How Trumpcare Could Impact Other Areas of Insurance and Financial Planning
In early March, President Trump and Congressional Republicans released the American Health Care Act, which was intended to replace the Affordable Care Act (aka Obamacare). Although this plan did not garner enough votes to pass, the GOP aims to continue its promise and bring TrumpCare to fruition one way or another.
While Trump’s plan, like Obamacare, primarily concentrates on health care and related coverage, it could actually have much more of an impact on life insurance and other financial planning aspects than many people think.
In fact, if it is passed, there are several key components to the Trump health care plan that could hit consumers directly in the wallet, either in a positive or a negative way. For example, one of the key changes would be to remove the individual tax on those who don’t purchase health insurance – which would be retroactive to year-end 2015.
This means that, should the Trump plan be approved, those who did not have health insurance coverage in 2016 would not be required to pay the penalty when they file their 2016 income taxes.
Should this be the case, though, it is estimated by the U.S. Congressional Budget Office that roughly 14 million people will cancel their health insurance coverage,1 also eliminating what could be a hefty premium payment for them.
But, even though this could ease the strain on the monthly budget for some consumers, for someone who is already dealing with a major health issue such as cancer or heart disease, it could also mean having to liquidate savings or investments in the future in order to pay medical related bills.
This is particularly the case for someone who endures a long, drawn out illness and who could rack up a significant amount of medical debt – debt that is so high, his or her survivors are not able to pay the bills that come due upon the individual’s death. It could also have a major impact on future expenses. This includes high dollar financial obligations, such as college tuition for a child or grandchild.
Life insurance coverage can offer a solution for the imbalance here. By having funds available that are received free of income taxation, heirs wouldn’t be as likely to fall into long-term financial hardship, even in the event of substantial expenses in the future.
Tuition costs have been on the rise for years, with no end in sight. In fact, according to the National Center for Education Statistics, the average annual cost for undergraduate tuition, fees, room, and board for the 2014-2015 academic year were over $16,100 at public institutions, and nearly $42,000 at private non-profit institutions.2
By placing money in the market to save for future college tuition costs, it’s anyone’s guess how much there will be – if any – at the time the child needs these funds. On top of that, depending on how a traditional college savings plan is set up, the money could be subject to taxation over time and / or at the time of withdrawal, essentially lessening the amount even further.
Using life insurance to ensure higher education costs can provide a solution. In the event of an insured’s death, the policy’s proceeds are received tax free by the named beneficiary. If, however, the insured is alive and well and the policy is still in force, funds from the cash value can be borrowed, tax-free, for college funding needs.
If this loan is not paid back, the insurance company will reduce the amount of the death benefit on the policy. However, that’s not necessarily a concern for those who are using the policy primarily as a college savings vehicle.
As it stands, even if President Trump’s health care plan is given the green light, it won’t likely take effect for some time. Talking with clients and prospects about their options between now and then can help them to put their own plans in place for moving forward.
We’ll show you the system that thousands of other insurance professionals have used to generate a substantial amount of income, while at the same time assuring clients that high ticket expenses will still be paid in the future – regardless of a long list of factors that are out of their control.
- “CBO Cost Estimate American Health Care Act,” CBO, March 13, 2017.
- National Center for Education Statistics. Fast Facts. (https://nces.ed.gov/fastfacts/display.asp?id=76)