Frequently Asked Questions
How is National Life Group different from other financial services companies?
Our difference is our focus. Since we do not have shareholders, we answer to Main Street, not Wall Street. This allows us to take the long view and has served our clients well.
What types of resources will I have access to?
Behind every application or policy, there are over 800 of us working together to deliver on our promises. We pride ourselves that from our CEO to our underwriters, we are accessible and ready to help you help your clients. Our sales desk and agent service desk are ready to support your needs.
Experienced Financial Professionals
What types of contracts do you offer?
What markets do you serve?
You will find that we offer a breadth of product and riders that meet the needs of most markets. With that said, we are focused on the needs of the middle market, small business owners, as well as the teacher and public service markets.
What programs do you offer to help me bring my practice to the next level?
If you want to broaden your practice to include business owners and affluent clients, our CPA Advantage Program is designed to help agents market themselves to certified public accountants and to cultivate relationships that will lead to referrals and sales through partnership opportunities over time.
If you are working with teachers or public service employees, our 403(b)/457(b) Certified Training Program can help you navigate and thrive in today's new marketplace.
New To The Business
What does being an insurance agent involve?
On a typical day, you will call potential clients and schedule appointments to gather information about their financial goals. You will be relied upon to explain the features of various life insurance and annuity policies and customize insurance programs to suit their needs. There is also a certain amount of administrative tasks you will perform, such as keeping records, handling policy issue and renewals as well as helping your client’s manage and ultimately settle their policies.
Much of your time will be spent meeting with clients in their home or place of business. Many agents spend a lot of time marketing their services and creating their own base of clients.
What type of training do you offer?
We offer a variety of training solutions including onsite seminars and schools as well as our NLGroupU training portal which includes video and online learning resources.
How do you work with CPAs?
Through our CPA Partnership program, you can expand your practice to offer financial services to your clients. Whether you want to offer our products through an agent partnership, or become a licensed agent yourself, we can customize an approach that works for you.
How long have you been partnering with CPAs?
We have been partnering with CPAs for over 35 years.
What type of resources will I have access to?
When you enter into a partnership with us, you will have access to in-house advanced marketing attorneys, retirement planning and qualified plan design specialists, as well as life and annuity product specialists. Through our Broker/Dealer/ Investment Advisor, you will have access to an extensive line of financial products and services.
How will you support my training and marketing needs?
We are one of a small number of life insurance companies in the United States licensed as approved sponsors on the National Registry of CPE Sponsors allowing us to offer CE credits through public seminars as well as private briefings for you and your associates. We also offer an online eLearning training platform for products and sales strategy training.
For marketing support, you will have access to a number of marketing programs, customizable marketing material, newsletters and websites.
What type of training and development do you provide?
What are some of the benefits of working in this industry?
This is a great industry for women. Many of our female producers cite flexibility, a healthy work-life balance, the ability to make a positive impact on many families’ lives, and the ability to have great financial success in their own lives as benefits. There is camaraderie amongst those in this industry as well.
Advanced Markets Buy-Sell
How do you determine which type of buy-sell agreement is right for your client's business?
Which type is right will depend on how your client's company is set up, how many owners there are and what their cash flow may be. There are three common types to consider – Entity buy sell; Cross Purchase buy sell, and Wait and See.
What triggers a buy-sell agreement?
Business Succession Planning is based on an event taking place. The trigger event could occur when the owner of a business retires, becomes disabled, or dies, or simply decides to leave the business for other reasons
Can you have a buy-sell agreement when there are more than two owners?
Yes, for example if there are three owners, each owner will own a policy on the life of the other owners. That would be six policies in this case. There are other options available as well.
Why use life insurance as a funding vehicle for a buy sell agreement?
A key to using life insurance as a funding vehicle is that generally you are paying cents on the dollar, and death benefit is received tax free.
In a bankruptcy situation if the business interest is part of the bankruptcy estate what happens to it?
In a bankruptcy situation, if the business interest is part of the bankruptcy estate, it may benefit the business and co-owners to simply purchase the interest and prevent strangers from becoming owners in the business.
What is a Notice and Consent Form?
For a death benefit to remain income tax free when a business is an owner of the policy, a Notice and Consent Form must be provided to the insured and signed by the insured prior to a policy being issued.
Advanced Markets Retained Earnings
As a business owner, what are some of the reasons I might want to purchase life insurance?
There are many business uses of life insurance that could help you and your business including:
- Protecting the life of a key person
- Buy-sell life insurance is a common financial tool used to fund succession planning
- Life insurance can be used to secure repayment of loans in the event you or a key person dies before a loan is repaid
- If you have an employee Stock Option Plan you will generally have a repurchase obligation on shares of the business that have been distributed from the ESOP, Life Insurance can help defray the cost of that liability
- A Split Dollar Loan would provide permanent life benefits to the executive(s) at a reduced personal out of pocket cost, providing the business cost recovery
- Life Insurance helps to pay for Non-Qualified Executive Benefits less
What are Retained Earnings?
