Tim Fuller

President, SRS Inc.

Tim Fuller is President of SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency) that has connected independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners for more than 50 years. Tim and the SRS team specialize in impaired-risk underwriting, advanced case design, and helping advisors place the cases other IMOs turn away.

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Death Tax Savings For The Uninsurable – A Small Balm In Gilead

September 23, 2026March 14, 2023 by Tim Fuller

Advisor and client reviewing an advanced markets estate planning strategy in a private office

When the first generation of a high-net-worth family can’t qualify for life insurance, the usual estate-tax funding playbook stalls. Here’s the structure advisors use to keep the plan moving anyway.

Key takeaways

When the first generation is uninsurable, insurance on the second generation — funded via generational split-dollar — can keep the estate tax plan alive.
The first generation lends premium dollars to a trust owning policies on the second generation; the loan is repaid only when the second-generation insureds die.
Because repayment is decades away, the loan avoids using lifetime gift-tax exemption and can qualify for a valuation discount in the first generation’s estate.

Generational split-dollar lets a family fund estate-tax liquidity through the second generation when the first generation can’t qualify for coverage at any price.

The problem when the first generation is uninsurable

Estate tax planning for wealthy families usually follows two steps: reduce the anticipated tax bill with every workable strategy, then insure against what’s left with life insurance on the first-generation client, typically a grandparent. That plan breaks down when the grandparent turns out to be a medical decline and can’t get coverage at any price.

Shifting the insurance to the next generation

Most tax and legal advisors point to the same fallback: insure the second generation instead, so there’s liquidity to cover estate tax when the second generation’s wealth eventually passes to the third. The structure that makes this work is often called generational split-dollar.

How the loan structure works

The first generation lends the premium dollars to the owner of the policies on the second generation, usually an irrevocable trust whose beneficiaries are generations two and three. The note is repayable only when the second-generation insureds die, often decades away. That timing matters for two reasons: the loan doesn’t require using any of the first generation’s lifetime gift-tax exemption to cover premiums, and when the note’s value later lands in the first generation’s estate, it can qualify for a meaningful valuation discount since repayment is so far out.

What the Levine case confirmed

Generational split-dollar drew scrutiny for years after some unfavorable rulings. That changed with the Tax Court’s decision in Levine v. Commissioner, which upheld a $2,300,000 valuation on a $6,500,000 note, saving the estate over $1,500,000 in estate taxes, and gave attorneys a workable blueprint for drafting these arrangements.

How to use this with clients

This is a fit for families where the first generation is uninsurable and there’s still a meaningful anticipated estate tax bill at the second generation’s death. Underwriting the second generation is more involved, since it requires showing the carrier a credible path to the anticipated inheritance, but it’s often the only way to keep the estate-tax funding plan alive once the first generation can’t qualify.

If you have a client whose estate plan depends on insurance the first generation can no longer qualify for, that’s a case we can help you work through.

Frequently asked questions

What is generational split-dollar?

It’s a strategy where the first generation lends premium dollars to a trust that owns life insurance on the second generation, with the loan repaid only at the second generation’s death. It lets a family fund estate-tax liability at the second-to-third generation transfer without using the first generation’s gift-tax exemption.

Does this only apply when the first generation is uninsurable?

No. It’s most often used as a fallback when the first generation can’t qualify for coverage, but it can also make sense when the first generation is insurable and there’s still a substantial estate tax expected at the second generation’s death.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency) connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners — with the impaired-risk and complex-case expertise to place business other IMOs and BGAs turn away.

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Your Clients Aren’t Average – Why Is Their Long-Term Care?

September 23, 2026February 23, 2023 by Tim Fuller

Adult daughter and her aging mother sharing a warm moment while discussing long-term care planning

Some long-term care carriers price coverage around the “average” claim — a few years, then done. The real claims data tells a very different story, and if a client’s coverage is built around an average, that’s exactly the plan that fails the client whose care need runs long.

Key takeaways

The commonly cited “average” LTC claim length (3.7 years women, 2.2 years men) hides the real risk: the longest, most expensive claims.
Largest-claim data from seven carriers shows multi-million-dollar, decade-plus claims for both men and women.
Clients whose coverage is built around an average are exactly the clients a long claim will bankrupt.

In five of the seven carriers tracked, the largest male LTC claim ran as long as, or longer than, the largest female claim — even though pricing assumptions favor women needing more care.

