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 The 1982 code decreed that any money withdrawn from an annuity would be considered income first and would therefore be taxable.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
Fringe benefit provided by the employer to its employees as sanctioned under the 1981 Economic Recovery Tax Act. Under Internal Revenue Code Section 129, this benefit is nontaxable to the ...
Premium payment made by the policy owner under a universal life insurance policy, usually on an automatic monthly preauthorized bank draft basis. The amount of the payment is established ...
Insurance for which premiums are charged according to the size of the face amount of the policy, so that the greater the face amount, the lower the cost per $1000 unit of insurance. ...
Addition to a life insurance policy stating that when an insured becomes disabled for at least six months, premiums due are waived. Depending on the rider, the insured may begin to receive ...
Fund established to pay specified losses, usually the low severity property losses. This type of account is an excellent device in conjunction with a self-insurance plan, in which the fund ...
Professional liability coverage for a practitioner in a given field of expertise. Coverage takes the form of defending the practitioner against liability suits whether or not with ...
Loan under which the owner of a home receives the equity in the form of a series of monthly income payments for life. Upon the owner's death, the lender institution (usually a bank) gains ...
Coverage for damage to property resulting from riot or civil commotion. Riot is defined by most state laws as a violent disturbance involving three or more (in some states two or more) ...
Judicial rule of evidence under which no reduction in damages awarded by a court is allowed for bodily injury, sickness, illness, or accident merely because the plaintiff has other ...
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