Life insurance as a benefit for companies and executives


    Carson Porter is the founder and CEO of REV Agency Syndicate

    Life insurance – a term that makes professionals shudder at the mere mention of it. Morbidity, mortality and the dull nature of life insurance make it a subject that is often avoided and overlooked. Yet this robust and flexible financial instrument may just be the missing link in your financial portfolio.

    We all know that life insurance pays out a death benefit when you leave this life and move on to whatever or wherever, but did you know that some life insurance policies provide just as much or more useful benefits to you while you’re alive? If you didn’t know, I bet you didn’t know either that due to re-regulation in recent years, tax code updates, updated death tables and other market causes, now could be a great time to get into a new life insurance policy.

    So why should business owners and high-paid employees and executives worry about life insurance? I mean, isn’t this for someone who has debts that they don’t want to leave to family or who can’t afford their own funeral expenses?

    Of course, those are also acceptable uses. But with more than 840 life insurance and annuity providers, with each provider having multiple policies, there are: thousands of different policies available. Each policy is a different contract with features and benefits. I want to discuss three key features and benefits that the business world would pay close attention to.

    • Tax code 7702 and the underlying regulations allow life insurance to effectively accrue interest that is exempt from state and federal income taxes through “tax-advantaged” treatments. Since these are considered “unqualified” plans, there is no limit to the amount of money you can put into them. There are only rules regarding the amount of insurance to be purchased for the amount you are putting in and/or the rate you are financing in the policy.

    Because the market demands more robust options than your typical 1980s life structure, you can actually buy cash value policies that allow you to receive interest credits based on popular indices such as the S&P 500, NASDAQ, Blackrock, and more. Combine that with the ability to add participating rules that protect all of your principal and interest from a market downturn, while still providing ample opportunity to absorb market gains and you have a powerful accumulation tool that doubles the risk reduction while lowering your portfolio’s overall provincial tax rate.

    • These types of policies can also be used for “deferred benefits” plans. This allows highly compensated individuals to reduce their current tax burden by deferring certain incomes to a future date, thus better controlling the distribution of their income and thus their tax liabilities on that income. Again, since this is still an “unqualified” structure, it is not subject to maximum funding limits common in IRAs, 401(k)s, and other “qualified” plan structures.

    This creates an economic powerhouse for these individuals, allowing them to better control many aspects of their finances while maintaining an account structure that earns fairly well. This avoids the risks of market setbacks, which can negatively impact an individual’s ability to invest, divest or retire on time and within budget.

    • Today, from the mom and dad shop to multibillion-dollar companies, one of the biggest problems facing businesses is the ability to attract and retain high-quality human capital. HR and finance are usually opposing departments and do not communicate well with each other. But when the two begin to collude, we are able to use cash value life insurance policies to develop benefit-rich executive bonus programs that provide the typical financial resources one would expect, but also provide many other levers to the company, the employee. and to its beneficiaries which far outweigh other plan structures.

    By leveraging this cash value life insurance chassis in conjunction with a vesting contract and schedule, many companies are building a culture of communicating loud and clear: “We value who you are as a person and professional, and we invest in making you financial goals as well as your other benevolent goals at work, at home and in all areas of your life.”

    When researching and taking action on some or all of these ideas, plans, and concepts, there are some key indicators to keep in mind and avoid pitfalls.

    If you are interested in these plans, I recommend that you:

    • Find an independent insurance agent with experience in these specific strategies.

    • Interview your agent and make sure your core values ​​align.

    • Emphasize the use of “principal” policies over “appropriate” policies.

    • Quickly follow up on acceptance requests.

    • Remember that these are contracts. The insurance companies are regulated and have to fulfill them, but you also have to fulfill the obligations that you make.

    This holistic benefit approach breaks through business language and, let’s face it, substandard benefits package offerings covered in a layer of dust from the repetitive and immutable decades of mundane offerings.

    Today’s entrepreneurship and employer/employee relationships demand modern solutions to these modern problems.

    Cash value life insurance can be one of the missing links your organization needs to get your teams, your executives and your owners reinvested in your core focus and re-engaged in reaching new heights as a competitive and benevolent organization.

    The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice on your specific situation.

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