The problem with planning around “average”

The commonly cited average length of an LTC need is 3.7 years for women and 2.2 years for men. That statistic often gets used to justify shorter, cheaper benefit periods, on the logic that most people won’t need care much longer than that.

An average describes the middle of a range, not the edges — and the edges are where long-term care claims get expensive.

What the largest claims on record actually look like

The American Association for Long-Term Care Insurance tracks the largest LTC claims paid by carrier. Looking at the largest claims paid through December 2018 across seven leading carriers tells a very different story than the averages suggest. In five of those seven cases, the largest male claim ran as long as, or longer than, the largest female claim — even though the “average” narrative assumes women need care longer:

Carrier 1: 14 years, 2 months (male), $2,276,381 — vs. 16 years, 6 months (female), $2,329,333
Carrier 2: 19 years, 3 months (male), $2,205,800 — vs. 15 years, 4 months (female), $2,636,417
Carrier 3: 16 years, 2 months (male), $2,091,083 — vs. 9 years, 10 months (female), $1,727,594
Carrier 4: 15 years, 8 months (male), $1,700,000 — vs. 14 years, 6 months (female), $2,000,000
Carrier 5: 14 years, 3 months (male), $1,461,256 — vs. 11 years, 7 months (female), $2,012,385
Carrier 6: 15 years, 4 months (male), $1,413,934 — vs. 15 years, 6 months (female), $1,499,601
Carrier 7: 13 years, 2 months (male), $1,179,502 — vs. 18 years, 1 month (female), $1,316,417

Source: American Association for Long-Term Care Insurance, largest claims paid through December 2018.

Every one of those claims topped $1 million. Several ran past 15 years. None of them would have been fully covered by a policy built around a two-to-four-year average.

Why the outliers matter more than the average

Conditions like Alzheimer’s and Parkinson’s don’t follow a predictable timeline. A client diagnosed in their early 60s can need care for well over a decade. Planning around the average length of a claim ignores exactly the cases that do the most financial damage — the ones that go long.

That’s the case for looking past the shortest, cheapest benefit periods and considering options like a Continuation of Benefits rider or a lifetime benefit period — particularly for clients with a family history of cognitive decline, or clients who would rather pay more now than risk running out of coverage later.

Frequently asked questions

Is the average length of an LTC claim a good number to plan around?

Not on its own. It’s a useful baseline, but the largest claims on record run into decades and well past $1 million — numbers a policy built around the average simply won’t reach.

Do men need shorter long-term care coverage than women?

Not necessarily. While women have a longer average claim length, the largest individual claims on record show men meeting or exceeding the longest female claims in five of the seven carriers reviewed.

What’s the alternative to a benefit period based on averages?

Look at Continuation of Benefits riders or a lifetime benefit period, which remove the cap entirely and protect against the claims that run far longer than expected.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.

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Permanent Total Disability Coverage for MLB Player

September 23, 2026January 11, 2023 by Tim Fuller

Professional working confidently at her desk, representing disability income protection

A five-year, $105 million contract was on the table — and the biggest risk to it wasn’t a pitcher’s fastball, it was the chance the player never got to sign it. Here’s how we structured permanent total disability coverage to protect a Major League free agent through the riskiest year of his career.

Key takeaways

A five-year, $105 million contract was at risk the moment a career-ending injury could happen before it was signed.
Permanent total disability coverage pays a lump sum for a career-ending event, unlike standard monthly-benefit DI.
The policy was sized against the player’s projected earnings, not his current salary.

We placed a $25 million permanent total disability policy — structured to pay a lump sum — for roughly $250,000 in premium, protecting a $105 million contract before it was even signed.

The situation

The client was an outfielder and designated hitter entering the final year of his current contract, heading into free agency, and projected to sign a five-year deal worth roughly $105 million. His advisor came to us with a clear problem: standard disability coverage wasn’t built for exposure like this. One career-ending injury or illness before that new contract was signed could cost the player, and his family, a life-changing amount of money.

Why permanent total disability was the right tool

For a high-income athlete, the exposure isn’t just “can’t work for a few months” — it’s “career over, permanently.” That calls for permanent total disability coverage designed to pay a lump sum, not a monthly benefit. We worked directly with the player’s agent and financial advisor to size a policy against his actual earnings trajectory, not just his current salary.

