New York Life Life Announces 2021 Dividend

New York Life 2021 Dividend Rate

The New York Life Insurance Company announced today its plans to pay participating policyholders around $1.8 billion in dividends in 2021.  This payment represents a $100 million total dividend payment decline to all participating policyholders over the 2020 payment. In a press release, New York Life’s Chariman and CEO expressed his confidence in New York …

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Buying Life Insurance for your Parents

Buying Life Insurance for your Parents

We often think about buying life insurance for ourselves, our spouses, or our children, but sometimes you may find yourself in a situation where you worry about a parent and the expenses that might come up upon their death.  Additionally, the advancement of life insurance with living benefits creates a whole new financial planning strategy …

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Ohio National Life Announces 2021 Dividend

Ohio National 2021 Dividend

The Ohio National Life Insurance Company announced its plans to pay participating policyholders around $100 million in dividends in 2021.  This payment roughly the same total dividend payment to all participating policyholders in 2020. In a press release, Ohio National’s President and COO noted the current low interest rate environment’s impact on dividends given adjusted …

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What is a Participating Life Insurance Policy?

What is a Participating Life Insurance Policy?

A participating life insurance policy is any policy eligible to earn dividends payable by the insurance company that issued the policy.  While a policy may have participating status, it is not guaranteed to necessarily receive dividends.  Many financial resources confuse the definition of participating by claiming that it means the policy will earn dividends.  This is …

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How to Become an Independent Insurance Agent

Becoming an independent insurance agent takes little more than passing the license exam to have an insurance license, but becoming a successful independent insurance agent requires much more.  Independent insurance agents typically require a strong business plan to succeed and often capital to weather fluctuating income. Captive versus Independent Insurance Agent Many people begin their careers in the insurance business as captive agents.  These are people who work for a specific insurance company and represent it during transactions.  The captive agent generally has sales quotas and usually must look to his/her company first for all insurance solutions.  If the company does not have a reasonable insurance product for a given potential client, the captive agent can sometimes look for products at other insurance companies and act as a broker to sell that outside product to his/her new client. Captive agents often receive fringe benefits beyond just the commissions paid on the insurance business they produce.  This might look something like having access to health insurance at a subsidized cost or receiving reimbursement for certain business operating expenses like rent or professional liability insurance. Independent insurance agents, alternatively, do not work for a specific insurance company and do not represent any insurance company.  They instead act as a broker between insurance companies and insurance buyers. Independent agents do not generally have sales quotas at any specific company.  However, some companies may require a certain level of sales submitted annually in order to maintain a selling relationship with the independent agent. Independent agents generally do not receive fringe benefits like captive agents.  However, independent agents do often receive expense allowance payments on the insurance business they sell for a company.  This comes as a bonus payment on top of the insurance commissions payable to the independent agent. Reasons to Go Independent Some captive agents transition from a career captive arrangement to an independent agent.  Common motivators for making this move are: Freedom to sell products from multiple companies with no quotas to fill Additional compensation through expense allowances Fewer compliance roadblocks when conducting business No Quotas While independent agents do not have quotas, they often find it extremely difficult to maintain strong business relationships with several life insurance companies.  Each insurance company has its own unique systems while conducting and servicing insurance business and it's very difficult to manage several of these idiosyncracies across a large number of companies. Independent agents often find it easiest to work primarily with one company while selling products from other companies on occasion.  The good news is the agent has no real worry about being fired for not meeting a sales goal.  But we should note the reality that most independent agents still act somewhat like their captive counterparts when it comes to recommending a favored company. Additional Compensation One of the biggest misnomers that likely exists about independent agents is that they earn more money when selling insurance than captive agents.  While there's a shred of truth to this, and for some very high producing independent agents an opportunity exists to exploit this truth, for most the compensation is roughly equal across the board. The fringe benefits enjoyed by captive agents often equal or outweigh the additional compensation paid to an independent agent. Compliance Roadblocks There's no doubt that insurance company-established compliance can be a serious impediment to operating an insurance practice.  Sometimes these impediments are for good; other times they are major annoyances with varying degrees of prudence. Independent agents can avoid many compliance roadblocks because they do not work for any specific insurance company.  There certainly are rules they must follow, but insurers are much less worried about how independent agents conduct their day-to-day business because it has little effect or consequence to the insurance company. Transitioning from Captive to Independent For captive agents, there isn't a formal process for becoming independent per se.  The captive agent terminates his/her employment contract with his/her employer and can at that point act as an independent agent if he/she wishes.  Sometimes, contract termination isn't at the discretion of the agent. But while the process of transitioning isn't necessarily a formal one, there is certainly a good deal of planning recommended to the captive agent looking to make this transition. A currently captive agent should heavily consider the benefits derived from the career insurance company.  He/she should also strongly investigate the effect of leaving a company and the process of transitioning clients (if applicable) to his/her new practice.  Some companies may make this transition extremely difficult, while others will put up few if any impediments. Some, but definitely not all, agents will have an option to continue to sell their former career company's products after transitioning to independent agent status.  This means they will broker that business just like any business they produce once independent.  But, the agent must understand that he/she no longer works for the company and can no longer market himself/herself as a representative of the company.  Also, resources the agents may have had ready access to as a career agent may no longer be available to him/her as an independent agent. For people who spent time as a captive agent, there's a good chance they are familiar with several aspects of business as usual when working as an insurance agent.  This might include finding and buying professional liability insurance, being responsible for income tax withholdings, and filing/paying for insurance licenses. But there are potential aspects of being an independent insurance agent that are new to a captive agent.  Many captive agents receive advanced commissions for insurance business paid under an arrangement other than annually (monthly for example).  This means the insurance company assumes it will receive the required premium payments and pays the insurance agent ahead of receiving those actual premium payments.  This is not a common payment option for independent agents--they instead receive commissions when the policy owner pays the premium. Starting out as an Independent Agent Some people chose to take an insurance licensing exam and become an independent agent without working for any insurance company.  This is a bold move that can prove extremely difficult.  While there are few impediments in place to prevent someone from doing this, it is possible for some insurance companies to refuse to appoint someone newly licensed with no professional background selling insurance to sell their products--this is especially true in the home and auto insurance industry. Additionally, someone who begins selling insurance with no prior experience will likely lack certain knowledge about industry norms that impact day-to-day business conduct.  The inexperienced agents may not realize he/she needs professional liability insurance and may very likely not know where to begin looking for it. Starting out independent can be very overwhelming, but for those who find themselves in over their heads, there's always the option of finding a captive arrangement at a company.

