Insurance Q&A: “Is life insurance tax deductible?”
The answer depends on who’s asking. Generally, personal life insurance premiums are not tax deductible.
So if you have a term life or whole life insurance policy, you are not able to deduct the premium payments on your annual tax filing.
On the other hand, your employer may deduct their portion of your life insurance premium if they sponsor the policy, as it is one of their many costs of doing business. If the employer pays the entire premium, they can deduct the full amount from their earnings for the year.
Employers are also allowed to deduct any partial payments they make if they share in the overall expense. This is probably more common than them paying for all of it.
For the record, an individual isn’t able to deduct their portion of the life insurance expenses even when shared with an employer. You’re simply out of luck on the tax side of this equation.
What If I Own My Own Business?
Self employment can be a gray area when it comes to life insurance and tax deductions. Just like your insurer, the Tax Man has seen it all and is not easily fooled by business owners who attempt to take advantage of the code.
While your tax advisor is the best person to talk to about this topic, you can generally expect that if your company is small enough (sole proprietor), or your company life insurance plan is only set up to insure you, as the company owner you probably won’t receive a tax break for the premiums paid.
You might have some wiggle room if your company’s life insurance program sponsors (or is offered to) every employee. This can get complicated, so again, speak to your tax advisor to make sure you are not on the wrong side of legal here.
One Silver Lining!
There is a potential silver lining when it comes to life insurance and taxes. Since life insurance premiums are not tax deductible, the policy payout may not be taxable.
In most cases, the benefits of a life insurance program are typically not taxed when they are paid out. Of course, you’re not going to be around to enjoy that, but your beneficiary will take comfort in that and that’s really who the policy was purchased for in the first place.
Of course, just like there are exceptions with tax deductions for premiums, there are exceptions to the taxability of benefits. Be sure to discuss this with your life insurance agent and your tax advisor when evaluating your coverage needs in the first place.
When Tax Deductions Don’t Matter
You may find that the potential savings from a tax deduction on life insurance premiums pale in comparison to how much you can save by simply shopping your premium with multiple insurers.
After all, you may be throwing money out the window by paying too much for your policy in the first place.
Shop your premium and gather life insurance quotes to ensure your bottom line is protected…paying less by switching life insurance companies could outweigh any tax benefits.
Read more: What do insurance companies test for life insurance?
(photo: gfpeck)
This post was written on January 3, 2012
Allstate Insurance recently launched its so-called “Claim Satisfaction Guarantee,” which is currently available in 31 states.
In short, Allstate policyholders who are dissatisfied with their insurance claims experience are able to receive up to a six-month insurance premium credit on their auto insurance policy.
How It Works
Perhaps your insurance adjuster didn’t call you back fast enough…you may receive a six-month premium credit. Perhaps you were put on hold too long or a customer service representative was rude to you on the phone…you too may receive a six-month premium credit.
Here are the “steps” of the Allstate Claim Satisfaction Guarantee program:
1. You’re an Allstate customer.
2. You have a car accident and file a claim with Allstate.
3. They pay your claim, but you’re not happy.
4. You send a letter explaining why.
5. Allstate gives you up to a six-month credit on your premium.
*Customers who qualify for this program must notify Allstate in writing within 180 days of their incident to express that they are dissatisfied with any aspect of their claim experience in order to receive the credit.
Tip: Allstate offers a six-month credit for the premium charged for the vehicle listed on the policy. If the vehicle in question was not listed on the policy at the time of the accident, you will receive a credit equal to the premium for the vehicle with the lowest premium amount listed on the policy.
Basically, you will not get an entire six-month premium credit if you have more than one car on your policy. If you have two cars that each cost $500 per policy term ($1,000 total per term), the most you will receive in the form of a credit is the $500 for one vehicle.
Additionally, you are only able to receive one “credit” per policy term. Regardless of how many cars you have on your auto policy, you only get one credit.
Too Good to be True?