The solution

We placed a $25 million permanent total disability policy, structured to pay out as a lump sum, at a premium of roughly $250,000 plus taxes and fees. The policy protected the player against exactly the risk that mattered most: a career-ending injury or illness before his next contract was secured.

The result

The advisor, the agent, and the player all got what they needed: a comprehensive policy that let the player focus on the game, not on the what-ifs. He went on to sign his contract with that protection already in place.

If you’re working with a high-income earner ($500k+ annually) who’s an all-star in their own field — an athlete, executive, physician, or business owner — it’s very likely they carry exceptional income exposure that a standard policy won’t cover. That’s a case we can help you design.

Frequently asked questions

What is permanent total disability coverage?

It’s disability coverage designed to pay a lump sum if the insured suffers a career-ending injury or illness, rather than a monthly benefit. It’s typically used for high-income earners whose future earnings, not just their current paycheck, are the real exposure.

Who needs this kind of coverage?

Professional athletes, executives, physicians, and business owners earning $500k or more annually are the most common candidates — anyone whose income depends on a specific, hard-to-replace physical or professional ability.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Vaping – Underwriting Non-Combustible Tobacco Use

September 23, 2026January 6, 2023 by Tim Fuller

Underwriter reviewing medical and financial data with a client during risk assessment

Vaping doesn’t have to mean tobacco rates for your client. If they use only non-combustible products, one of our carriers offers a path to non-tobacco pricing — here’s how it works.

Key takeaways

Vaping-only clients have historically been rated at full smoker rates, regardless of the lower health-risk profile.
One carrier partner offers non-tobacco pricing for vaping-only use once a carrier-ordered biomarker test comes back negative for combustion.
Qualifying requires no cigarette or cigar use in the past 10 years, in addition to the clean biomarker result.

Clients who vape but don’t use combustible tobacco can move from Preferred Tobacco to Standard Non-Tobacco rates — a full rate-class downgrade in cost — if a biomarker test confirms no tobacco combustion.

What counts as non-combustible tobacco

Non-combustible tobacco products don’t require burning tobacco to use. Vaping (e-cigarettes) is the most common example — the device heats liquid at a lower temperature to create an inhalable aerosol, rather than burning tobacco leaf. Underwriters have historically rated vaping the same as combustible tobacco: at smoker rates, regardless of the lower health-risk profile.

The program that changes the math

One of our carrier partners offers a special underwriting program that allows non-tobacco rates for vaping-only use, provided a biomarker lab test ordered by the carrier comes back negative for tobacco combustion. If your client qualifies, the rate class can improve by a full downgrade — for example, from Preferred Tobacco to Standard Non-Tobacco.

How to qualify

Tobacco use must be non-combustible only: nicotine delivery devices (vaping), chewing tobacco, or snuff
No use of cigarettes or cigars in the past 10 years
A tobacco combustion biomarker ordered by the carrier must come back negative

If you have a client who vapes and doesn’t smoke combustible products, it’s worth checking whether they qualify before you quote them at smoker rates by default. Contact our underwriting team and we’ll walk the case through this program with you.

Frequently asked questions

Does vaping always get rated as tobacco use?

By default, most carriers rate vaping the same as combustible tobacco use. But select carriers offer a biomarker-tested program that can qualify vaping-only clients for non-tobacco rates.

What’s the biggest qualifying hurdle?

No use of cigarettes or cigars in the past 10 years, combined with a negative tobacco combustion biomarker test ordered by the carrier.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Helping Clients Understand the Complexities of Income Protection

September 23, 2026January 4, 2023 by Tim Fuller

A client’s income is often their single biggest asset — bigger than their home, their portfolio, even their business. Most advisors make sure everything else is insured. Here’s how to make sure income itself doesn’t go unprotected.

Key takeaways

Most clients assume employer group LTD is enough protection — it usually isn’t, especially for higher earners.
Individual Disability Insurance (IDI) is sized to total income, travels with the client, and layers on top of group coverage.
The moment a client’s income and career risk peak is often the same moment employer-tied coverage disappears.

Group long-term disability often replaces only 40-60% of income, excludes bonuses and incentive pay, and disappears the moment a client changes jobs.

