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Some clients may understand the need for Disability Income Insurance, but still resist purchasing because they don’t want to “lose” those premium dollars if they never use the coverage.

For many, the purpose of buying Disability Insurance (DI) is so they can sleep at night knowing if they get sick or hurt one day everything will be okay financially.

But what if nothing serious happens to your client during their working lifetime that prevents them from working?  They have paid premiums to a policy for years that never was used.  Having some peace of mind may have a cost, but there is a way to mitigate that cost.

There are income protection plans available with return of premium options that pay back the premium to your clients (income tax free).

This is how it works:

A 39-year-old male Real Estate Agent earning $110,000 qualified for an Income Protection Plan that would pay him $5,000 each month (tax free) if he got sick or hurt and could not work.
The premium for the coverage is $119.73 per month.
If he reaches age 67, his total premium paid would be $38,094.
If he adds the Return of Premium Advantage the additional cost would be $79.02 per month for a total premium of $198.75 per month.
At age 67 with no claims being paid, the Real Estate Agent will receive a check for a tax-free amount of $63,236 – which is the investment return equivalent of 82% guaranteed* on the additional $79.02 monthly premium.

This “money back DI” solution can be offered on a long-term or even short-term policies.  One option of the return of premium rider provides a lump sum return of a specified percentage of premium paid every 10 years (80 percent or 50 percent) less any benefit you receive.

Reach out to your clients to find out if they have been reluctant to purchase individual DI coverage because they feel they would be throwing money at a policy they will never use.  Although policy premiums will be higher with the return of premium option, emphasize the “value” of being able to use the returned amount any way your client wishes – perhaps a lump sum payment on the mortgage or add to their retirement fund.

Contact your Disability Income Specialist with any questions or if you would like to see a proposal for yourself.

*The IRR will vary subject to clients age, occupation, and benefit amount.

Little Harold ran into the kitchen where his Mother was preparing dinner and said, “Hey Mom!  You know that antique vase on the stand in the front hall that has been handed down from generation to generation?”  When she looked up he reported, “Well my generation just dropped it!”

The transfer of valuable assets must be done with care.  And so it is with life insurance handed down or handed off through a change of ownership.

Long before the life settlement prairie fire swept across the industry landscape, Congress was concerned about the practice of brokering in the lives when no true insurable interest existed.  Section 101 of the Internal Revenue Code doesn’t prohibit the purchase of a policy, but it does curtail the tax advantages of such an “investment” to an extent that could be significant to the unsuspecting.

In a nutshell

Death proceeds are not includible in gross income (i.e. they are income tax-free) unless the policy was acquired for “valuable consideration”, then they are excluded only to the extent of the consideration paid (basis).  And consideration doesn’t have to be cash.  The IRS will go far afield in construing any hard or intangible assets, services or other benefits rendered in the acquisition of the policy as consideration.  There are some common exceptions.  Most business-related TFVs are protected if they occur between partners or their partnership (LLCs taxed as a partnership are considered partnership), or if the transfer is to a corporation in which the insured is a shareholder or officer.  Most transfers within a domestic situation are not affected because they are considered gifts.

Beyond that attorneys and accountants must struggle with the “gray areas” that always gather like a fog around the real life situations addressed by the letter of the law.  The two most common scenarios we encounter follow with a description and our best guess as to the response that a qualified advisor might give:

Collateral assignments

The regulations to IRC 101 state that “the creation, for value, of an enforceable contractual right to receive . . . proceeds of a policy may constitute a transfer for a valuable consideration . . . [but] the pledging or assignment of a policy as collateral security is not a transfer for a valuable consideration . . .” Consequently, use of a policy to secure a loan is not a TFV.   But an assignment for some other reason may be.

Beneficiary changes

There are several reasons it may not be wise to make someone a beneficiary in return for some consideration, but a potential TFV problem is probably not one of them.  Again, the regulation states there must be “an enforceable contractual right to receive . . . proceeds of a policy”.  A revocable beneficiary change does not create such a right.

Fortunately there is a “fix” for policies tainted by a transfer-for-value.  Unlike the family vase (pronounced vahze if you are in good company), this is a Humpty-Dumpty that can be put back together again.  The regulations have two pieces of good news.  First, a transfer back to the insured is never a TFV and, second, it is only the last transfer that governs taxable status.  It may be possible to cleanse the troubled policy with a transfer back to the insured and then work forward from there.