The offer from Allstate is pretty cut-and-dry. There are some terms and conditions, but rest assured that TTAI has read through all of the available information for you. We don’t see any glaring “holes” in the program.
(List of Allstate auto insurance discounts.)
Of course, if Allstate has been overcharging you hundreds of dollars annually for several years, you do not necessarily win here.
It is highly recommended you obtain insurance quotes online and/or through an independent insurance agent to ensure you are not overpaying for your coverage…regardless of how many bells and whistles are thrown at you.
Allstate is a public corporation. Their highest loyalty is to their stockholders in the form of increased share value. Don’t let their multi-million dollar advertising budget convince you otherwise. If Allstate thought for one second this new program would cost them more money that it brought in (in the form of continued sales), it wouldn’t have happened.
It would be nice to see a homeowner’s insurance version of this guarantee, as Allstate has had some legal trouble in more than one state with regard to their practices of late.
Read more: Allstate Safe Driving Bonus Check Review
This post was written on January 3, 2012
We just couldn’t help ourselves. TTAI doesn’t take its eye off the ball even over the Holidays. Each year many of us make a list of resolutions that likely won’t last through January…the author of this article included. Mostly, our resolutions are about lifestyle changes. Lose weight, eat better, and spend more time with loved ones.
But what about some resolutions that may save hundreds of dollars in insurance premium or thousands of dollars when it comes to insurance claims?
The insurance resolutions below may only take a few minutes to complete, but the benefits may last a lifetime!
Without further ado, here are the top 10 insurance resolutions for 2012 (and every year after).
1. Get Online Quotes – It takes all of five minutes and may save you hundreds of dollars in premiums. You’re already online. Get some insurance quotes and stop wondering if you are overpaying for coverage.
Tip: How to get the best online insurance quote.
2. Ask for Discounts – If you own a television set, you know discounts are all-the-rage, as insurers fight to retain your business.
Tip: You need a new agent if your current agent recommends increasing deductibles or lowering coverage to save money when you inquire about discounts.
3. Bundle Home and Auto – You may earn discounts if you get both your home and auto insurance with the same insurer.
Tip: Don’t settle for just the discount. Shop online and see if you are still paying too much. Every insurer has different rates. Bundling with your current insurer may still be more expensive than switching to another insurer altogether.
4. Consult an Independent Agent – The days of driving to the closest State Farm, Farmers or Allstate agency and paying whatever they ask are over. Independent insurance agents can often get you better coverage at a lower premium.
Tip: The companies independent agents represent don’t spend $500,000,000 of your premium dollars on advertising each year. Chain insurers are the “insurance equivalent” of Bank of America.
5. Get Renters Insurance – Renters insurance is one of the cheapest insurance policies out there…think $200-$400 per year. Just because you rent doesn’t mean you cannot suffer a huge property or liability loss. Can you afford to re-purchase everything in your apartment if it burns down this year?
Tip: Your landlord’s insurance policy does not cover your “stuff.”
6. Review Your Current Coverage – Do you still pay for comprehensive and collision insurance (full coverage) on your 15-year-old car? Do yourself a favor and drop that coverage if your car isn’t worth that much anymore.
Tip: Your auto insurance company will pay you the LESSER of the cost to repair or replace your damaged vehicle or it’s actual cash value at the time of the loss…regardless of how much it means to you personally or how much you pay to insure it.
(Why do insurance companies total cars?)
7. Inventory Your Personal Property – Do you have a list of everything you own? We didn’t think so. You will be required to provide an inventory of your contents in the event your personal property is lost, stolen or damaged and provide it to you insurer. Take video, pictures or write a list and keep it in a safe place. We recommend uploading this list to your email account, where you can access it from any computer on planet Earth that has an Internet connection.
Tip: Do you want to make that list now while you still have your “stuff”…or from a hotel room after your home or apartment has burned down. We’ll bet you a shiny nickel you’ll miss a few things if your home burnt down. Also, you insurer doesn’t just write you a check for your “Contents” limit; you must provide a list to them in the event of a loss.