The gap in group long-term disability coverage

Many employers offer group long-term disability (LTD) coverage, and many clients assume that’s enough. It usually isn’t. Group LTD is typically taxable, often only replaces 40-60% of income, and frequently excludes bonuses and incentive pay entirely — even though those can make up a large share of a client’s total compensation.

For higher-income earners, the gap is even wider. Group LTD benefits are often capped at a flat dollar amount that falls well short of what’s needed to replace a real monthly income. And because the coverage is tied to the employer, it typically disappears the moment a client changes jobs — at exactly the point in their career when their income, and their exposure, is highest.

What Individual Disability Insurance actually covers

Individual Disability Insurance (IDI) is built to close that gap. Just as life insurance pays a beneficiary for a loss, IDI pays a monthly benefit — tailored to a policyowner’s total income, not just their base salary — if a serious illness or injury keeps them from working. It travels with the client, not the employer, and it can be layered on top of group LTD to cover the income group coverage leaves out.

Why now is the right moment to raise it

Clients are more open than ever to conversations about protecting their income and their families against the unexpected. That makes this a natural moment for advisors to introduce IDI, not as an abstract product, but as a direct answer to a concern clients are already thinking about.

How to talk to clients about it

The clearest way to make the case is to point out that expenses don’t pause just because income does. Mortgages, car payments, loans, and everyday costs keep coming due whether or not a client can work — and a disabling illness or injury often adds new expenses on top of the old ones. IDI protects the income clients are already using to cover those costs, maintain their lifestyle, and support their families.

By raising income protection proactively, advisors don’t just fill a coverage gap — they demonstrate the kind of comprehensive planning that keeps clients loyal for the long run. If you have a client relying solely on group LTD, or a high earner whose real income exposure has never been fully addressed, that’s a case we can help you design.

Frequently asked questions

What is Individual Disability Insurance (IDI)?

IDI is a policy that pays a monthly benefit, tied to a client’s total income, if they’re unable to work due to a qualifying illness or injury. Unlike group LTD, it belongs to the individual and stays in place even if they change jobs.

Why isn’t group long-term disability enough on its own?

Group LTD is often taxable, typically caps out at 40-60% of income, frequently excludes bonuses and incentive pay, and ends when the client leaves their employer — leaving a meaningful gap for many earners, especially higher-income clients.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Tax-Deferred vs. Taxable: How to Explain an Annuity’s Real Yield to Clients

September 23, 2026November 14, 2022 by Tim Fuller

Retired couple relaxing on a porch at sunset, representing guaranteed annuity income

A fixed annuity quoting a “guaranteed” rate can look unremarkable next to a taxable alternative advertising a higher number — until you run the tax math. Here’s a simple way to show clients what a tax-deferred guarantee is actually worth.

Key takeaways

Clients anchor on the headline rate, not the after-tax outcome — that’s where taxable alternatives look falsely competitive.
On a $100,000 deposit, the tax-deferred annuity compounds to roughly $116,758 by year three at 5.30%.
Tying the comparison to a client’s actual tax bracket and time horizon makes the tax-equivalent yield conversation most persuasive.

A 5.30% tax-deferred annuity guarantee is equivalent to an 8.15% return on a fully taxable investment at a 35% tax bracket.

The comparison clients don’t usually see

Say a client is deciding between a tax-deferred fixed annuity guaranteeing 5.30% for three years, and a taxable investment. Assuming a 35% tax bracket, that 5.30% tax-deferred guarantee is equivalent to an 8.15% return on a fully taxable investment. Most clients — and plenty of advisors — never see that comparison laid out side by side.

Running the numbers

On a $100,000 deposit, the tax-deferred annuity at 5.30% grows to roughly $105,300 in year one, $110,881 by year two, and $116,758 by year three. A taxable account would need to earn 8.15% just to keep pace after taxes — and that’s before accounting for the annual tax drag on a taxable account, which compounds the disadvantage year over year.

Why this comparison matters for the conversation

Clients tend to anchor on the headline rate, not the after-tax outcome. When a taxable option quotes a higher number, it’s easy for a client to assume it’s the better deal. Showing the tax-equivalent yield reframes the conversation around what actually lands in the client’s pocket, not just the rate on paper.

How to use this with clients

This kind of side-by-side math is most persuasive when it’s tied to a client’s actual tax bracket and time horizon, since both change the tax-equivalent yield. It’s also a natural opening to talk about how tax deferral compounds over multiyear guarantee periods, and where a fixed annuity might fit alongside other retirement and legacy planning tools.

