Cheap Whole Term Life Insurance Rates, American General Life and Accident Insurance Company

Cheap Whole Term Life Insurance Rates, American General Life and Accident Insurance Company

 

 

 

 

 

 

 

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This article discusses cheap whole term life insurance rates, american general life and accident insurance company. The dividends paid on participating life insurance policies aren't taxable. They are actually a return of part of the previously paid premiums (though insurance policies rarely spell out the method by which these dividends are figured out). What to do with the dividends depends on the insured's situation. See
life insurance for more information.

Chief things to consider: Do I need more insurance? Do I need insurance to provide estate liquidity? Can I put the money to better use outside insurance? The options:
Take cash. Obviously the first choice if the insured needs the cash or can invest it well. Reduce premiums. Dividend dollars applied to reduce premiums reduce them dollar for dollar. It takes more than a dollar in taxable income to pay a dollar in premiums.
Accumulate interest. Dividends can be left with the insurer to accumulate interest at a guaranteed rate. May be used to increase retirement benefits guaranteed under a policy's retirement options. The earned interest and the dividends may be includible in the estate of the insured unless steps are taken to exclude them.
Example: An individual buys a $50,000 ordinary life participating policy at age 40. Annual premium: $1,400. Accumulated dividends after 10 years: $2,800. At that time the policy and accumulated dividends are transferred to his spouse. She uses dividends on additional $10,000 insurance coverage. When the eighth premium falls due, the accumulated dividends on both policies should be sufficient to pay it and all additional future premiums.

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No gift tax is due on the transfer of policy to the spouse (because of the 1981 law). Caution: The interest earned on accumulations will be taxed annually to the individual. For this reason, the accumulation process is not often used.
Paid-up additions: Using dividends to buy additional paid-up insurance is a particularly valuable option, where the insured's health is impaired and he is uninsurable. No medical examination is required.

The paid-up additions option is used quite popularly since there is a tax shelter involved in the accumulations and very little difference between the total funds under the additions method as compared to the accumulations method.
Buy term insurance. Part of the dividend can be used to buy one-year term insurance, usually equal to the amount of increase in the cash value of the policy. This practice keeps the amount of pure insurance level.

Source: Consumer Information Center

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