8. Research Your Current Insurer – We’re not talking reading angry posts on the Internet from individuals who didn’t follow steps 1-7 above. We’re talking court cases here. Many large chain insurers are currently being sued by the states in which they conduct business. The lawsuits range from overcharging for coverage to underestimating your home’s replacement cost (to keep their premiums lower). You have the Internet…use it.
Tip: Google the phrase “lawsuit” and any company who advertises on television every 30 seconds and you’ll see the light.
9. Read Your Policy – Even TTAI knows this isn’t fun. But would you rather find out you didn’t have coverage for a particular loss after it happens or before? While the policy language is mind numbing, you’ll find that asking your agent of insurer for a laymen’s terms explanation of a particular coverage is pretty easy.
Tip: Your agent will not be attentive after a claim if she/he isn’t attentive to your coverage questions prior to a claim. Again, do you want to know what kind of agent you have before or after you file a claim?
10. Stick to Your Resolution – Just like laying off the chocolate or soda, real results come from continued discipline and effort. “Set it and forget it” works for cooking a turkey…not for your insurance. This is one of your top expenses in the budget. Treat it as such.
(photo: John Brennan)
This post was written on January 3, 2012
Insurance Q&A: “Is homeowner’s insurance tax deductible?”
The true cost of owning a piece of property is often substantially higher than just your monthly mortgage payment. The two biggest additional costs come in the form of property taxes and insurance.
And while the continuation of the mortgage interest tax deduction is currently up in the air, for the time being it can still be deducted from your taxable income. Keep your fingers crossed on that one if you’re a homeowner. Even if it’s kept intact, it may be reduced.
But what about a deduction for those costly homeowners insurance premiums? Not so fast. There is currently no tax deduction available for this common expense. You are simply “out” the money for personal homeowner’s insurance costs as far as good old Uncle Sam is concerned.
What Property Insurance Is Tax Deductible?
However, property and homeowners insurance may be tax deductible in certain instances. Namely, when the insurance premiums are being incurred as part of a business venture. The two most common examples of when home and property insurance are tax deductible are landlord policies and home businesses.
Landlord/Rental Properties – Being a landlord is a business venture. As a result, almost all of the expenses associated with operating your “business” qualify as tax deductions…landlord’s insurance policy premiums included.
Home Businesses – There are some instances in which you can deduct part of your personal homeowner’s insurance premiums for a home-based business. We’re not talking your “computer room” here. You must have a legitimate home office and be self-employed.
You may lease a certain portion of your personal home to your business to help qualify for this deduction. Ultimately, your business may write a monthly check to you in order to occupy the space in your home. But be careful with this one. Consult a tax advisor before you file to ensure you are not red-flagging yourself for an audit by trying to cheat the IRS!
Private Mortgage Insurance (PMI) – You may also qualify for a tax deduction on PMI, which is necessary if your mortgage loan was more than 80% of the value of your home when it was purchased. Again, consult your tax advisor before attempting any such deduction.
The Good News?
Okay, so we know you’re probably bummed that homeowners insurance premiums generally can’t be deducted on your income taxes.
But it’s not all bad news. If you happen to file an insurance claim, which likely isn’t good news, for what it’s worth, claim payments you receive from your insurer are generally not taxable.
And hey, it probably wouldn’t be worth getting the small tax deduction on your homeowner’s insurance premium if you had to trade that for a tax on a property claim settlement, which could end up costing you thousands of dollars on a large enough claim!
Read more: Is car insurance tax deductible?
This post was written on December 27, 2011
Most of us buy the car we “want,” “deserve,” or “think we can afford.” It isn’t until later that we actually worry about the related insurance costs.
But is there a way to be proactive and buy a car we know will give us the best shot at saving on auto insurance? Put simply, yes.
There are too many factors included in insurance pricing and too many insurers, all with different car insurance rates, to simply pick an individual car as a winner, but there are some guidelines to keep insurance costs low.
As you’ll see, some insurance premium factors can be controlled…and some cannot. Let’s take a look at examples of both.
