Diminished Benefit

“There are substantial income and estate tax advantages to certain life insurance products,” said Jay Messing, a senior director of planning in the Northeast for the private bank unit of Wells Fargo & Co. “Any time you get tax increases, whether it’s income or estate, the efficiency of those life insurance products tends to increase in value.”

Still, the coverage is purchased with after-tax dollars, diminishing the tax benefit compared to a retirement account, Rubin said. If wealthy individuals accumulate excessive assets in life insurance, the products’ tax treatment may draw scrutiny, Batson said.

MetLife Inc. and Prudential Financial Inc. are the largest U.S. life insurers. Other top sellers of life insurance and annuities include Prudential Plc’s Jackson National and Lincoln National Corp. Allianz was the No. 10 annuity seller, according to data compiled by the National Association of Insurance Commissioners.

“We believe Americans should have every opportunity to maximize their retirement savings, as well as protect their long-term financial security,” Radnor, Pennsylvania-based Lincoln said in a statement.

‘Give Back’

The benefits for the companies may be limited because retirees often use tax-deferred accounts to fund savings products, said Caleb Callahan, senior vice president at broker- dealer ValMark Securities Inc. Many insurance companies also provide retirement plans for companies, he said.

“What you get in one hand, you give back in the other,” he said in a phone interview.

The retirement cap is part of a $3.8 trillion budget that leans on top-earning households for revenue to cut the deficit. The account limit is projected to raise $9 billion for the government over the next decade. The budget also caps the value of tax deductions and other breaks for top earners and imposes a minimum tax on those earning more than $1 million a year.

The limit on retirement accounts would be implemented by prohibiting taxpayers from adding more tax-free money to the accounts once the cap is reached. The cap would be set starting at $3.4 million, the amount needed to fund a $205,000 annual annuity for a 62-year-old, and would be adjusted for the cost of living. Investors could add to the accounts if investments lag.