Photographer: Helloquence
“Since October, myriad new permanent life insurance products have surfaced, tailored to the 2017 tax rules. Insurers are also tweaking existing products to conform to these rules.
The era of policies with generous tax advantages closed when the changes to the federal Income Tax Act took effect on Jan. 1. The possibility of accumulating funds without affecting a policy’s exempt status evaporated for permanent life insurance. The tax-free savings capacity of universal life was also hard hit. Effects are being felt mainly among insured with high net worth.
The accumulation of tax-free funds in universal life has been slashed to one-sixth of the original amount, depending on the age of the insured and the duration of the policy. For company shareholders, the portion of the death benefit of their policy that may be credited to the capital dividend account has shrunk. Now, the estate will receive less tax-free funds,” wrote Alain Theriault for The Insurance & Investment Journal on March 22, 2017.
Theriault continued, “Tax laws sparked changes
Insurers had to revamp several products or replace them with new ones. A table compiled by the life insurance product intelligence centre InsuranceINTEL shows that product launches have mushroomed since October 2016. The new tax laws have largely sparked this hyperactivity, which lingered into January.
Some ousted products were not replaced. For example, Empire Life announced in its 2016 results that it would no longer sell universal life insurance. The insurer acted quickly, pulling its universal life products Trilogy and Trilogy Plus on Oct. 15. At the same time, participating whole life Optimax Wealth replaced Optimax. On Jan. 1, the insurer added an eight-premium payment option to Optimax Wealth and to another participating product, EstateMax.”
Read the full article here.
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