If you have a client comparing a fixed annuity to a taxable alternative and want help running the actual numbers for their bracket and time horizon, that’s a conversation we can help you have.

Frequently asked questions

What is tax-equivalent yield?

It’s the rate a taxable investment would need to earn to match the after-tax return of a tax-deferred vehicle like a fixed annuity, given a client’s tax bracket. A higher headline rate on a taxable product doesn’t always mean a better after-tax outcome.

Does the tax-equivalent yield change with a client’s tax bracket?

Yes. The higher a client’s tax bracket, the more valuable tax deferral becomes, and the higher the taxable-equivalent yield needed to match a given tax-deferred guarantee.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Critical Illness Coverage for a Breast Cancer Diagnosis

September 23, 2026October 26, 2022 by Tim Fuller

Doctor and patient reviewing a health chart on a tablet, representing health impairment underwriting

A broker in Maryland finished her chemotherapy and radiation feeling like the worst was behind her — and then the bills kept coming. Here’s how a critical illness policy would have changed that picture, and why it’s worth raising with clients every October and every month after.

Key takeaways

Traditional health insurance doesn’t cover the non-medical costs of a serious diagnosis — child care, travel, lost income.
A Critical Illness Policy pays a tax-free lump sum on diagnosis, with no restrictions on how the money is used.
This conversation is worth raising with clients regularly, not just during awareness months.

People are roughly five times more likely to be diagnosed with a critical illness than to die before age 65 — which is why the premium is a safety deposit box, not a bet.

The situation

The client was a broker who had been diagnosed with breast cancer. She underwent a successful full mastectomy, followed by a course of radiation and chemotherapy. Physically, she was on the mend. Financially, the picture was much harder: she was unable to work full time during treatment, and her business, household, and medical expenses kept building while her income slowed down.

Why critical illness insurance was the missing piece

Traditional health insurance covered her medical treatment, but it was never designed to cover everything else a serious diagnosis brings with it — deductibles, child care, travel to and from treatment, and short-term home health care, all of which typically come out of pocket. A Critical Illness Policy is built specifically for that gap: it pays a tax-free lump sum on diagnosis of a covered serious illness, including cancer, heart attack, or stroke, with no restrictions on how the money is used.

Claims statistics suggest people are roughly five times more likely to be diagnosed with a critical illness than they are to die before age 65 — which is why it’s worth thinking of the premium less like a bet and more like a safety deposit box. If the client is diagnosed with one of the covered illnesses, the policy pays the full face value directly to them. If they die of one of the covered illnesses, that face value goes to their beneficiary. And if they die of any other cause, 100% of premiums paid are returned to the beneficiary as a tax-free death benefit — so the coverage isn’t a use-it-or-lose-it proposition.

The result

For a client in this situation, a critical illness payout arrives exactly when it’s needed most: while treatment is disrupting income, not months later during a claims process tied to ongoing medical bills. It’s the kind of coverage that turns a health crisis into a manageable one financially, even when it can’t change the diagnosis itself.

October is Breast Cancer Awareness Month, and it’s a natural prompt to reach out to clients about what they can do today, before a diagnosis, to make things easier if the unexpected happens. If you have a client who could use a critical illness conversation, that’s a case we can help you design.

Frequently asked questions

What does a critical illness policy actually pay for?

It pays a tax-free lump sum directly to the policyholder on diagnosis of a covered serious illness, such as cancer, heart attack, or stroke. Because it’s a cash payment with no restrictions, clients can use it for deductibles, child care, travel to treatment, home health care, or lost income — whatever the diagnosis actually costs them.

What happens to the premiums if the client never gets sick?

If the client dies of a cause other than one of the covered illnesses, 100% of the premiums paid are returned to their beneficiary as a tax-free death benefit, so the coverage isn’t forfeited if it’s never used for a covered diagnosis.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Case Placement: Standard Non-Tobacco After Three Carrier Declines

September 23, 2026September 23, 2022 by Tim Fuller

Three carriers turned this case down before the fourth one said yes — and offered better than expected. Here’s how a client with thyroid nodules and carotid stenosis went from three straight declines to a Standard Non-Tobacco offer.

