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There’s the old story about the hungry chicken and the hungry pig who agreed to both contribute to a mutual breakfast.  The chicken suggested they have ham and eggs, to which the pig replied, “That’s a contribution for you, but it’s total commitment for me!”

When proposing life insurance we would manage client expectations better if we took time to explain the disproportionate obligations that exist once coverage is put in force.

It would also help them understand the purpose behind those often annoying requests and requirements made by the carrier – particularly in the area of financial underwriting.

Consider This:

Clients often think that a carrier ought to be inclined to sell them as much life insurance as they want.  They assume that because the local grocer would sell them his whole stock of fresh radishes, an insurance company ought to respond in the same manner and get frustrated when it does not.  The difference, again, is the disproportionate obligations and the economic exposure that remain after the transaction.  Except for a change in the type of asset you and your grocer are in the same position before and after the sale.

When a life contract goes into force the buyer is only under a non-binding obligation for periodic premium to keep the coverage going.  If paid the carrier is on the hook for a death benefit exponentially greater than the premium if the insured dies.  And that exponent is even more extreme when the client takes advantage of low term rates.  To use an example from experience with my own offspring:  a healthy 21-year-old female can purchase $350,000 for $185 a year.  The carrier is at risk for a payment that constitutes just 1/20 of 1% of their exposure.

We can argue that the disproportion is mitigated or eliminated when we look at the big picture.  If the carrier has underwritten correctly over a large pool of policyholders it all shakes out in the wash over time; does it not?

The key here is “if the carrier has underwritten correctly”

And part of correct underwriting is not issuing an amount of coverage that makes an insured worth more dead than he or she is when alive (or as we say in the trade, not increasing the likelihood that insureds will fall down a flight of stairs before their time).  The carrier wants to know why you need the coverage and the financial circumstances that justify both the need and the amount, usually in the form of a simple, easy-to-complete financial supplement that must be signed by a qualified third-party advisor for larger cases.  Resistance on this will only delay the case and maybe raise the suspicions of the underwriter.  Alert your client in advance and respond quickly to request that are made.

We turn over financial information for everything nowadays: loan applications, refinancing a mortgage, getting a new credit, or opening a PayPal account.  Don’t let your clients develop a mindset that applying for life insurance is any different.

We specialize in alerting you up front regarding potential underwriting requirements on your case, estimating how much coverage a carrier will allow given your client’s financial circumstances, and helping with bumps in the road if financial justification issues occur.  Give us a call.

Indexed Universal Life (IUL) is a popular product choice for cash value accumulation because of its potential for higher interest crediting rates based on the performance of a selected index over a given period of time.

A big selling point for the IUL product line is the assurance that the client will never lose a single cent of their accumulated cash value due to poor market performance.  Unlike Variable UL policies which are subject to market performance and allow for both gains and losses on your account value, IUL uses a floor rate to protect your cash value from losses when your index account allocations have negative returns.

This makes for a great story during the accumulation phase.  But what about the distribution phase?  What is the best way to distribute the funds from the policy?

Understanding the different options available is the key to making the best decision for your client.  Most IUL policies allow for either fixed or variable loans.

The fixed loans have a stated interest rate on the outstanding loan amount so there is no question about the cost of the loan.  After a certain number of years, the IUL product will often provide for a wash loan or preferred loan where the amount being charged on the loan is the same as the interest being credited to the cash value (thereby resulting in zero net cost on the loaned funds.)

The more commonly illustrated policy loan distribution is the Variable Loan

Using a positive arbitrage (the illustrated interest crediting rate for cash value is higher than the interest rate being charged on outstanding policy loans) allows an illustration to reflect a gain on the outstanding loan rather than a charge.  Because this can make an illustration more attractive due to the higher cash value accumulations during the distribution phase, it’s what many producers prefer to show to their clients.

It is imperative that producers understand how these loan features work and communicate to their clients that they also have the potential for a negative arbitrage which can create considerable interest due on outstanding policy loans.

Depending on your client’s risk tolerance and whether or not they plan on paying outstanding policy loan interest as it accrues, either policy loan option can be appropriate.  If you do not have an understanding of how your clients would like to approach their policy loans and simply elect the variable loans due to the potential for positive arbitrage, you may be setting yourself up for a difficult conversation if the loan interest charged exceeds the interest crediting rate for cash value and the amount available for distribution decreases well below your clients anticipated income amount.

