Month: August 2022

5 Movies to Die For: Life Insurance Scams on Film

Insurance fraud isn’t sexy. Or is it? Okay, insurance fraud isn’t funny. Or IS it?

The following five films use life insurance to drive the plot in a couple of dark, steamy, and hilariously creative ways. And we highly recommend you check them out if quarantine has you running dry on new things to stream.

Just don’t get any ideas.

Steamy Scams

Cinematic sex sizzles. So, let’s start there.

Double Indemnity, 1944

If you like Casablanca-esque dialogue then you’ll relish Double Indemnity starring Fred MacMurray, Barbara Stanwyk and Edward G. Robinson – three powerhouse Hollywood stars back in its Golden Age.

Murray plays Walter Neff, an insurance rep who figures he’s got it all figured out when he knocks on the Dietrichson’s door one day in May for a simple renewal inquiry. But it’s not Mr. Dietrichson who answers. It’s his wife, a buxom blonde with an itch to scratch. And it’s not romance she’s after. It’s her husband.

The movie’s steamy scenes are tame compared to today’s but the film noir mood this black-and-white film sets sizzles, nonetheless.

The Postman Always Rings Twice, 1981

Forty years later, people still debate if the iconic kitchen scene Jack Nicholson and Jessica Lange pull off in The Postman Always Rings Twice is real or staged.

If it was real, the movie would never make it to mainstream theater screens, obviously. So perhaps that’s why Mussolini banned a 1943 Italian version titled Ossessione.

Funny Fraud

It takes some strong funny men to make light of a topic as dry as life insurance. But they did so. Brilliantly.

Alias Jessie James, 1959

Few careers in the 20^th century are as iconic as Bob Hope’s. And this Wild West comedy co-starring Rhonda Fleming shows off his comedic timing to a tee.

Milford Farnsworth (played by Hope) unwittingly sells—and then tries to get back—a six-figure life insurance policy from the infamous Jesse James.

The romp that follows is worth the watch for those with a classic sense of humor.

Fletch, 1985

You may know Chevy Chase from the early 2000’s television series Community, but before that, the Saturday Night Live original cast alum appeared in a bunch of movies playing a string of hapless characters with clever panache.

The film Fletch gives Chase plenty of opportunities to perform plethora character sketches as undercover reporter Irwin M. Fletcher. The basic plot is familiar by now—a man offers a fortune to end his woes by asking Fletcher to kill him.

We won’t blow the ending’s cover. Just sit back and enjoy Chase’s brilliant comedy.

Dark & Dastardly

Fraud taken at face value isn’t entertaining. But it is intriguing. So is this movie.

Strange Bargain, 1949

Strange Bargain features two down-on-their-luck men, business owner Malcolm Jarvis Richard Gaines  and his employee Sam Wilson Jeffrey Lynn, and their plan to make Jarvis’s suicide look like a murder so Jarvis’ family can survive off the insurance money. Wilson waffles but is drawn in by circumstances beyond his control.

Fun fact: Lynn also appeared in Double Indemnity.

Contemplating life insurance is heavy. Shopping for life insurance is daunting. But watching other people tangle with fraud is delicious. So, grab a bowl of popcorn and let life insurance be fun for a change.

How Does a Life Insurance Rider Work?

Not every life insurance policy will meet every one of your needs. Cancer, heart attacks and accidents can wipe out your income long before they end your life.

The supplemental coverage a life insurance rider provides guides your base policy closer to what you and your family may need if the unthinkable happens and threatens your financial security. And most come at a nominal fee.

And while you can purchase a stand-alone long-term care or accidental death or dismemberment policy, riders attached to your base life insurance policy are less expensive and provide the same coverage.

So what insurance riders are available to you and how can each protect you and your family against financial disaster in the wake of a disastrous event?

Life Insurance Accelerated Death Benefit

Also known as an ADB or living benefit, an accelerated death benefit allows you to use your base policy’s payout to cover the cost of medical care for a terminal or chronic illness while you are still alive. Medical services covered include hospice, nursing home or private home care.