Contact Us

Call with any concerns you have about the tax results of transferring ownership of an existing policy, or if you need help rescuing one from the grip of potentially taxable proceeds.

Small business owners often wear many hats – they are HR, IT, Senior Management, and Operations all-in-one.  Being a small business owner can be tiring and time consuming.

Appeal to this market by presenting them with a simple plan – so they can have peace of mind knowing their family and business will be in good hands when they move on.

Help business owners prepare for the future by using a buy-sell agreement

71% of small business owners surveyed said they have thought about who would run their business in their absence, but only 35% of all surveyed had a business continuation plan.¹

Many business owners don’t have formal plans to transfer their business to a successor in the event of retirement, disability or death.  A business may fail due to confusion and lack of a clear plan after such an event.

As a life insurance professional, you can help business owners create a continuation plan using life insurance policies.

How You Can Help Business Owners With Life Insurance:

Establishes a guaranteed buyer at the time of the triggering event
Sets a price for the business when the business owner is less vulnerable and ensures the business will be sold at a fair market value
The surviving business owner(s) won’t have to run their business with the deceased person’s family members (if they choose not to)
Provides liquidity, when the family needs it most, to fund the sale of the business to surviving partner(s)

We will help you prepare business valuations, design the proper life insurance proposals – give you the tools to become a business insurance expert.

Contact your Life Sales Representative today – maintain a competitive edge in the business insurance marketplace.

1. Lifehealthpro.com, New Tax Laws Open the Door for Business Insurance Discussion, April 2011. Survey was based on 874 small businesses with 100 employees or less.

If you feel challenged with significant adverse family history compromising your client’s ability to achieve Preferred rates, we have a solution.

Our Underwriting Team is here to help with all your impaired risk cases.

Here are some examples:

Example #1

67- year- old male
5’10”, 190 lbs.
BP averages 140/84, total cholesterol 218, & Chol/HDL ratio 4.6
Father died at age 45 due to a heart attack and mother died at age 60 due to advanced breast cancer
No other adverse medical history in his APS records

Underwriting Decision:  Preferred Best!

Key Factor:  Family history is NOT considered when the proposed insured is older than 65.  Therefore, the fact that our individual had two parents dying of heart disease/cancer at age 60 and younger had no bearing on the final decision.

Example #2

42- year- old female
5’3”, 154 lbs.
BP averages 130/80, total cholesterol 220, & Chol/HDL ratio 4.2
Both hypertension and cholesterol are currently being treated with medications
Father passed away at age 59 due to prostate cancer
No other adverse medical history in her APS records

Underwriting Decision:  Preferred Best!

Key Factor:  Gender specific cancers are not considered on proposed insured’s of the opposite sex.  Since our female applicant’s adverse family history was due to a male disease, it also had no bearing on the final decision.

Please contact us today for more information about this carrier and how we can help boost your sales.

In the competitive world of financial services, business professionals are always looking for ways to add value to help differentiate themselves.

In a market of one-stop shopping, becoming the local LTC resource can help you stand out in the crowd.

Build Your Brand

Develop relationships by contacting and joining local community organizations, like the Council on Aging, Rotary Club, or Chamber of Commerce.  Establish yourself as a Long-Term Care professional and offer your services to help educate people in the community on the need for LTC planning.  You can also place an advertisement or by-line article in a local publication to establish yourself as an expert on LTC.

Create Awareness

Contact local estate planning lawyers and accountants to educate them on Long-Term Care Insurance and its relevance in their practice.  Remind them that protecting the assets and net worth of their clients from a LTC event can help preserve their client’s quality of life and help protect their assets.

You can also visit local nursing homes and care facilities to share Long-Term Care information and insight with the families of residents.  Talk with them about their own vision for retirement and their personal Long-Term Care needs.  Use social media to reach out to your contacts to provide expertise and ask for referrals.

Building Relationships

Keep your schedule full, and make contacts with as many potential clients as possible.  In order to succeed in this field, you will need to continually educate people on the importance of Long-Term Care planning. Follow these steps to build your reputation and position yourself as an expert in the industry.

Generate Leads

Seminars or webinars are a great way to get in front of many people at one time.  We offer numerous marketing materials for you to use when presenting to potential clients.  Be sure to follow up with a phone call to attendees, to schedule an appointment and answer any questions.

Our team is here to offer you support and prospecting techniques when discussing LTC in your community.  Contact us today.

