besides, through life insurance one can also plan for regular income after retirement.

Not expensive
It is wrong to believe that one needs to spend a fortune in premiums to get a good insurance cover. Here is a simple example of the value of the insurance cover one needs to take and how much premium one has to pay: Here is a 30 year old person, drawing a gross salary of Rs 6 lakh per annum (Rs 50,000 per month), and has a family of four (wife who does not work and two kids). His monthly household expenses is around Rs 20,000. If this person meets an untimely death, his family will still need Rs 20,000 a month to meet the expenses.

Assuming that this person had taken a insurance policy worth Rs 25 lakh for a 25 years term by paying an annual premium of around Rs 35,000 or Rs 2,916 per month, his family would get Rs 25 lakh on his death. This money, invested at an interest rate of 9 per cent would yield around Rs 19,000 per month. Thus by paying a premium of around Rs 2,900, this person can easily provide financial independence to his family.

Another pertinent point here is that this person being young will have to pay considerably lower premium than someone at the age of 45. This is the primary reason why we should buy life insurance at an early age.

Savings factor
Life insurance is also a good option for savings though one cannot compare an insurance product with other pure investment schemes for the simple reason that life insurance offers life cover and other products don’t.
One should always keep this in mind before comparing other investment options. In life insurance, unlike non-life products, you get maturity benefits on survival at the end of the term. In other words, if you take a life insurance policy for 20 years and survive the term, the part of the amount invested as premium in the policy will come back to you with added returns. In the unfortunate event of death within the tenure of the policy, the family of the deceased will receive the sum assured.

Now that most insurance companies are offering unit-linked insurance plans, investors can get stock market-linked return with life cover.

Insurance as tax planning
Insurance also serves as an excellent tax saving mechanism as the premium paid for self insurance or for the dependents in the family gets deducted from the taxable income.

The Government of India has offered tax incentives to life insurance products in order to facilitate the flow of funds into productive assets. At the peak tax rate of 30 per cent, savings can be substantial.

Planning for old age
Retirement, an age when every individual has almost fulfilled his responsibilities and looks forward to relaxing, can be painful if not planned properly. Have you considered the increasing inflation and taxes?

Will your investment offer you attractive returns under such circumstances? Will it take care of your family after you? An insurance policy will definitely take care of these and a lot more.
source:http://www.deccanherald.com/Content/Feb282008/bannking2008022754589.asp

Reliance Life Insurance launches Reliance Wealth + Health Plan

Life insurance major Reliance Life Insurance has launched the first-of-its-kind Reliance Wealth + Health Plan, a unit linked plan coupled with health benefits.

The launch was announced by Mr. P. Nandagopal, CEO, Reliance Life Insurance. The Reliance Wealth + Health Plan is the first wealth creation product that also offers comprehensive health coverage as a key differentiator in the domestic insurance market.
"The unique proposition of this plan is that it offers complete investment flexibility to grow wealth by investing in different plans and funds and also provides the financial support for managing health expenses. It is in line with our strategy to offer best-in-class products to our customers" said Nandagopal while launching the product.

The plan offers the convenience of cashless payments, cover for the entire family under one plan and the option to increase life cover to provide additional security.

"With annual premium as low as Rs 10,000 to Rs 12,000 per annum, the insured can get health and saving benefits and protect himself/herself against high or unexpected medical bills. The plan provides lumpsum benefit to take care of hospitalization expenses, which include daily hospitalization expenditure, intensive care unit expenses and post-hospitalization spending in the form of recuperation benefits", he said.

The plan offers enhanced health coverage against life threatening illnesses and major surgeries, with all insured having an option to cover themselves against untoward incidents as well. Likewise that the amount towards medical expenses can be availed a number of times in a year and up to 95 per cent of the fund value can be withdrawn during the policy period.

"The policyholder can avail all the benefits with all features of ULIP for maximum flexibility and liquidity, minimizing risk, maximizing returns and averaging cost of units. The plan also contains coverage's with a bouquet of riders available for all lives under the policy and has significantly lower charges and free switches for best risk appetite fund. This is the only plan that provides such additional value with a maturity benefit at the end of the policy term" said Mr Nandagopal.
The product is expected to contribute 35-40% of the total sales of the January-March quarter, 2008.

''We expect a significant business growth on the back of this product, as so far people have not been provided with adequate choice of quality insurance products,'' he added.

source:http://economictimes.indiatimes.com/News/News_By_Industry/Healthcare__Biotech/Reliance_Life_Insurance_launches_Reliance_Wealth__Health_Plan/articleshow/2827464.cms