According to  recent figures produced by ACLI – The American Council of Life Insurers- around 75 million American families rely upon life insurance products for security in retirement and for other pressing financial requirements in the future.

ACLI, as well as the Association for Advanced Life Underwriting (AALU), GAMA International, The National Association of Insurance and Financial Advisors (NAIFA) and the National Association of Independent Life Brokerage Agencies (NAILBA) have written a letter to congress in the light of concerns about government proposals to change the rules regarding the tax code – rules which may affect current benefits on the kinds of private financial products offered by life insurance companies.

Congress is planning Changes to the Tax Code in order to Reduce National Debt

The reason behind the proposed changes is part of the government’s urgent goal of reducing the national debt.

In the letter ACLI state that while they appreciate that “The huge national debt is a crisis that must be addressed” their (the government’s) plans to replace this crisis with “a new crisis that damages the financial protection and retirement plans of millions of Americans would be misguided.”

And

“As changes are considered to the tax code … the vital role life insurers’ products play in the lives of 75 million American families must be recognized.”

Life Insurance Protects Against the Risks of Death of Wage Earners

Life insurance has long been recognized as providing an essential public service, protecting American families from the early death of a breadwinner, as well as providing a security net for the longer term – as people live longer, or need financial support through illness or disability. ACLI has stated that rather than undermining the public’s efforts to provide for themselves via private means, the “use of safe and secure financial products like those offered by life insurers…should be encouraged”.

A Change in the tax code could discourage rather than encourage members of the American public to “explore private retirement income options, whether individually or through the workplace”

Changing the Tax Code Unfair on Individuals who have acted prudently

The letter to congress also points out that changing the system now would be especially unfair on the millions of Americans who took “thoughtful and reasonable steps to protect their families. Years of personal sacrifice and careful financial planning could be undermined by such an abrupt change.”

What the government plans to do still remains to be seen – but what is certain is that the Life Insurance industry are prepared to do whatever it takes to persuade the American Government to call a halt to plans to change the tax code as regards life insurance products.

Source: Insurance news.net, targeted news service Nov 15

photo credit: Alex E. Proimos

Divorce is right up there with bereavement when it comes to raising stress levels, and – as well as being one of life’s most unpleasant experiences, a break up also seriously impacts on your financial health. This is why it pays to plan ahead – and life insurance, as ever, should be an integral element of planning for life’s undesirable eventualities.

Unfortunately, however, married couples neglect to consider negative outcomes. As Carole Peck, president of Carole Peck Financial Center puts it “Couples often overlook the financial ramifications of their split, or assume lawyers will hammer things out to everyone’s satisfactions.”

Female Spouse often Loses out Financially in Divorce

Very often it is the female partner who gets to keep the family home in the event of a divorce, in order to carry on looking after the children in familiar surroundings.

In exchange the main wage earner, (usually, but not always), the male spouse, tends to keep control of IRAs and other long term financial assets; and while he continues to reap the rewards from their previously joint financial portfolios the family home may start to seem  less of an asset and more of an intolerable financial burden.

Even with decent alimony and child support there may well not be sufficient funds to keep up with mortgage payments, property taxes and home repairs. And if payments cease due to the illness or bereavement of an ex-spouse the family face eviction.

Life Insurance can Provide Financial Stability in the Event of Divorce

Ellie DeLano writes a blog – the ‘Divorce Diaries’ about her personal journey through the divorce process and urges women to think about the importance of life insurance in the event of divorce . The spouse considered to be the most financially well-off (usually the male) should be encouraged to take out a life insurance policy which includes the children as beneficiaries, until they can be considered independent.

In her case she was lucky – a divorced friend had urged her many years previously to have it written into the parenting agreement that Peter, her husband, be “required to name me as beneficiary on his life insurance, until the children are no longer my dependents.” Now that the couple are divorcing Ellie is thankful for this timely advice.

As she says, “If I were to die unexpectedly, Peter would have more than enough money to buy and keep a roof over the kid’s heads, feed them and even probably send them to college. If the situation were reversed, I’d be in serious trouble. We’d lose the house without his support check, and life would certainly be much harder than I complain about now.”

Life Insurance could be a Lifeline – so it Pays to be Practical

In her ‘Divorce Diaries’ Ellie advises even the most happily married to plan for any contingency:  “Don’t sell yourself short just to seem like the ‘nicer’ person.”

We all enter into our marriage contracts thinking it will last forever- but it is imperative to use your ‘practical head’ when planning the future. Setting up adequate life insurance has to be a priority when it comes to safeguarding a future for you and your children – something which you may be very thankful for one day.

Source: mainstreet.com posted 02 December 2010

Divorce Diaries, posted in WomansDay.com Editors on 29 December 2010

photo credit: epSos.de

The need for parents to consider taking out life insurance has been highlighted recently. LIFE (Life and Health Insurance Foundation for Education) recently awarded $105,000 worth of Scholarships to students who could not afford to pay for college because a parent had died.

Parents who die without Life Insurance Scupper College Plans for Children

LIFE reported on the case of Esther Kim who was only 16 when her dad died of cancer – he didn’t have any life insurance, which left her and her family financially insecure. Esther had always been a straight ‘A’ student and had always planned to go to College, but the bereavement looked set to put her plans on hold, since she, along with her mom had to work flat out in order to keep the family going.

Luckily for Esther she now has the chance to start a course at Oglethorpe University. She has achieved this by using money she saved herself, as well as a student loan and a scholarship worth $10,000 from the not for profit organization LIFE.