How an accelerated death benefit works:

• Your illness must meet certain criteria to qualify and different states have different eligibility requirements.
• Your insurance company may use your entire death benefit or a percentage of it, depending on the care you require. For example, an insurance company may pay 2% for nursing home care and 1% for a private caretaker.
• Your beneficiaries receive what is left of the benefit after your death.
• Accelerated death benefits are broken down into two specific riders: Chronic Illness and Long-Term Care (LTC).

Chronic illness rider

This life insurance rider covers the cost of medical care for illnesses from which you will not recover. Although similar to a Long-Term Care (LTC) rider, there are differences, as you will see below.

How a Chronic Illness rider works:

• A medical professional must certify that you aren’t able to perform two of six Activities for Daily Living (ADL) such as eating, moving, bathing, dressing, and toileting or continence, and other eligibility requirements.
• Unlike a Long-Term Care rider, this rider only pays expenses for one unrecoverable illness over your entire lifetime.
• Payouts may begin immediately or after a short waiting period.
• Payouts are taken from a capped percentage of your base policy’s death benefit for the remainder of your life.
• There are no restrictions on how you use the benefit.

Long term care (LTC) rider

This life insurance rider provides coverage for medical care for an illness or disability that prevents you from performing daily activities for 90 days or more.

How a Long-Term Care rider works:

• As with a chronic illness rider, a medical professional must certify that you aren’t able to perform two of six Activities for Daily Living (ADL) as eating, moving, bathing, dressing, and toileting or continence, and other eligibility requirements.
• This rider costs more than the chronic illness rider but is less expensive than a standalone LTC insurance policy.
• You can use it for more than one health event lasting more than 90 days during one’s lifetime.
• Unlike a chronic illness rider, this one pays out as a reimbursement or lump sum up to 100% of base your policy’s death benefit.

Waiver of Premium rider

A Waiver of Premium rider frees you from premium payments if you are no longer able to work.

How a Waiver of Premium rider works:

• This rider requires a statement from the Social Security Administration and a doctor to certify disability and you must continue to show proof of your disability every few years.
• It does not cover pre-existing conditions.
• It can take up to six months to pay out but once approved, you’ll be reimbursed for premiums paid during the waiting period.
• Your insurance company may require that you add your Waiver of Premium at the time you purchase your base policy.
• Be sure to ask how your life insurance company defines a disability. Each company defines it differently.

Accidental Death and Dismemberment Insurance (AD&D)

An accidental life insurance rider pays a death benefit if you die or lose a limb or physical function that prevents you from working. Because an accidental life insurance rider is limited to accidents and thus less of a risk to your insurance company, it’s an inexpensive option.

How an AD&D rider works:

• This rider pays the lump sum of your death benefit if you die due to an accident.
• It pays a percentage of your death benefit if you suffer a disability due to an accident, such as losing a limb, your sight, speech or other function as a direct result of the accident.
• Insurance companies have different requirements that must be met for your beneficiaries to receive the payout, such as the type of accident and injuries suffered.
• This rider is limited only to an accident—not a heart attack or a chronic or terminal illness.

Family Income Benefit Rider

A family income rider provides your family a monthly payment equal to your income in the event of your death. This rider payout is in addition to the lump-sum death benefit your base policy provides.

How a Family Income Benefit rider works:

• You set the amount of time your family will receive the monthly payment.
• Your family receives the lump-sum death benefit once this rider period ends, although you can set up a distribution plan customized to your family’s needs.

Child Term Rider

A child term insurance rider provides a death benefit should a child die before an age you determine.

How a Child Term rider works:

• This rider pays out as a lump sum.
• You can convert it to a permanent policy when the child outlives the rider term.

Return of Premium Rider

A Return of Premium rider reimburses the premiums paid if you outlive your policy.

How a Return of Premium rider works:

• You can use your refund to purchase a new policy without a medical exam.
• This rider returns only the money you paid for premiums. Not fees or additional riders.

Guaranteed Insurability Rider

This rider allows you to increase your death benefit every three or five years.