Key takeaways

Multiple overlapping findings on paper often get declined by carriers that underwrite off diagnosis codes alone.
A specialist’s follow-up findings — clinically insignificant nodules, stable carotid stenosis — can change the outcome entirely.
Matching a case to the right carrier can turn a decline into a Standard offer.

Three carriers declined or rated this case at Table D and Table 3 before a fourth carrier evaluated the full clinical picture and offered Standard Non-Tobacco.

The situation

The client was a 58-year-old male, non-smoker, seeking $1 million of universal life coverage. A comprehensive routine physical a year earlier had turned up mild carotid stenosis and a single thyroid nodule on ultrasound. His other medical history included neuropathy, mild osteoarthritis, and acid reflux. A follow-up thyroid ultrasound six months later found new nodules — too small to biopsy. A specialist ordered additional imaging and determined the nodules were clinically insignificant; no biopsies were ultimately needed.

Why this case was hard to place

On paper, this is exactly the kind of file that gets declined by carriers unwilling to dig past the surface-level diagnosis codes: multiple overlapping findings (carotid stenosis, evolving thyroid nodules, neuropathy) without a single carrier fully underwriting the clinical picture as a whole. That’s exactly what happened. Carrier #1 declined to offer at all. Carrier #2 came back at a Table D. Carrier #3 offered a Table 3 — still a meaningful flat extra and a hard sell to the client.

The solution

Rather than accepting the Table 3 as the ceiling, we took the case to a fourth carrier with underwriters willing to evaluate the specialist’s follow-up findings on their own terms — a clinically insignificant thyroid nodule with no biopsy required, and mild, stable carotid stenosis, not a progressive or high-risk presentation.

The result

Carrier #4 offered Standard Non-Tobacco — the best possible outcome for this profile, and a dramatic swing from the Table 3 the client would have settled for elsewhere. The difference wasn’t the medical file; it was which carrier’s underwriters actually read it.

If you have a client sitting on a decline or a heavy table rating because of overlapping or ambiguous findings, that’s exactly the kind of case our underwriting team is built to re-shop. Send us the file — we’ll find the carrier that reads it the way it deserves to be read.

Frequently asked questions

Why would four carriers give four different offers on the same file?

Carriers vary widely in how they underwrite overlapping or ambiguous findings, especially when a diagnosis code alone doesn’t capture the full clinical picture. A specialist’s follow-up notes and imaging results can change the offer dramatically — but only if the carrier’s underwriters actually weigh them.

Is it worth re-shopping a case after a decline or a heavy table rating?

Often, yes. A decline or a high table from one carrier doesn’t mean the case is uninsurable at a reasonable rate — it may just mean that carrier didn’t fully evaluate the clinical detail. Cases like this one, which moved from a Table 3 offer to Standard Non-Tobacco, show how much the outcome can depend on where the case is placed.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Justifying Key Person Coverage Above 10x Compensation: The “Sweat Equity” Case

September 23, 2026September 20, 2022 by Tim Fuller

A son or daughter working for below-market pay at the family business, waiting for a future ownership stake, creates a real and measurable coverage need — even though underwriters are often trained to be skeptical of anything tied to an inheritance that “might never happen.” Here’s how to make that case.

Key takeaways

The standard 10x-compensation formula for key person coverage breaks down for a family member paid below market rate.
Carriers won’t count a hypothetical future inheritance toward coverage — but they can recognize today’s below-market pay gap.
Framing the case around present, measurable facts, not future ownership, is what gets it underwritten.

The gap between what an underpaid family-business heir is paid and what their role is actually worth is a real, current financial need — not a bet on a future inheritance.

The underwriting problem

Key person coverage is typically justified using a multiple of compensation — often around ten times salary. That formula works fine for most key employees, but it breaks down for the “underpaid key kid” who’s taking less than market rate today because they expect to inherit or eventually own the business.

Underwriters are right to be cautious about building future ownership into a net worth calculation. Carriers generally won’t let a second generation count an anticipated inheritance toward the coverage they can buy to pay future estate taxes, because that inheritance might never materialize. That’s a reasonable position — hope of future ownership doesn’t create a present financial need on its own.

Why this case is different

The “sweat equity on the come” scenario isn’t about counting a hypothetical future inheritance. It’s about three present, measurable facts: the son or daughter is taking less compensation than their work is worth; the business is getting their services at a below-market rate; and replacing them with someone not motivated by future ownership would cost more than what’s currently being paid. That gap between what they’re paid and what their role is actually worth is a real, current financial need — not a contingency on whether the inheritance ever happens.