Parents have to Consider Children’s Future should they Die Prematurely

Mr Marvin H Feldman, President and CEO of LIFE Foundation stated “ When parents die prematurely without adequate life insurance, the people who depend on them most – their children – often face difficult financial realities that can force their dreams of a higher education and a better life to be put on hold.” “We are proud to be able to help deserving young people like Esther and our other scholarship recipients to reach their college goals, and we hope their stories will remind all parents to protect the financial well-being of their loved ones through proper financial planning.”

The LIFE Lessons Scholarship Program offers scholarships to students who are unable to afford a college education due to a parent dying with negligible or no life insurance. During the last year 59 American students received awards from the Foundation – in order to qualify students had to make a video, or write about the financial consequences of losing their mom or dad.

The judges included members of the LIFE Board, as well as Life Insurance company executives, from some of the top US Life Insurance companies. One of the scholarships was awarded as a result of an online vote – Mashell Ewing was the winner, for describing how difficult her financial circumstances had become since the death of her single mom.

Single Parents need to Consider Life Insurance as a Priority

Mashell’s mom died suddenly of a heart attack having made no provision for life insurance. Since then Mashel l and her brother both had to work long hours just to pay the rent and care for their younger sister. Despite this Mashell managed to secure a place at the University of California, Berkeley and so determined was she, she took out loans to help pay for college fees. The extra $5000 dollars awarded to her last year by LIFE will help her achieve her plan to graduate this May.

The LIFE foundation was set up in 1994 with the aim of educating the public about life, health, disability, and long-term care insurance.

Source: lifehappens.org/content

photo credit: ralph and jenny

People getting divorced are often locked in a hostile battle: The emphasis is on whom gets what in terms of property, income and assets, and of course who gets custody of the children if there are any. But what happens if, during divorce proceedings, one of the spouses becomes critically ill or dies – with no changes to life insurance during the divorce?

This was illustrated recently in a high profile celebrity divorce case where the life policy owner – film star Dennis Hopper, was locked in an acrimonious divorce with his estranged fifth wife Victoria Duffy-Hopper. Hopper attempted to change the beneficiary of his life policy mid divorce so that his wife and young daughter would not receive an insurance payout in the event of his death. However the judge decided he would have to wait until the divorce came to trial before any names could be changed. Hopper died before the divorce came through and his estranged partner received the life insurance payout.

Rules Prevent Life Policy Holders from Impulsiveness

The rules regarding when changes can be made to an estate plan vary from state to state. In California, for instance, no changes can be made for a set period of time after a divorce is filed. What this seems to imply is that a person holding a life insurance policy might be better off making any necessary changes before filing the divorce papers.

The reasons for preventing those going through a divorce from making big changes such as changing beneficiaries of wills or life insurance policies is to allow them a ‘cooling off’ period; it has happened that soon to be divorced couples reunite and, if a spouse then dies without having changed their will or life policy back, they leave their bereaved partner with nothing.

Source

The Probate Lawyer Blog[1], June 2010; also featured in Forbes Magazine [2]

photo credit: ljv

Following a federal judge’s ruling, AIG (American General Life Insurance Company) will be forced to go to court in what has been termed a ‘convoluted’ case involving the authenticity of a life insurance policy taken out on behalf of recently deceased Germaine ‘Suzy’ Tomlinson.

Southern Indiana District Judge Sara Evans Barker ruled against the life insurer which was seeking a summary judgment against those attempting to secure a claim. Instead she decided that the case warranted further legal consideration in the form of a trial.

AIG Voids Policy Claiming Authenticity is “Questionable”

AIG who has voided the controversial policy, claims that the authenticity of the life insurance taken out on behalf of Ms Tomlinson by a friend and associate, J.B. Carlson, is questionable. The life insurer asserts that he (Carlson) “procured the policy by improper and fraudulent means” and that the policy was “procured on individuals for whom there was no insurable interest.” Geoffrey Vanderpal, an independent life insurance agent was the driving force behind the proceedings, according to court records.

Defendants Attempted to Sell Life Policy on Stranger-Oriented Market

Apparently Carlson and his co-defendants were attempting to sell the policy on the stranger-oriented life insurance market when Suzy Tomlinson died, which stopped them in their tracks. Judge Barker stated that she believed that the lawsuit had been brought against Carlson, Vanderpal and other defendants because there was a belief that they had duped Ms Tomlinson into obtaining a huge life policy without them having any insurable interest – in order to collect a sizeable profit by selling the policy in the secondary market.

Spokesman for AIG, Mark Herr responded to Judge Evans Barker’s decision to bring the case to trial by saying, “We believe that this policy was obtained by fraud” and that “the order gives us the opportunity to prove that at trial.”

Deceased’s Daughter Steps into the Fray

However the case has become even more complicated for AIG, with the arrival of Ms Tomlinson’s daughter Tomisue Hilbert on the scene. She is acting on behalf of the Tomlinson estate and argues that the life policy should be honored but the proceeds should be paid to the estate. According to the Hilbert spokesperson “American General issued the policy for its own gain and anticipated profit, and accepted substantial premiums for the insurance of the policy without due regard to sound underwriting policies or procedures.” Tomisue Hilbert only learnt of the policy after reading about it in a newspaper and was, understandably “shocked.”

Judge Sara Evans Barker welcomed the daughter’s right to be involved in the trial – the date for which is due to be set in the near future.

photo credit: yeowatzup