How a Guaranteed Insurability rider works:

• Your insurance company determines the time frame for benefit increases.
• This rider does not require a medical exam or health questionnaire.
• There are no rate changes should your health decline.

Accidents and illnesses happen. It’s up to you to decide if a rider is more expensive than the costs you may incur without one. It’s best to speak to an insurance specialist to determine what’s right for you and your family.

Compelling Reasons Why Life Insurance Is Important

You think bad things are never going to happen to you but recent events suggest otherwise. And a lot of people for whom life insurance never crossed their minds or who were stalling buying an insurance policy are adding life insurance to their financial plan in increased numbers.

If that doesn’t convince you, here are three compelling reasons why life insurance is important for you and your loved ones.

1. It protects your family’s well-being. The last thing you want your family to worry about if you should die unexpectedly is money. Life insurance eases stress and maintains your family’s standard of living by paying off debt and covering living expenses. It also can cover burial expenses, which cost on average about $9,000.

   Best of all, most death benefit payouts are tax-free.

   And even if you aren’t the primary breadwinner but the primary caretaker of children and day-to-day household activities, life insurance can help your surviving spouse with childcare and daily household maintenance costs.

   Life insurance can also cover your mortgage and educational expenses.

   Finally, insurance companies pay out faster than estates, which take time—and sometimes money—to process.

2. It provides financial security. Some life insurance policies provide investment opportunities that can enrich your retirement savings and provide cash value for college tuition or home improvements.There are also riders that add extra protection should you suffer a disability or terminal illness.

   A disability rider can be bundled with your life insurance policy for added protection in the event you can no longer work. And an accelerated death benefit covers the costs of medical care for a chronic or terminal illness.

   If you’re a business owner, life insurance can protect your business partner or loan co-signers by paying off debt and covering the costs of daily operations such as payroll, inventory, etc., which is a less expensive option than borrowing from a financial institution.

3. It alleviates taxes. Most policy proceeds are tax-free, but if there is a tax liability, there are policies that can alleviate the tax burden on your heirs such as your children, grandchildren, or a favorite charity.Unlike an estate inheritance, 401K, or IRA, life insurance policy payouts are tax-free for owners whose estates are valued at less than $12 million.

   Additionally, dividends from permanent insurance policies can earn tax-free dividends, which offer a steady stream of tax-free income with its accumulated cash value for use while you’re still alive.

Although life insurance is available at myriad price points even the most modest payouts buy time for those you care about to figure out what to do next in the wake of their loss.

And no matter how much life insurance you choose to purchase, you can’t put a price on the peace of mind it provides.

Uh-Oh…

On July 27, 2022, the fed raised interest rates again, bringing rates to between 2.25% to 2.5%.

Does this mean a recession is coming or are we already in one? Who knows? Every financial pundit has a different opinion. Either way, both inflation and recession create nail-biting fortuity.

What Does a Recession Mean for Me?

If you hold a student loan or home loan, the recession news is less positive than it is for those with enough money in a savings account to keep afloat or who are living off a high-yield savings account.

But whether higher interest rates work for or against you; whether we’re in a recession or not, there are some things you can do to ride out a recession with your financial boat intact.

Financial Advice for Riding Out an Economic Downturn

Take stock of your current financial situation.  Winnie Sun, Managing Partner, Sun Group Wealth Partners  advises to take a look at your retirement assets, savings, and checking accounts to see where your assets lie.

Audit your budget to see where you’re spending and where you’re earning. This will help you determine if you need a budget or not.

Start with the bare bones to get a baseline. First the priorities. What are you spending on housing, food, utilities and medical expenses? After that,  look at what you’re spending on car payments and nice-to-have’s like streaming services.

Consider whatever is left is discretionary income.

Be a Budget Planner. Make budgeting a family affair so everyone agrees on your financial management plan. It’s good for your marriage and provides instructive money role modeling for your kids.

 

Tip: Use a membership card that offers a percentage-off gas deal. Some rewards programs offer cash-back incentives.

Diversify your investments. Stocks tend to fall during a recession, which can be a good thing or a bad thing.