Making the case to underwriters

The key is separating the two arguments. An underwriter is right to reject “insure me for more because I’ll inherit the business someday.” But “insure this key person for more than ten times their stated compensation because their real economic value to the business exceeds their pay” is a different, and much stronger, argument — one that should factor into the financial underwriting process regardless of whether the future ownership transfer ever occurs.

Bringing us a case like this

If you have a client with a key person case that doesn’t fit the standard compensation-multiple formula — a family business successor, a founder’s child, or any key employee being paid below market in exchange for future equity — that’s exactly the kind of case our underwriting team is built to help you place.

Frequently asked questions

Why won’t carriers count a future inheritance toward key person coverage?

Carriers generally won’t build an anticipated inheritance or ownership transfer into a net worth or coverage calculation because it isn’t guaranteed to occur. That’s a different issue, though, from a key person’s current below-market compensation, which is a present, measurable financial fact.

How do you justify key person coverage above the standard 10x compensation multiple?

By showing the gap between what the key person is currently paid and what their role and services are actually worth in the market — including the higher cost of replacing them with someone who isn’t motivated by future ownership. That gap represents a real, current financial need independent of whether any future ownership transfer occurs.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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Disability Buy-Out Placement for a $33M Commodities Firm Buy-Sell

September 23, 2026September 14, 2022 by Tim Fuller

The CEO’s share value had grown 250% since the buy-sell agreement was last updated — and the board realized their disability buy-out coverage hadn’t kept pace. Here’s how we closed a $33 million gap before it became a problem.

Key takeaways

Buy-sell agreements can quietly fall out of date as a company’s value grows, leaving disability coverage underfunded.
A disability buy-out policy pays a lump sum matched to the buy-sell agreement’s trigger language if a key owner becomes disabled.
Reviewing buy-sell coverage against current valuation — not the valuation at signing — is what catches gaps like this one.

The CEO’s share value grew 250% since the buy-sell agreement was last funded — and the board closed the resulting $33 million disability buy-out gap for roughly $110,000 a year.

The client

A large Texas-based firm operating in grain, energy, freight, and other commodities.

The situation

The client’s buy-sell agreement had failed to keep pace with the company’s rapid growth. As the business expanded, the CEO’s share value increased by 250% since the agreement was last funded, and the insurance portfolio protecting the shareholders needed a significant increase to match. The board, made up of a dozen shareholders, determined that a disabling event affecting the CEO could cripple the company without adequate disability buy-out coverage in place, and set a target of $33 million in coverage to fulfill the buy-sell obligation.

The solution

We placed a disability buy-out policy funded to a $33 million limit, structured to pay a lump sum benefit if the CEO became disabled, under the definitions and trigger language of the disability repurchase clause in the buy-sell agreement. The annual premium came in at roughly $110,000 plus taxes and fees — a fraction of the exposure it protected against.

The result

The board now has a buy-sell agreement backed by coverage that actually matches the current value of the business, closing a gap that had been quietly widening as the company grew. If the CEO were to become disabled, the company and remaining shareholders have the funding in place to execute the buyout without a forced sale or a cash crunch.

Four questions worth asking every business-owner client

For productive succession-planning conversations, we suggest asking clients or prospects: Do you know the current value of your business? Do you have a buy-sell agreement in place? Has that agreement been revisited since any change in company value, or since partners were added or removed? And without a buy-sell agreement, are you aware you could end up in business with a partner’s spouse if that partner dies or becomes disabled?

If you have a client whose buy-sell agreement hasn’t been revisited since their business changed in value, that’s a case we can help you review and place.

Frequently asked questions

What is disability buy-out insurance?

It’s a policy that pays a lump sum, or sometimes installments, to fund the purchase of a disabled owner’s share of a business under a buy-sell agreement, so the remaining owners can complete the buyout without a forced sale or cash shortfall.

How often should a buy-sell agreement’s funding be reviewed?

Whenever the business’s value changes meaningfully, or when partners are added or removed. In this case, the CEO’s share value had grown 250% since the agreement was last funded, leaving a significant gap that only came to light when the board reviewed it.

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Reviewed by Tim Fuller on 2026-09-23

Tim Fuller

President, SRS Inc.

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