Pricing You Can Control
How much you pay for car insurance, just like anything else you buy, is somewhat determined by personal choices. This includes your vehicle, desired coverage, driving history and credit history. Follow the recommendations below if your goal is to snag cheap car insurance.
Your Vehicle
One of the biggest choices we have is which car we choose to drive. Here are some tips on the type of vehicle your should consider if your main goal is cheaper insurance coverage.
Buy Cheap – this is the best way to get cheaper car insurance. As a general rule, the less your vehicle costs to repair or replace, the less you pay to insure it.
Older Cars – the older your car, the less it should cost to insure (classics excluded). Older cars often don’t require physical damage coverage (comprehensive and collision). It simply doesn’t make sense to pay extra for this coverage if you’re not going to get any money from the insurer if you car is damaged or totaled.
Note: If you lease or finance a vehicle (of any age), your lender will require this coverage to protect their financial interest in your car. The lender is considered the loss payee on the policy.
Base Model – go for the base model. If you opt for a “sport” model, the “luxury” edition or a convertible, your car insurance costs will skyrocket. See “buy cheap” above.
(Do red cars cost more to insure?)
Buying the right car is only a small piece of the puzzle. Let’s address some other pricing factors that are under your control.
Your Coverage
The type of car insurance coverage you desire and corresponding policy limits are going to come into play. We already discussed the lender/lessor requirement for full coverage (including physical damage), but what else matters?
Liability Limits – state minimum liability coverage is usually the cheapest, although some insurers discount higher liability limits, as they believe an individual seeking better coverage may be a more responsible overall driver.
No Fault Coverage – your premium will increase if you opt for personal injury protection or medical payments coverage on your policy.
Ticket/Accident Forgiveness – if you are the type of person who likes to pay for additional insurance on top of your existing insurance, ticket forgiveness and accident forgiveness may be for you. But it’ll cost you.
Roadside Assistance – insurers love to add roadside assistance and towing coverage to your policy. While it will certainly help if the need for this coverage comes into play, you’ll pay a little extra for it. For the record, Allstate’s free lifetime membership in their Good Hands Roadside Assistance program is only free if you don’t actually use the services…only “membership” is free.
Driving Habits
Your personal driving habits can be the difference between dirt-cheap and ultra-expensive coverage. Buying a 1995 four-door Honda Civic with 1,000,000 miles will not do you any good if you have prior insurance claims and driving infractions on your record.
Your insurer will likely run your MVR to verify your driving record and a C.L.U.E. report to validate your claims history. Expect a higher overall premium if either of these reports return recent “activity.”
(How much does insurance go up after an accident or ticket?)
Credit History
The cheapest car insurance available these days is afforded to those with the highest credit scores. While not every insurer evaluates your credit history, known as an insurance score, you can certainly expect to pay more if your history is shaky.
For the record, insurers who don’t review credit are typically more expensive than those who do. Although this option will likely be your best friend if you’ve had some credit hiccups in the past.
(Car insurance and credit scores)
Pricing You Can’t Control
Let’s take a moment to look at some car insurance rating factors that may not necessarily be under your control, no matter who you go with.
Age and Gender
Both your age and gender come into play when it comes to insurance pricing. Car insurance for teenagers is typically much higher than that of more mature drivers (for obvious reasons).
And if you are a male teenager, you can expect to pay more for coverage than your female counterpart.
Your premium is also dependent on where you live. Not only by state, but whether or not you live in a densely populated area is also taken into consideration. The higher the population where your car is garaged…the higher the chance you’ll be involved in an accident…and the higher your car insurance premium.
By the way, Michigan has the highest car insurance costs.
So hopefully you’re not completely lost. If you find the above information mind-numbing, your best bet is to compare car insurance quotes online (to get an idea of pricing) and/or speak with a local independent insurance agent who can shop your rate based on your unique needs.
Read more: Top 10 cheapest cars to own and insure.
This post was written on December 19, 2011
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