National Association of Insurance Commissioners (NAIC)

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Outside of federal and state legislature, insurance companies also abide by non-governmental associations that unify the states and help protect consumers.  Industry associations such as the National Association of Insurance Commissioners impose major influence on insurance companies to maintain common industry standards.

Industry Regulation

A major form of self-regulation, the National Association of State Commissioners (NAIC), is widely recognized as a major influence in the insurance industry.  NAIC is not a federal or state legislative body, nor does it regulate insurance law, even though its members are the insurance commissioners (i.e., the chief insurance regulators) of each state in the U.S.

Founded in 1871, the National Association of Insurance Commissioners was created as a non-governmental organization that has since created and maintained a uniform set of laws for states to follow in an attempt to standardize multiple-state insurance laws.  Though it has created a set of ‘by-laws’ to help centralize the state-run insurance industry, NAIC, itself, does not actually regulate insurance law.  The states regulate their respective insurance laws as well as abide by any relevant federal laws. Read More

Health Savings Accounts (HSA)

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Tax-Advantaged Health Insurance

Health Savings Accounts, simply called “HSAs,” are a form of health insurance that combines a health ‘savings account’ with a High Deductible Health Plan (HDHP).

Still relatively new to the market, these tax-advantaged medical savings plans are often purchased by self-employed individuals and small employers to provide tax deducted funding as well as tax free withdrawals if used towards qualified medical expenses.  HSAs, were enacted into law in January 2004 by the 108th Congress as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 under Title XII, Section 1201.

This form of medical insurance is exempt from taxation and provides for the accumulation of pre-tax dollars deposited and held in a health savings account that grows and rolls over each year to accumulate a long-term savings fund.  HSA funds are also used to pay for qualified medical expenses, such as doctors visits and prescribed medications, are not considered as gross income, and can be withdrawn from the HSA savings account tax free!  Accumulated funds can also be withdrawn without penalty or tax after the beneficiary (insured) reaches the Social Security retirement age.

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What is an Annuity?

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Retirement Cash Flow

An annuity is a financial tool that will provide a succession of payments to a policyowner, or annuitant, in exchange for a single lump sum payment or series of payments to the insurer.  In other words, an annuitant pays an insurance company a certain amount which is then credited with a certain rate of interest, and this is how money grows in an annuity.

Annuities are interest bearing, tax deferred savings vehicles designed to provide future income in exchange for a lump sum or series of payments now.

During this growth period, or accumulation period, the rate of interest is not taxed, which allows for a greater accumulation of funds.  Once an annuitant is ready for the policy to start paying out (payout or annuity period), the annuity concludes its accumulation task and benefits are paid at specified periodic intervals.  These payments can either be paid over a certain amount of time, paid at a specific monetary amount per payment or act as a death benefit to an annuitant’s beneficiary. Read More

Insuring a Partnership or Corporation Buy-Sell Agreements

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Life insurance is similar for a business as it is for an individual in protecting against the financial loss associated with premature death.  Though various kinds of companies exist (sole proprietorships, partnerships and corporations), life insurance is necessary to ensure capital is adequate and available if unexpected loss occurs.

The death of a business owner or partner in a business can also bring the end to the business; life insurance plays a vital part in protecting the integrity of a business if such event were to occur.    Life insurance, in the form of a ‘buy-sell’ agreement, provides the necessary protection to ensure the survival of the business and a disbursement of ownership rights to remaining partners or owners.

As a licensed insurance agent, it is important to understand the basic concept of a buy-sell agreement as well as the types of buy-sell agreements available to properly insure against the loss of a business owner or partner.

The death of a business owner doesn’t necessarily mean the end to the business.  Buy-sell agreements are used to provide structure in the absence of the business owner or partner.

A ‘buy-sell’ agreement, also known as a ‘buyout’ agreement,  is defined as a financial agreement or arrangement that protects business partners against financial loss by securing a predetermined fair market value share of a partner that, upon a predetermined event such as death, is sold to the remaining partners in the business to ensure the continuation of the business. Read More

Health Insurance Replacement

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As with any successful business, ongoing commitment to customer satisfaction is the key to business growth.  It is even more important in the insurance industry!  Clients are more likely to renew or continue to use your services, if they are comfortable with you,  the agent.

When an agent earns the trust of a client, a sale is made — and referrals will follow.

Even more important, clients will refer others to the you, helping to build your book of business.  Something as important as protecting one’s family and financial wealth is worth the comfort of knowing they are in good hands.

Health insurance replacement often occurs for may reasons including better benefits, reduced deductible, reduced premium, and better network coverage.  It was common to switch insurance when moving to a different state due to the limited networks maintained by each insurer, though, now more insurers provide for a national network of coverage to eliminate the need to change insurance due to a change in where one moves or travels.

Policy Replacement vs Policy Retention

Due to the many factors involved with issuing a policy based on an insured’s preexisting health concerns or the benefit advantages of one plan over another, as a licensed insurance agent, you should closely exam the advantages and disadvantages of replacing a health insurance policy.

The following factors should be considered: Read More

Traditional IRA vs Roth IRA

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Planning for Retirement

Individual retirement accounts, or IRAs, were enacted by Congress in 1974 as part of the Employee Retirement Income Security Act (ERISA).  IRAs are popular tax-deferred retirement plans that provide individuals with a method of investing their income and saving money for retirement.  As a licensed insurance agent, it is important to understand the benefits of each type of IRA.  Two types of IRAs include the ‘traditional IRA’ and a ‘Roth IRA.’

Traditional IRA

Simply known as an IRA, individuals and self-employed business owners have the opportunity to save money for retirement while receiving a current tax break.  As the amount contributed accumulates, it grows tax deferred until it is withdrawn at retirement.  Contribution amounts may be fully or partially deducted from current income, which results in a lower current income tax for the individual.

Any individual under the age of 70½ who has earned income can participate in an IRA.  Contribution levels allow up to 100% of an individual’s annual income, but cannot exceed contribution limits set each year by the federal government.  Any contribution that exceeds annual limits will be subject to a 6% “excise” tax.  Individuals who are 50 years or older are allowed to make “catch up” contributions that exceed normal annual limits.

 

Withdrawal from an IRA owner’s account must begin no later than April 1st following the year an individual reaches 70½ years old.  From this time on, a minimum amount must be withdrawn every year from the IRA to avoid a penalty tax on such difference.

If an individual withdraws IRA funds prior to reaching age 59½, the withdrawal will be viewed as income, and not only will it be taxed as income, it will also be subject to a 10% penalty fee because it is being withdrawn prematurely.  Exceptions to this penalty tax include withdrawals for a first-time home purchase, higher education expenses, or to cover qualified medical expenses.

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