Newsletter

LIFE INSURANCE: RECENT DEVELOPMENTS

March brought a few significant changes in the life insurance world. The biggest trend is that more people are buying coverage earlier, especially term life, because premiums continue to rise slowly each year. Several major insurers announced small premium increases for new applicants due to higher claims and higher operating costs.

Insurers also continued expanding no‑exam life insurance, making it easier for people to get approved quickly using electronic health records and prescription checks. These policies are becoming more common for people in good health who want fast coverage without medical tests.

Overall, the message from March is simple: life insurance is still affordable, but prices are creeping up, and applying sooner can help people lock in lower rates.

Long-Term Care: Recent Developments



Long‑term care costs continued to rise in March, especially for home health aides and assisted living facilities. The main reason is ongoing staffing shortages and higher wages for caregivers. Several national surveys released in March show that families should expect steady cost increases throughout 2026.

On the positive side, more companies are offering hybrid long‑term care policies (life insurance with long‑term care benefits). These plans are becoming popular because they guarantee that someone will receive a benefit — either long‑term care coverage or a life insurance payout.

The key takeaway from March: long‑term care is getting more expensive, and planning early gives people more options and lower costs.

WHAT’S NEW IN SHORT‑TERM AND LONG‑TERM DISABILITY INSURANCE

March brought several updates in the disability insurance world. These changes affect how people qualify for benefits and how insurance companies define disability. Here’s what’s new.

1. More Employers Are Reviewing Their Disability Plans

Many employers are updating their short‑term and long‑term disability plans.



Why?

• More employees are taking medical leave
• Mental‑health‑related claims are rising
• Costs for extended absences are going up

Some employers are improving benefits, while others are tightening rules to control costs.

2. Insurers Are Updating “Own‑Occupation” Definitions

One of the biggest changes this year involves “own‑occupation” coverage.

What “own‑occupation” means

If you have an own‑occupation disability policy, you can receive benefits if you can’t do the main duties of your specific job, even if you can work in another job.

Example:

A surgeon injures her hand and can no longer perform surgery.

She can still teach or consult — but under an own‑occupation policy, she may still qualify for disability benefits because she cannot perform her own occupation.

Why insurers are tightening this definition

Insurance companies are:

• Being more specific about what counts as your “occupation”
• Requiring clearer job descriptions
• Limiting how long certain own‑occupation benefits last

This helps insurers reduce disputes and control costs, but it also means people should review their policies carefully.

3. Stricter Rules For Partial Disability

Insurers are also tightening rules around partial disability, which is when someone can still work but not at full capacity.

What partial disability means

Partial disability benefits may apply when:

• You can work some, but not all, of your normal hours
• You can perform some, but not all, of your job duties
• Your income drops because of your medical condition

What “stricter rules” means

Insurers are now:

• Requiring a larger loss of income before benefits are paid
• Asking for more detailed medical documentation
• Limiting how long partial benefits last
• Narrowing the definition of what counts as a “partial” loss

In short, it’s becoming harder to qualify for partial disability unless the income loss is clear and significant.

4. More People Buying Individual Disability Policies

Because employer plans are changing, more people are buying individual disability insurance to protect their income. These policies:



• Offer stronger own‑occupation protection
• Stay with you even if you change jobs
• Lock in your premium at the age you buy

Simple Takeaway

Disability insurance rules are tightening, especially around own‑occupation and partial disability.

Professionals should review their coverage to make sure it still protects them the way they expect.

2026 ANNUITY SNAPSHOT

Here’s a quick overview for anyone reviewing or considering annuities for this year.

What's Changing

The annuity landscape is shifting more this year than it has in a decade. New rules, redesigned products, and updated tax interactions are shaping how annuities fit into retirement planning.

1. Stronger Consumer Protections

All states now follow the Best‑Interest Standard, which means:

• Clearer explanations
• Better documentation
• Recommendations that must show why the product fits your goals

This makes the buying process more transparent and easier to understand.

2. New Product Designs

Effective this year insurers must follow new reserve rules. As a result:

• Some products have been redesigned
• Some guarantees have been repriced
• New versions of popular annuities are rolling out

If you’re comparing options, expect to see updated features and crediting strategies.

What People Are Noticing During Tax Season

As clients file their 2025 returns, a few themes are emerging:

1. Annuity Income Is Still Taxed as Ordinary Income
2. Nothing new here—payments from traditional annuities continue to be taxed at ordinary income rates.

3. Non‑Qualified Annuities Still Use the “LIFO” Rule

Withdrawals come out as earnings first, then principal.

This is catching some people off‑guard if they took withdrawals in 2025.

4. Roth Conversions and Annuities Require Closer Coordination

The One Big Beautiful Bill Act (OBBBA) changed how Roth conversions, deductions, and income thresholds interact. As a result, annuity income can now affect a client’s eligibility for certain deductions and tax credits, so tax planning and annuity planning must be coordinated to avoid unintended consequences. Review planned Roth conversions together with expected annuity distributions and other income to determine the best timing and amounts.

Actionable points:

• Compare projected taxable income before and after a Roth conversion to the thresholds for deductions and credits.
• Model annuity payouts (or interest credited) for the conversion year to see whether they push clients over key limits.
• Coordinate timing: consider delaying or accelerating conversions or distributions to manage phaseouts.

5. MYGA Owners Are Receiving 1099‑INT Forms Again — What a MYGA Is and Why You Received a 1099‑INT

A MYGA (multi‑year guaranteed annuity) is a fixed annuity contract in which an insurance company credits a guaranteed fixed interest rate for a set term (typically 3–10 years) after a lump‑sum deposit; the interest grows tax‑deferred inside the contract but is taxable annually to the owner unless the annuity is held inside a tax‑qualified account such as an IRA.

Because many MYGAs credit interest each year, issuers must report interest of $10 or more on Form 1099‑INT, and recipients must include that interest on their tax returns unless the annuity is in an IRA. That reporting is what surprised some clients when their 1099s arrived.

Here's what to do:

• Confirm contract ownership: if the MYGA is inside an IRA, interest is not reported on a 1099‑INT to the individual; if owned personally, expect annual 1099‑INT reporting.
• Review year‑end statements and the 1099‑INT to reconcile reported interest with your records.
• Plan distributions and conversions with the tax impact of reported interest in mind to avoid unexpected increases in taxable income.

Who Might Benefit From an Annuity in 2026

An annuity may be a good fit if you want:

• Income you can’t outlive
• Protection from market losses
• Tax‑deferred growth
• A stabilizing anchor in a volatile market

Quick Tips for 2026 Buyers

• Match the annuity to your goal (income, protection, growth).
• Compare at least two product designs—2025 vs. 2026 versions may differ.
• Review fees, liquidity, and surrender schedules carefully.
• Ask how the new rules affected the product you’re considering.

State of Florida Annuities: A Guide For Consumers

Click here for a consumer guide on annuities published by the State of Florida Chief Financial Officer.

About Paul Cholak

Paul has over forty years of benefits experience and has been Director of Employee Benefits for large companies, as well as a benefits consultant with major consulting firms. He understands the life and health insurance needs of individuals and families of all ages. He also has considerable experience in selling life and health insurance to employer groups.

He guides you through the steps of getting insurance and is available to help you both BEFORE and AFTER you've made your purchase decision.