Short-term disability insurance and long-term disability insurance are both designed to provide replacement income to your clients, in the event they are unable to work due to accidents or sickness.  The most obvious difference between the policies is the amount of time they are designed to sustain your clients’ incomes.

A short-term policy will pay benefits for a select period up to a maximum of two years; a long-term policy will pay benefits for a select period of a minimum two years, and up to age 65 or even age 70.

Let’s take a further look at the advantages to both policies.

Advantages of Short-Term DI:

Short-term disability insurance pays benefits after a pre-determined elimination period (the number of calendar days after a disabling injury or illness, before the disability insurance policy would begin to pay benefits) has been met.

Short-term disability insurance lasts for a shorter, specified period and typically a shorter elimination period or “waiting period” before benefits become payable.  The average elimination period is 7 to 30 days.  This type of insurance policy is useful for major, but relatively brief disabilities such as those suffered from accidents or non-terminal sickness.

Also available is a very affordable short-term disability plan that only covers accidents.  These are popular with younger, blue collar workers worried about getting hurt (either on or off the job).  The premium is more affordable, as it does not cover sickness – so this should be offered to clients who aren’t as concerned about getting sick, but are more concerned about getting hurt or having an accident.

In many instances, short-term disability insurance is only a portion of how clients protect their income in a situation where they cannot work.  They may also use their emergency savings, workers’ compensation, paid leave and other forms of insurance in conjunction with short-term disability.  But, when these benefits are exhausted (or if they never had them in the first place), short-term disability can provide critically important funds.

Advantages of Long-Term DI:

In the case of a long-term absence from work, a combination of short-term disability insurance benefits and other savings may not be enough to financially sustain your clients and their families.  This could leave them vulnerable to financial burdens, such as mortgage foreclosures or default on debt.

A long-term disability insurance policy can help protect your clients and their families from scenarios like mortgage foreclosure and bankruptcy.  These insurance policies are typically more comprehensive, offering long-term benefits that will protect your clients in the event of accidents and sickness.  There are also additional rider options available such as a Cost of Living Adjustment, Partial Disability Benefits, and Benefit Increase Riders.  The additional options for a long-term policy allow you to tailor coverage to meet your clients’ unique needs.

The benefit period on these policies ranges from two years, or until age 65 or 70, and often have a longer elimination period such as 90 to 180 days.  Because your state may have different regulations governing the length and availability of long-term (and short-term) disability insurance, please contact us for plan availability.

How can you get started on designing the right plan for your clients?  Asking the right questions is always a good start:

How long would they be able to meet their monthly expenses if they were unable to work for a period of time?
How much of their savings would be available?
Does their employer offer an income protection plan?
What are their occupations and annual reported incomes?

For more information about short-term and long-term disability insurance, contact your DI Sales Rep.  We can provide a quote comparison with several options to choose from, to meet each of your clients’ needs – complete our simple, one-page Individual DI Quote Request Form.

It was an eye-opener the first time I walked into the office of a civil engineer back in the 1970s and saw, spread across an entire wall, the flowchart mapping out the relationship and time sequence of all that was involved in getting an eight-story building there in the Burg from ground-breaking to grand-opening.

The complexity of the diagram was a mind boggle of boxes at several levels top to bottom, each containing a task that demanded completion before progression on the line to the next box was possible.

As we sit comfortably in the air-conditioned result of a similar building plan, the ease with which we can turn a tap or flip a switch seldom causes us to pause and think of all that got us there.

The order of things is essential.  The correct order is critical.  Fortunately the order and timing of insurance conversions and ownership transfers is less complicated.

A common planning scenario involves a personally-owned term policy where conversion is considered because of a decline in the health.  The goal is to transfer the policy to an irrevocable trust either to protect the death benefit from estate taxes, creditors or spendthrift heirs – or any combination of the three!

The issue at hand is whether to convert before or after the transfer of the policy to the trust

The answer will probably turn on the “best” fair market value for the contract.

Most advisors will probably choose to determine that the FMV of the term policy is its interpolated terminal reserve.  Level term products do have a reserve to offset the “underpayment” of premium in the later years when the insured is older, but the premiums remain the same.  On the other hand most advisors will determine that the FMV of the new permanent policy (in its first contract year) as premiums paid.  Usually the advisor will opt for the lower of the two.

