Risk Insurance - Tax Implications

Taxes on your life insurance

Life insurance and income protection policies are very popular. The implications of a claim in relation to tax and other government benefits are sometimes overlooked however.

Tax refund

The premium you pay on "income protection insurance" is tax deductible. So at the end of the year you can claim 100% of this as an expense, even if you are on wages. If you were to make claim on "income protection insurance" you will generally get 75% of your pre disability income paid to you on a monthly basis, before tax. However note that if you receive the sickness benefit or ACC, the amount of your claim will most likely be reduced. This may not be the case with mortgage repayment insurance.

Lower your ACC levy

ACC covers you for the loss of income and medical expenses for an accident. Many people decide that they want cover for illnesses as well, so take income protection insurance. This means that in many cases the cover for an accident is duplicated. If you are self employed however, you could reduce your ACC levies by using ACC "cover plus extra". This enables you to set a lower amount of cover from ACC for a lower levy which is handy if you know you will be covered from your own income protection insurance anyway.

Do I pay tax on my life insurance?

Taking a life cover under your company name may seem great for tax deductibility of the premiums but this will most likely mean that the company will pay tax on any claims arising as well. This can end up being a lot of money and may mean that you need a lot more cover to do the same job. To avoid this it could be cheaper to take non tax deductible cover for a lower amount under your personal name. When taking income protection for a business it is also important to be aware of the kind of proof of income might be required when and if you may need to make a claim. Indemnity type policies require proof of income at claim time which can be a challenge for many self employed people. You could look at an agreed type cover or business overheads insurance to avoid this challenge.

Fringe benefit tax

If you own a business and run your personal insurances through the business as expenses, you will probably be liable for fringe benefit tax. It is important to check how much this might be with your accountant.

In summary the key points to remember are:

- Income protection insurance is tax deductible even if you are on salary
- ACC cover plus extra can be a good way to avoid duplicating cover for accidents
- Any claim on an insurance owned by a business may also be liable for tax

Ask your accountant about the implications of your insurance structure or find a good insurance broker who can liaise directly with your accountant.

By Hamish Patel

How To Read an Insurance Policy

If the word insurance makes people's eyes glaze over, the thought of reading an insurance policy puts them into a catatonic state. Just as understanding the basics of insurance is not difficult, neither is reading an insurance policy.

First of all, insurance policies nationwide tend to be comprised of standard boilerplate language - this is to keep apples with apples and oranges with oranges throughout all insurance companies and all types of insurance. This boilerplate language also pretty much steers away from typical "legalese" so all wording within the policies is plain and simple. Boilerplate forms doesn't mean that all policies are the same - they are not - but like coverages, etc., are explained in the same way so if you can read one policy, you can reasonably read another.

The first place you should start is with the Declaration Page, commonly referred to as the "Dec Page". In fact, if you don't get any further than this, this part of your policy is very important for you to be familiar with for all the reasons. What is the "Dec" page? The Dec Page is a summary of what your policy is providing for you and includes your policy number, the specific named insured, the effective and expiration date of the policy, what is being covered, how much it is being covered for, what it is costing you in total and per individual coverages, your agent's name and contact information and will show any loss payee (lien-holder) if applicable. If this is an automobile policy, the Dec page will also list the vehicles and drivers being covered. In short, the Declarations Page is a wealth of information that you should give some study to until you feel comfortable with it. This accomplishment alone will make you feel more enlightened in regard to what your insurance policy is all about.

The next step is to look at every heading in the policy, one by one. You will see things like Agreement, Definitions, specified Coverages, Insuring Agreement per the specified Coverage, Exclusions, Limit of Liability, Out of State Coverage, Other Insurance, etc. These are not scary words, right? Two very important sections are Definitions and Exclusions - found in various places in the policy- and if you don't go over any others, you need to read these. Definitions will tell you who is considered an insured, etc., and the information listed will remove assumptions from your thinking and clarify what is what. Exclusions are assumption busters, as well. It is not written in Greek and you really need to know what exclusions apply to your policy. Ignorance is not bliss when you have a claim!

Too often, too many of us buy insurance for the lowest premium. Let's use an auto policy as an example. People buy what is mandatory by the state (and by the bank, if the vehicle is financed) and look only at the premium. With the cost as the only focus, these people have no clue what their policy does cover. Then they have a loss that is not covered because they did not elect to take the particular coverage that would apply and they are angry.

