The coming changes to Life Insurance

You may have been hearing a lot of talk about upcoming changes to life insurance products across the entire insurance industry. We don’t yet have a lot of firm answers as to what this will look like for our members and IBC as a whole. But we do have a good idea, and it’s still a good outlook for you.

What is the new change and why did Insurance Companies push hard for it?

A recent 5,593-page bill was passed that includes revisions to the IRC section 7702. Interest rate parameters that were originally set forth in code section 7702 back in the 1980’s could support the static 4% guarantee. This is because rates were much higher back then.

But there’s been a continual decline in interest rates since the 1980’s. That, coupled with the interest rate environment of 2020 means that life insurance companies could no longer operate a sustainable business at 4% amid continually declining rates.

Yields inside each insurer’s general funds were steadily declining. However, their products still remained at the 4% guarantee for American policyholders. This new tax code change was the only way insurance companies could remain strong and reliable while still offering financial security.

Once new products are released, it means that for the same premium amount you’re paying now, you will have less death benefit. 

When will this new change take effect?

This new legislation has already taken effect, but it requires insurance companies to develop new products to reflect the new legislation. This takes time. Word on the “street” is that changes to life insurance could be seen as early as the end of 2021. Although it wouldn’t be a surprise if it takes well into 2022 before any new products are released. Each insurance company will release their products when they are fully redesigned and approved. This will likely not happen all at the same time.

What does this mean for current policies in force?

Absolutely nothing. All current contracts will be honored as they are. If you’re earning at 4% in your policy, you’ll be grandfathered in. These changes to life insurance only affect new policies under the new terms once the redesigned products are released. 

Here’s the long and short of it:

Yes, death benefit will cost more with these new policies. This may not be good for those wanting a policy simply for the death benefit. But for those of us who practice Infinite Banking with our policies, it looks to be an overall benefit. This is because the initial cash value may be slightly higher and grow faster since more money can be put into the policy without causing a MEC (read this article to learn more about a MEC). 

There may even be a possibility that those who may have assumed denial of coverage for themselves due to age or health conditions, may now be pleasantly surprised. N ew parameters may cover a broader range of Americans.

Even though the death benefit will initially be lower, it may even out over a couple decades. And what’s that thing I always say? “This is not a sprint. It’s a marathon.” If you’re in this for the long-haul, you’ll find that you can have your cake and eat it, too. 

But, again, we still don’t have much concrete information to go on at this point. We expect to hear more details as time goes on. But the main takeaway is that IBC isn’t going away any time soon. Not even with these changes to life insurance. It’s been around for over 200 years, and for good reason. 

If you’re unsure about these new changes, my best advice would be to take advantage of the 4% guarantee now.

There is still time to get in on this “insurance fire sale.” Until new insurance products are released, the current products that guarantee 4% growth are still in effect. This means you can still get one before interest rates drop. But you should act fast, as we don’t know exactly when these new products will start to be released.

When you’re ready to get started on creating your financial legacy or if you have more questions, most questions can be answered by watching this video. Start there and then schedule a consult with my team when you’re ready to begin.