LIFE INSURANCE RATINGS Insurance companies are rated by independent rating agencies including: A.M. Best, Standard & Poor, Moodys, Fitch, and Weiss. A composite of the top rating agencies is published by Vital Signs and is referred to as the Comdex.
LIFE EXPECTANCY Life expectancy calculators may help a client better understand their own life expectancy. Dean P. Foster at the University of Penn Wharton School (along with Choong Tze Chua and Lyle H. Ungar) prepared a short form calculator (about one minute) and a long form calculator (about five minutes). Northwestern Mutual Life also maintains a life expectancy calculator.
LIFE INSURANCE REGULATION Life insurance is regulated by state insurance departments. State life and health insurance guaranty associations provide a safety net for their state’s policyholders, ensuring that they continue to receive coverage even if their insurer is declared insolvent. Working together through NOLHGA, the guaranty associations form a national safety net, protecting insurance consumers all across America in their time of need.
SPLIT DOLLAR IRS Regulations govern split dollar arrangements entered into or materially modified after September 17, 2003. The regulations provide for two types of arrangements: economic benefit arrangements and loan arrangements. Arrangement entered into before September 17, 2003 and not materially modified thereafter are subject to prior ruling and notices, most importantly: Notice 2002-8, Notice 2001-10, Revenue Ruling 66-110 and 64-328. Economic benefit arrangements allow an owner of a life insurance contract to provide the non-owner a death benefit interest in the life insurance contract. The value of the life insurance benefit is subject to taxation. Premium payments by the non-owner of a life insurance contract are treated as a loan. These arrangements are taxed in accordance with IRC 7872.
TAX TREATMENT OF LIFE INSURANCE POLICIES The tax code defines a life insurance contract. Premium payments are generally not deductible. Cash values grow on a tax-deferred basis provided that the policy is not a MEC. Death benefits are generally not taxable provided that there has not be a transfer of value.