Retained Earnings are a percentage of a business’ net earnings not paid out as a dividend, but instead are retained by the company to be reinvested in the business or to pay business debts. Retained Earnings are accounted for under shareholders’ equity on the balance sheet.
What is the accumulated earnings tax?
A corporation is subject to a penalty tax called the accumulated earnings tax, in addition to a graduated tax, if it accumulates earnings(retains earnings) within the corporation for the purpose of preventing the imposition of income tax upon its shareholders.The tax is 20% of the corporation’s accumulated taxable income (15% for tax years beginning prior to 2013). The tax can be imposed only upon amounts accumulated beyond those required to meet reasonable needs of the business.The corporation must demonstrate a specific, definite and feasible plan for the use of accumulated funds in order to avoid the tax.C corporations are allowed to accumulate $250,000 before being subjected to the 20% accumulated earnings tax.Professional Service Corporations are allowed to accumulate $150,000 before being subjected to the 20% accumulated earnings tax.
Is there a way to reduce taxes on retained earnings using life insurance?
Yes. If you are a C Corporation with retained earnings above $250,000, or if you are a Professional Service Organization and have more than $150,000 in retained earnings you will be subject to the Accumulated Earnings Tax. If you have a business need for life insurance the premiums the business pays will reduce your business cash account. The cash value of the policy will be reflected on the balance sheet as an asset. To the extent the cash value is lower than the premium paid, the net effect will be to lower the retained earnings in the business.
How would transferring a corporate owned life insurance policy to the Insured help my business?
Transferring a life insurance policy to the insured “once the business insurance needs are fulfilled” may help you:
- By removing the policy from the company balance sheet through Bonus, Distribution, or Dividends reduces retained earnings.
- When insured becomes the new policy owner, the insured owns the rights and benefits of the policy, including the right to exercise riders and utilize cash value. They will pay taxes on the fair market value of the policy distributed from the business as income.
How are Retained Earnings calculated?
It begins with Net Income: Gross Earnings minus all reasonable business related expenses, minus the cost of Insurance, the balance equals your current year net income (or loss).
You then take the Retained Earnings from the beginning of the year and add to it your Net Income or Loss. The total is your end-of’ year Retained Earnings.
Advanced Markets Qualified Plans
How do I determine the type of Qualified Plan that is best suited for my business?
There is no “one size fits all” Qualified Plan. Every business is different and therefore their qualified plan should be designed to fit their specific needs. A Qualified Plan should be custom designed for each business. We recommend working with a financial advisor that has expertise in the field of qualified plans. The plan will be designed based on your goals, objectives and budget. Life insurance can be included in the plan to help meet your objectives.
Do I have to include my employees in a Qualified Plan?
In general, employees must be in their employer’s Qualified Plan if they meet the following requirements:
- Age 21+
- Have at least 1 year of service
- Work 1000+ hours
If desired, eligibility rules can be less restrictive than the requirements listed above, but the employer must follow the eligibility rules established in their plan document.
When should I start a Qualified Plan?
The time to start a qualified plan is whenever the time is right for the business owner. They can start early and save for years or start later and potentially make larger contributions over a shorter period of time.
Who can have a Qualified Plan?
Any profitable, successful business is a prospect for a Qualified Plan, including:
- S Corporations
- Limited Liability Corporations
- Limited Liability Partnerships
- Professional Corporations
- Non-Governmental Non-Profit Organizations
Are contributions to a Qualified plan deductible?
An employer can usually deduct, subject to limits, contributions made to a Qualified Plan, including those made for their own retirement. The contributions (and earnings and gains on them) are generally tax deferred until distributed by the plan.
Is life insurance inside a qualified plan taxed?
When life insurance is provided in a qualified plan there is a current taxable event to the participant known as the “economic benefit.” The theory of the income taxation of the “economic benefit” is that the participant is currently receiving a benefit (the life insurance protection) under the plan and a current benefit should be taxed as opposed to a future benefit which is deferred.If the insured dies before retirement with the life insurance held in the plan, the beneficiary would receive the net death benefit as an income-tax free death benefit.The cash surrender value is taxed to the beneficiary in the same manner as any other distribution from the plan. The taxable term cost that has been paid may be applied as basis to the taxable amount.
If a participant wants to maintain the existing life insurance outside the qualified plan, is it better to pay tax on the cash value accumulation or is it better to buy the life insurance from the plan for its cash value?
If the participant has ample money outside the plan, then buying the life insurance by replacing the cash value with monies from other assets might be the best option. The policy is then individually owned, no tax is incurred on the cash value, and the insured can access the cash values of the life insurance policy to supplement retirement using policy loans and withdrawals exercise the policy riders (if applicable), etc.
If the participant cannot buy the life insurance from the plan for its cash value, then paying the tax on the life insurance might be acceptable. A loan could be taken from the policy to pay the tax, or the loan could be used to reimburse the participant for the tax they incur.
Life insurance policy loans and withdrawals reduce the policy's cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy's cash value in early years.