Term Insurance Taxability

[Corduroy Frog]

All of you have seen this. Affectionately known better as Code "C" in box 12.

This is considered a "benefit", and as such IRS taxes any provision of coverage over $50,000.

Almost anyone with a group insurance packages has this. I think it's because the greedy insurance companies refuse to write group medical insurance unless the employer
gives them some term life insurance on employees. This gives them a real gravy train.

Competitively (versus the available alternatives) speaking, is this so-called "benefit" really worth even the amount of tax that our clients are paying? Economically questionable, they won't ever collect this unless they die young and the coverage will not be extended when they are put out to pasture by their employer.

Wonder how and when this IRS idiocy of taxing this stuff got started? Just another source of free tax revenue maybe? In theory a benefit, but from what I see, it is only a "benefit" for the insurance company.

Veritas and others, wanna comment?

[erchess]

I don't know how to write this into law

but I would like to make all grouping of insurance illegal. Thus there would be only individual coverage of anyone for anything and a company could be put out of business and the controlling twenty or so people bankrupted because it gave any kind of break to someone who had more than one policy with that company. I would also stop businesses from claiming any kind of write off for insurance on anything including the employer's own property and including the insurances the employer is required to have such as workers comp.

[Nashville]

Radical

This probably sounds personal, but some of these ideas are really radical. Not being able to deduct insurance? Workers' comp? A company who specializes in checking dynamite misfires might have more than 50% of their revenue tied up in workers' comp alone.

What about the value of group term life and whether it is even worth the tax that employees are forced to pay on it?

[erchess]

Personally

I really don't know how to measure the value of insurance so I tend to think that it has none. Hence my notion that we'd be better off without it. The government shouldn't criminalize it even if that were possible but I see no need to encourage it.

My problem with insurance is that most people who are insured pay more in premiums than they get in benefits. I don't even like Social Security or traditional pensions because of this "problem". If you'd care to explain to me how to calculate what insurance is worth to the buyer I'd be very interested. Note that I have a rudimentary understanding of how the insurance company decides what it needs to charge me for a given policy. To me that's an unrelated question however.

I have car insurance but only because I must in order to legally drive. Lately, I think I would have it regardless but certainly at one time I would have driven uninsured had that been legal. I got E & O insurance when I first started in this business because I understand that bankruptcy does not permanently erase debt arising from a lawsuit and I in no way have enough revenue to be able to keep a spare couple million on hand in case I get sued. I had health insurance that I paid for through payroll deduction for a year but then I found out that I would have had to have double my normal expenses before getting to the threshold at which the insurance would start to benefit me so I canceled it. Now I recognize that that decision was foolish and I'd love to have medical coverage if I did not have a pre existing condition that prevented it. If current law does not change I will get medical coverage when I can. I see no need for me to have life insurance since I'm not supporting anyone other than myself. I wouldn't begin to know how to decide among the various kinds of policies out there if I did need life insurance. I don't like the fact that term may not pay off eg if you outlive the coverage period but I also don't like what I understand are the anemic rates at which other policies build cash value.

To my mind being called a radical is not an insult so I don't mind. Besides you didn't call me a radical you called my ideas radical - so in no way do I take what you said as personal.