If you prefer to stay in the stock market, buy from companies you know will come out strong as the recession wanes.

If the stock market’s fluctuations make you nervous, consider buying bonds like government-guaranteed savings bonds or investing in foreign securities and precious metals.

If you have a recession-proof job, take this time to pour as much into your savings as possible.

You can also invest in your family’s financial future with a level term life insurance policy. Term rates are locked in without the fluctuations interest-earning policies suffer. It’s much less expensive and payouts are completely tax-free.

Pay down or pay off credit card debt. And throw away new credit card offers—unless you can transfer current credit card debt to a card with a lower interest rate if you can find one.

Avoid new loans and consider refinancing any variable rate loans to fixed-rate loans. Look into doing the same for your student loans, too.

Invest in yourself. Consider ways you can generate outside income with a part-time job or an online business.

Reach out for help if you need to. Call companies and utilities to whom you owe money and explain your situation. A lot of times, they’ll give you a break.

Look for ways to have fun. Even in a recession, there are still simple ways to have fun and grow stronger bonds with your family. Play the games or do the puzzles you never had time for, go on a day trip to a free museum, or have a picnic. Ask your kids for other ideas.

No doubt economic downturns are white-knuckle events. But as you ride out the storm, take time to breathe and appreciate the little moments that make you smile. And stop doomsday scrolling. It’s going to be fine. This isn’t our first rodeo.

Do I Have to Pay Taxes on My Life insurance Death Benefit?

Life insurance is a lifesaver for loved ones you leave behind. But there can be some scary surprises if you aren’t familiar with the tax codes attached to your policy.

If your life insurance policy is simple, your payout is simple and tax-free. A death benefit is not considered income.

However, if your policy is set up to gain interest, any interest you earn on your policy is considered income and therefore is taxable.

Simple Term Policies: No Tax

A term life insurance policy,  is non-taxable. You buy the policy for say $50,000 and your loved ones will receive $50,000 tax-free.

Keep in mind that you must appoint a beneficiary. Not having one may delay your benefit from getting to your loved ones as it makes its way through probate court.

Also, consider leaving your benefit to more than one beneficiary to ensure that if one dies, the surviving one will receive the payout, not the IRS.

If you want your child to be your beneficiary, set up a trust. This ensures that inheritance is used in a responsible way.

Permanent Policies: Probably Taxed

The federal government and some state governments handle permanent life insurance differently since this type of policy can accrue interest. Beneficiaries may have to pay taxes on that gained interest.

However, the interest is taxable only if it exceeds the amount you paid in premiums. And it’s not retroactive. Your loved ones only pay on the interest earned after your death.

Now if you borrowed against your policy for more than you’ve paid in premiums and the interest it earned, you must pay what you owe before you die or your loved ones will pay taxes on the benefit. They’re also considered taxable income.

Useful Tax Strategies

Strategy #1: Transfer Your Life Insurance Policy

Transferring your policy gets you off the hook for taxes as well as premium payments. And while the person to whom you transfer is responsible for the payments and taxes, you can set aside a part of the benefit as a gift to help them pay those expenses. A gift is tax-free.

Transfers are irrevocable, so choose your transferee carefully. You can transfer your policy to a trust, which is especially helpful if your child is your beneficiary.

Now, the IRS does have some caveats regarding transfers.

And if you sell your policy, while this also frees you from paying your monthly premiums, you are on the hook for any cash or profits you received above the amount you paid in premiums.

Strategy #2: Tie Your Policy to an Estate

This is a great strategy if you make less than $12 million as an individual or $24 million as a couple. That’s the current federal threshold. If you make more than that, the estate is taxable. If you earn less than the threshold, the estate is tax-free. But no matter what side of the threshold you’re on, you do have to report the payout to the IRS.

Is your brain spinning yet? This is a lot of information—much of it beyond the scope of one humble post. Taxes, like people, can be complicated.

Make sure you talk to an attorney, tax professional, or accountant before making any tax-related decisions and putting them in writing. Your loved ones will thank you