[GNC] Whole life insurance

Michael or Penny Novack stepbystepfarm at comcast.net
Sat Apr 23 19:35:29 EDT 2022


Not just "whole life" but any "cash value" policy.

The point here is that such insurance contracts have both a pure 
insurance component and an investment component and may have associated 
"rights" which also can be thought of as having value (that might also 
be true of term insurance, no cash value but MIGHT have associated 
rights (like the right to renew WITHOUT consideration of your medical 
condition at that future date)

My line of country, so to speak, since my decades in the cypher mines 
were the ones at MassMutual.

IF you want to keep on the books, what is suggested below more work that 
necessary. To get the annual change in cash value use the statement. 
Otherwise consider your premium payments to all be for the (pure) 
insurance component (an expense). Do not try to separate out what part 
of that is for the other components. Leave that to the actuaries who 
priced the product. Because .... your annual statement will NOT allocate 
costs like David said they would. In my day I did things like the 
programs that produced the annual statements.

Just use the annual statement to enter the change in cash value without 
worrying what came from where. Part of that change is the "dividends" or 
whatever and part of that is things like the fact that you DID survive 
the year and they didn't have to pay the death benefit (yet).

Michael D Novack





On 4/23/2022 7:09 PM, davidcousens49 at gmail.com wrote:
> Fred,
>
> You will need a statement from the insurance company which details what
> component of the premium  credited to your bank account when you pay it) is a
> contribution/increase to the capital value of the asset which is the insurance
> policy (debited to the account representing the policy and which is a fee to
> cover their cost of operations/profits (debited to an expense account).
>
> They will have invested the funds you put into the policy and will pay bonuses
> which add to the value of the policy (you debit the policy value by the amount
> of the bonus and credit an income account by the same amount) Depending on the
> tax rules for your jurisdication, that may or may not be taxable income.
> Commonly this is taxed in the hands of the insurance company and not the
> individual, but this may vary between jurisdictions.
>
> Most companies will send you periodic statements detailing the increase in value
> of your policy, the premiums paid, and bonuses paid from which you can calculate
> the required quantities.
>
> The easiest way to handle this is to use an asset account for the policy with
> individual subaccounts for the premiums paid, administrative charges and the
> bonus payments.
>
> When you pay the premiums you credit your bank account and debit the premium
> subaccount,
>
> when you receive a statement work out the difference between the increase in
> poliycvalue (bfeore bonuses) and the premiums paid and credit the sub account
> for administrative costs and debit an appropriate expense account for that
> amount.
>
> Similarly with te bonus amounts debit the account for bonuses and credit
> theincome account ( taxable or not as appropriate).
>
>
> david Cousens
>
>
> On Sat, 2022-04-23 at 10:40 -0700, Fred Tydeman wrote:
>> Suggestions on how to record for whole life insurance:
>>    Premiums paid
>>    Increase in cash value
>>    Future death benefit
>>
>>   I think some of that is like the Degas painting example in the Tutorial in
>> that the increase in cash value is an Unrealized Gain.
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There is no possibility of social justice on a dead planet except the equality of the grave.



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