The solution to this frustration is to READ YOUR POLICY. Know what coverages you have elected and what they are for; know the exclusions under your policy; know your responsibilities to the company in the event of a loss. Failure to know these things will most assuredly result in disappointment and unnecessary frustration in the event of a claim.

Finley Keller has spent nearly 30 years in the insurance industry, beginning as a licensed agent with a CLU then moving into claims. Auto, homeowner, worker's comp and other liability-only type policy claims. Casualty and material damage.

Her last ten years were spent in SIU (Special Investigative Unit), working with fraud detection. The last four years she was manager of SIU, responsible for working fraud cases and the training of employees in compliance with state regulations as related to fraud. She is a retired member of NCFIA, Northern California Fraud Investigators Association.

She has a Senior Claims Law Associate (SCLA) designation through the American Educational Institute, Inc.

By Finley Keller

Maximize Bank Debt Recovery Successes Utilizing These Strategies

Bank debt recovery is growing, mostly because of a poor economy affecting both consumers and markets around the world. Banks and credit unions are adding new techniques and strategies to improve bank debt collection.

Banks are witnessing continually growing loan and credit card defaults, as well as checking account charge offs, due to years of steady rising consumer debt, as consumers face trying to just pay for the necessities. Because of this, banking and credit unions are incorporating new strategies to help improve debt recovery success.

Below are a few recommended bank debt recovery tips, which will definitely help increase your debt collection success.

· Offer flexible plans for customers experiencing financial hardship.

. Create "hardship" programs for borrowers who are late with their payments.

. Offer a new payment schedule, and/or lower payments, fees and interest rates when you anticipate customer payment problems.

· Create an avenue of communication where customers can freely talk about their issues. You can prevent much larger problems from occurring later by being proactive earlier.

Along with your existing internal debt recovery processes, these strategies are meant to "flag" potential problems sooner, and prevent them from growing into larger delinquencies later.

When To Consider Outsourcing Bank Debt Recovery to Collection Agencies

Another "must-do" for institutions with growing bank debt collection problems is quickly getting rid of, and outsourcing bad debt accounts.

Employing some of the tips suggested earlier, you'll be better equipped to identify, early on, the more difficult accounts, and distinguish them from the customers that you can work with internally through payment arrangements.

These more challenging accounts must be identified early on in the process, and outsourced to a collection agency. Failure to do so decreases the possibility of ever getting paid on them. It will also cost you much more in wasted time, resources, etc. Failing to do so, not only decreases your likelihood of getting paid on them at all, it costs you far more in time, resources, etc.

Some collection agencies offer programs designed to restore negative accounts and retain banking customers before the account is closed or charged off. In fact, research shows customer retention equaling 70% or better can be achieved, as well as restoration of negative account balances when contacted pre-charge off.

The crucial element is reaching these customers before the account is charged off, not afterward.In addition to the incentive to clear up their negative account balance, it is also proven that after a past due account is closed and charged off, these delinquent customers typically seek new bank accounts at other institutions.

Once this happens, there is little interest in that customer bringing their delinquent, charged off account, current.

By David Montana

Managing You Money - Do You Know How?

It is very important that you learn how to take financial responsibility for the decisions you make in your life. It is very unfortunate, but many Americans are financially illiterate when it comes to how to manage money. There is some good news to this bad news, and that is it is not your fault that you are not financially literate. The best colleges and graduate schools in the country usually do not even offer courses on money management.

Many people end up making the same financial mistakes over and over throughout their entire lives. Many times they procrastinate and failed to plan what they are going to do with the money they make. Many Americans spend money on wasteful things they do not need. You need to spend some time and do some research before you make big financial purchases in your life.

Whenever you face financial problems, you must find somebody of high integrity to listen to and take advice from. The world is filled with bad financial advice, just waiting to be given to you. If you have been victim of bad financial advice, do not worry too much about it. It is now time to find somebody who will give you some good advice right away.

Becoming a financial planner is a job just like every other job in America. Do your best not to put financial planners on high pedestals and think they know everything there is to know. You should take some time to have a broad understanding of finances and where your money is going to be invested. Your financial planners and accountants are the two best resources you have to understand money and what to do it.

I understand you are probably a very busy person and that is why you are hiring a financial planner. Many people are busy with their work and family lives, leaving no time to manage money and understanding financial basics. It is important you find a financial planner and account that will give you the broad overview of what is going on with your money.

The more money you make, the more the government will take. It is important you learn how to minimize your taxes and keep as much of your money as you can. There are thousands of investments that you can choose from to invest your money in. If you have some time, sit down and learn about what a few of them are.

By Darius Maslow