Incentives built into the tax code encourage people to ‘do the right thing’ by protecting financial security needs with products including life insurance, annuities.
NAIFA applauds the overall goals of the President’s Deficit Reduction Commission, and we further applaud the co-chairs of the Commission for issuing their draft proposals last week.
As a major component of the life insurance industry, NAIFA’s members – who are insurance agents and financial advisors – understand that the federal government, just like the life insurance industry, cannot promise more than it can deliver to beneficiaries. The insurance industry clearly can’t do that with the beneficiaries and owners of life insurance industry products, nor do we believe that our country can overreach and overpromise without ultimately incurring serious economic damage.
When the Commission meets later this month to consider adopting firm proposals and recommendations, NAIFA believes that the commissioners should be cognizant of the critical role that life insurance and annuities have played in protecting the basic financial security of 75 million American families. Life insurance and annuities play a unique role in basic financial security and are essential to any sound financial plan.
There are no other private sector products that transfer the risk of dying too soon or living too long from individuals and families to a very financially strong life insurance industry. Simply put: There is no substitute for life insurance and annuities as the foundational components of basic financial security.
For that reason, NAIFA believes that commissioners (and lawmakers) should be cognizant that the incentives applied to owners and beneficiaries of life insurance policies and annuities have been part of the U.S. income tax code since its inception in 1913. NAIFA members interact with individuals, families, and small businesses every day to offer guidance and help in planning for their financial security. NAIFA members know from firsthand experience that the incentives built into the tax code encourage and incent people to “do the right thing.” People face difficult choices every day on how best to spend their dollars. Current tax incentives granted life insurance and annuities do encourage people to willingly commit funds for the long term that will guarantee funds for the long haul, in order to address life’s major contingencies.
Commissioners and lawmakers should also keep in mind that if cuts in Social Security are being considered, it is only life insurance and annuities that can provide a viable benefit to offset those reductions. We believe that encouraging individuals and families to look after their own basic financial security needs will help keep even more individuals from having a dependency on government. The life insurance industry is a major supplier of long term investment capital and greatly impacts the country’s economy in the same manner as it does our fellow citizens.
NAIFA is pleased to join with other life insurance industry partners in urging members of Congress to provide strong incentives for individuals and families to acquire life insurance and annuities as an essential element of their long-term financial security.
-- Terry K. Headley, NAIFA President