Tax Equity And Financial Responsibility Acts Of 1982 And 1983 (TEFRA)
Legislation that redefined life insurance and raised taxes on life insurance companies. Among the provisions were new rules for some life insurance products, including a definition of flexible premium life insurance, and an increase in life insurance company taxes. Congress was concerned that a policyholder could take a substantial amount, say $1 million, and, after putting a few dollars toward a life insurance premium, put the remainder into a tax-free investment vehicle. One of two tests had to be satisfied for a policy to qualify as life insurance: the cash surrender value policy could not exceed a net single premium, and the death benefit had to represent a certain percentage of the cash value, which declined as the policy-holder got older. For example, at age 40, the death benefit must be 140% of cash value. The second rule closed a loophole on tax-free withdrawals from annuities. Prior to 1982 annuity holders could withdraw their initial premium tax free at any time. The 1982 code decreed that any money withdrawn from an annuity would be considered income first and would therefore be taxable. The older 1959 tax code devised a shorthand formula for determining taxes paid by insurers. The formula worked when interest rates were low, but as they soared, insurers found ways to reduce the increased tax bite. The 1982 code introduced a stopgap measure designed to raise taxes on life insurers by $3 billion.
Popular Insurance Terms
Professional designation earned after the successful completion of four national examinations given by the insurance institute of America (IIA). Covers such areas of expertise as principles ...
Amount paid to an insurer. Determination of the actual cost (not the price paid) of a life insurance policy has been widely discussed for many years in life insurance and consumer circles. ...
Loss of a key person due to death, disability, sickness, resignation, incarceration, or retirement. Because of the expertise of such an individual, there could be a loss of income, market ...
Percentage of life insurance or other insurance policies remaining in force; percentage of policies that have not lapsed. The higher the percentage, the greater the persistency. Since it is ...
Limited pay whole life policy under which all premium payments have been made. For example, a 20 pay policy is completely paid for after 20 payments; no future premiums have to be made, and ...
Bond issued to a contractor guaranteeing that the supplier (individual posting the bond) will provide all of the necessary materials for the satisfactory completion of the contracted ...
Distribution of a deceased beneficiary's share of an estate among that beneficiary's children. Contrast with per capita. ...
Theft of another's property by a person entrusted with that property. Coverage can be found under various bonding arrangements. ...
Legally binding unilateral agreement between an insured and an insurance company to indemnify the buyer of a contract under specified circumstances. In exchange for premium payment (s) the ...
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