Category: Life insurance

IRS Rule 7702 Updates, and Whole Life Insurance

At the beginning of the year, the tax law surrounding life insurance policies was shifted. Now, as we approach 2022, all life insurance companies will be shifting new policies to reflect these changes to IRS rule 7702. We’re here to break down what’s happening, and how it will affect the business you write. MEC Limits and Section 7702 7702 refers to the section of the IRS tax codes enacted in 1984, that outlines how life insurance should be treated from a tax standpoint. The most important point of the code

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No Deals in the Life Insurance Industry

“There are no deals in the life insurance industry…” This quote, more perhaps than any other, is something we must take to heart when we work with clients. Not because it’s “sexy,” but because it’s true. The more we try to glamorize the life insurance industry, the greater disservice we do to what life insurance can do—and the more we risk confusing clients. The truth is that there’s no magic. Life insurance doesn’t grow money out of thin air, nor does it eliminate interest, or allow you to pay yourself

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The Whole Truth About Direct Recognition vs. Non-Direct Recognition

When trying to explain policy loans, and Direct Recognition vs. Non-Direct Recognition life insurance companies, we like to begin with a discussion of ownership. In a mutual insurance company, policyholders are the owners of the company. Whole life insurance is not like car insurance, home insurance, or other types of property insurance where you funnel money in and may never see it again. Yet life insurance frequently gets lumped together with all other insurance by agents and clients alike.  Helping a client to understand that they’re an owner of the

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The Huebner Foundation: Foundational Life Insurance Education

“There is nothing more uncertain than life, and nothing more certain than life insurance.” Solomon Huebner It’s easy to get caught up in the more exciting parts of life insurance, like the infinite banking concept. After all, it’s exciting to think about leverage and cash flow and building your own “bank.” Yet it’s important that we don’t neglect the foundation of life insurance, which is protection and certainty. Whole life insurance is foremost, insurance. And it is the only type of insurance that is guaranteed to pay out—which is one

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Understanding the Participation Ratio in IULs

Earlier this year, we wrote about how to illustrate IUL returns in the Accumulation calculator. The reality is, IUL’s are sold as something they just aren’t—there are fewer guarantees, and a lot is still left up to risk.  Now, we have a new button that illustrates another “lesser-known” provision of an IUL policy: participation ratios/rates. The insurance company sets the participation ratio, and is non-guaranteed, which means it can change from year to year.  A participation rate controls how much dividend a policyholder will receive. For example, say the index

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Section 7702 Changes: Is Whole Life Insurance Still A Good Savings Vehicle?

By now, advisors in the industry are well aware that the life insurance industry is going through changes. The end of 2020 introduced recent changes to Section 7702 of the tax code, which hasn’t been touched in decades. While we’ve read mixed interpretations, we’re looking at the whole truth. The truth is, first and foremost, that whole life insurance is an incredibly certain asset. Insurance companies have always met guarantees and have a more than century-long track record of paying non-guaranteed dividends. Even through world wars, recessions, and the Great

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