Becoming an independent insurance agent takes little more than passing the license exam to have an insurance license, but becoming a successful independent insurance agent requires much more.  Independent insurance agents typically require a strong business plan to succeed and often capital to weather fluctuating income. Captive versus Independent Insurance Agent Many people begin their …

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How to Calculate Taxable Amount on a 1099-R for Life Insurance

How to Calculate Taxable Amount on a 1099-R for Life Insurance

1099-R reports distributions from: Profit-sharing/retirement plans Life Insurance/Annuity Contracts IRA’s Disability Plans It’s important to understand that 1099-R reports distributions regardless of taxability.  This means it’s possible to receive a 1099-R even when no taxes are due on the distribution. For example, if you take out a $50,000 loan against a universal life insurance policy …

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Pay for Your Whole Life Insurance Using Policy Dividends

Being the life insurance guy often puts me in a place where I answer questions about dividends.  Turns out a lot of people have a vague understanding that (some) life insurance policies pay dividends so we often answer the questions: “how do you pay for whole life insurance using policy dividends?

If this is a question you've often pondered, you're really going to enjoy what follows.

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What is the 1035 Exchange?

What is the 1035 Exchange?

The 1035 exchange is a tax-free transfer of cash values from one insurance contract to another.  The exchange also carries the cost basis from the old contract to the new one.  Functionally speaking, the 1035 exchange is a great strategy current life, endowment, and annuity policyholders can use to purchase a new policy with better features than their old policy while bringing over the value from the old policy with no tax consequences for making the change.

However, there are several important rules you must understand before you decide to replace an old insurance contract using the 1035 exchange.  Ignoring these rules could result in unfavorable consequences leaving you worse off.

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MassMutual Announces 2021 Dividend

MassMutual Announces 2021 Dividend

The MassMutual Life Insurance Company today announced its plans to pay participating policyholders $1.7 billion in dividends in 2021.  This payment equals the same total dividend payment to all participating policyholders in 2020. In today’s press release, MassMutual noted business diversity in its strong business performance in non-participating life insurance that continues to bring additional …

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