If the policy is to be gifted to the trust the lower FMV could keep the gift within sum of the available annual exclusions (usually $14,000 per trust beneficiary) to avoid the need to file a gift tax return.

If the policy is to be sold to a grantor trust (to avoid the three-year look-back), the lower FMV will require that less cash be gifted to the trust to be used by the trustee to purchase the policy from the insured/grantor.

Call us when client planning involves the combined issues of policy conversion and ownership transfer.  We will assist in getting the information for determining the FMV of both policies and will assist legal and tax counsel with the information they need to properly order the transactions.

Back to the 70s – before the eight-story was completed I had gotten to know many of the workers at the job-site.  They complained that working construction was too much like Christmas Day.  They did all the work only to have some fat guy in a suit get all the credit.

There aren’t many investment vehicles available that offer the tax advantages of properly structured, permanent life insurance.  Unfortunately, many clients are not aware of those benefits when purchasing term insurance, and they may not know about alternative product solutions.

Within your existing book of clients, do you have any individuals who are hitting the contribution limits in their qualified plans?

If so, Index Universal Life (UL) may be a great concept to introduce to them in your next meeting, as it can provide a number of benefits that are comparable to a qualified plan.

The following series of questions can be used to frame the benefits of Index UL, without specifically introducing the concept of life insurance

Do you believe that taxes will be static, or fluctuate over your lifetime?
Are you contributing to any qualified retirement plans? If so, are you funding to the maximum limits of those plans?
Would you be willing to trade the benefits of interest crediting in order to remove the risk of losing accumulated values, due to downturns in the market?
Do you mind paying taxes on income that you receive from your non-qualified assets?

Many of your clients will meet the contribution limits in their qualified plans; believe taxes are only going to increase; will not like exposure to loss of accumulated values due to downturns in the market, and will not like paying taxes on their distributions.

All you need to do next is ask them is how much they would like to contribute monthly for a vehicle that has

No contribution limits
No downside market risk
Compound interest crediting in the 10-12% range annually, without the possibility of losing their accounts’ value due to negative returns in the market
Non-reportable, tax-free distributions of their accounts’ accumulated value

Once your clients provide you with a premium commitment, we will help you to assess their insurability, and prepare proposals that solve for a minimum death benefit and provide the most efficient cash value accumulation.

Ideally, Index UL policies should be funded for 10-15 years prior to taking policy distributions, but they can be customized to meet many different specifications depending on your clients’ age and preferred premium schedule.

This strategy is not limited to clients who are maximizing their qualified plan contributions

Index UL can be an efficient solution for younger clients (ages 30-50) who are looking to further fund their retirement, prepare for a child or grandchild’s school tuition costs, or contribute discretionary income into a product with the tax favored features mentioned above.

We will help you identify clients within your existing database who would be good prospects for this strategy, and will create customized solutions to meet their needs.  To learn more about the Index UL products that are now available, and to explore how they can drive new sales opportunities – call your Life Sales Rep today.

Our Underwriting Department can help you make the sale for your clients whose weight is an issue.

One of our A+ carriers takes an aggressive approach to underwriting build cases.

Some case examples that may surprise you:

A man who is 6’ 0” and 300 pounds could possibly qualify for Standard rates with credits for favorable blood pressure and cholesterol levels.
A woman can be 5’ 4” and 235 pounds and possible Standard if there are no co-morbidities present.

Next time you have an applicant whose weight is an issue, think of us and you’ll find we don’t think it’s that big of an issue.

Contact our Underwriting Team to help uncover more ways to get better offers for your clients and increase your sales !

There are numerous people you know that need Long-Term Care (LTC) Insurance, many of them include your current clients.  Perhaps you have already sold them a Life Insurance Policy, yet how do you get them interested in LTC?

Cross Selling can be difficult, yet when you present your client with information about LTC, they should understand the benefit of protecting themselves when they may need it.

Begin by talking about the consequences of living a long life will have on their family – and offer to put together a plan to protect them from the biggest risk they face after retirement – one that must be protected with Long-Term Care Insurance.

Once the conversation is going, a few good questions to ask include:

What percentage of your retirement assets have you set aside to pay for Long-Term Care services?
Are you concerned about the impact a chronic illness would have on your retirement savings?
If it were necessary to increase your spending by $3,000 or $4,000 a month to pay for LTC services, would that concern you?

To learn more about incorporating Long-Term Care into your product portfolio, or if you need more prospecting tips, contact your LTC Specialist today!