Changes to taxation in Obama budget could affect life insurance

Mar 10, 2011

Obama changes could affect life insurance

President Barack Obama's proposed budget would end some favorable tax policies for life insurance companies, a move that could result in higher rates being passed on to consumers, according to Investment News.

One item in the president's budget that could cause a rate hike is a new tax for life insurance owned by corporations, the online news source says. The budget would also cut the deductions for dividends received used by life insurance companies that maintain separate accounts for variable insurance products, it adds.

Death benefits from life insurance would also be more closely monitored by tax authorities under new rules proposed by the president, making it more likely that they would be subjected to estate taxes, Investment News reports.

A partner at Davis and Harman LLP, John Adney, told the news source the budget's chance of becoming reality was hard to gauge.

"It's difficult to know what the likelihood of passage is given the situation in Congress," he said.

Experts say life insurance policyholders should take into account any new rules - particularly about death benefits - as they apply to their coverage.

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