life insurance

If you look back in the history of insurance, you find that it has traditionally been erected to protect widows and orphans of the middle class and the poor who could not afford the premiums. Because there was a clear social safety net purposes, the government needs insurance to protect from federal tax. So from 1913, given the premiums deductible and any increase in the value of the policy was left intact. In small estates, the amount payable to the estate tax beyond death. But what was really useful in 1913, is less relevant today, where the state has made Medicaid, Medicare and Social Security, not to mention food stamps and subsidized housing for people in need. People can avoid the worst effects of poverty without having to resort to insurance. More importantly, the decline in fertility. One hundred years ago, there were more children per couple, the waves of new immigrant families take root.


Today we have the lowest since they began to 13.9 births per 1000 adults. Risk of being left poor children has never been lower.

Perhaps this explains the second set of numbers. Sales of policies for families with children has fallen from 45% in the last 25 years. Families are no longer seems to believe that they must pay the insurance coverage offered by the state offers. Looking for a bit 'wider finds 30% of American adults have no life cover. This is not something produced in a recession, even if sales declined over the past two years. This trend was clearly in recent years of economic boom. Most people only run the risk of life. Permanent life insurance policies are rare in low-income classes.

So who is buying life cover? If you look at the ongoing policies of more than $ 2,000,000, which was 1% of the market for more than twenty years. Move forward ten years and these policies were 10% market share. Today represent 40% of the market. Therefore, these policies are used as legitimate vehicles for tax avoidance for the rich. In fact, if Obama were to force a higher effective tax rate on income for high income groups, would fuel the market because insurance premiums are deductible. In fact, once you add the tax exemption for all earnings on cash value policies are considered one of the best ways to keep the rich richer at the expense of the state.

If premiums for life insurance payable on net income and capital gains are taxable, tax revenues would increase by billions of years. But the idea of ​​increasing taxes on the rich is too socialist even for Democrats. Any tinkering with property taxes or the taxation of trusts would produce such a howl of rage in the media, nobody would be safe in place. But it would reduce the deficit and improve the quality of life for all Americans. How can it not good public policy? Perhaps if we returned to the original idea of ​​life insurance as a safety net for the less rich, we'd have a better America.