Agents who are selling IUL products and highlighting the ability to generate an income stream from the policy should have a thorough understanding of the loan provisions and be able to help their clients to better understand which feature is in their best interest.

Our Life Sales Team is here to help you navigate the various options and make the most suitable recommendations for your clients.  Contact us today.

Do your clients have “idle money” you don’t know about?

Perhaps they have some emergency funds sitting in savings, money market or a CD, and it’s just not working as hard for your clients as it could.

Do your clients have money that could be better used to help them plan ahead for the risk of a future extended health care need?

Consider reallocating a portion of these assets into a linked benefit solution.

Here are some potential benefits.  If your clients:

Change their mind.  With the Return of Premium Provision, clients can get at least their initial premium back.
Do not use the LTCi benefits.  Beneficiaries get a tax free death benefit.
Like the idea of instant leverage.  Instantly provide your clients approximately 2x their initial premium for a death benefit, and depending on the product, nearly 2x to 6x their initial premium in covered long-term care benefits (amounts will vary due to age and gender).
Need LTCi.  The benefits are tax free.
Want a tax break.  Covered LTCi benefits and life insurance death benefits are income tax free.

A linked benefit solution is a win-win proposition.  Let’s get your clients’ money working harder.  Contact your LTCi Specialist for more information.

Many middle-class Americans who face cancer, heart disease or other serious illnesses also face tens of thousands of dollars of debt.  Even with health insurance coverage factored in, additional costs for specialist care, unique treatments, and high deductibles add up quickly upon a critical illness diagnosis.

Fundraisers on crowdfunding websites like GoFundMe have become a popular way to find financial help in times of a healthcare crisis – yet only one in 10 campaigns meets its financial goal.*

The Need Is Real

Think of the difference $30,000 could make for a person who has just been diagnosed with a serious illness such as cancer or heart attack.  There’s never been a better time to reach out to your clients who have a family history of cancer or heart disease and offer Critical Illness (CI) Insurance.

I’ve heard consumers oftentimes express how the traditional process for buying insurance is too long and complicated.  We heard the message loud and clear.  We’ve taken steps to streamline the process with our Critical Illness Insurance carriers.

Up to $75,000 benefit with no exam or interview.  Simply submit a complete online application and receive an answer within 48 hours.

Higher deductibles and healthcare costs are adding stress to people’s lives and budgets.  Your clients will understand the importance of Critical Illness coverage once you talk to them about it.  Help them fill a financial gap at a time when they need it most.

Contact your dedicated Critical Illness Specialist.  We will guide you through the simplified process and provide you with everything you need to confidently add this line to your offerings.  Be CI sales proficient in less than 30 minutes.

*Source: Chicago Tribune: “Medical GoFundMe campaigns are a symptom of a sick health insurance system,” August 23, 2018.

Many argue that the best Super Bowl halftime show took place in Jacksonville, FL, some years ago.  In a forum known for mediocre performances that fail to meet the hype and fulfill the expectations, the lights and fireworks opened on a band named Wings, led by one of the last vestiges of an earlier rock group whose work and music had taken a place as the centerpiece in the canon of popular music in the English-speaking world.  Paul McCartney chose to lead off with one of his creations from the Beatles’ music catalogue.  He and 80,000 spectators sang the song Baby You Can Drive My Car with its tale of a taken young man lured into a position as chauffeur for his rising-star love-interest only to have her confess at song’s end, “I got no car/ and it’s breakin’ my heart,/ but I’ve got a driver/ and that’s a start!”

And so it often is with insurance sales to be funded with a proposed insured’s unneeded RMDs coming out of their qualified plans.  It makes sense.  Use the money you must take, but don’t need, and leverage an eventual death benefit to heirs with insurance coverage.  But if you and this concept are driving a successful sale then make sure you have an insurance company that wants to be a “car-rier”.

The pill in the jam is financial justification.  The insured is 70-1/2 and, seldom, has any earned income.  Consequently, coverage can’t be justified for income replacement purposes.  And more often than not the proposed insured doesn’t have federal or state death tax concerns.

In these situations it is important to know the carriers who are sympathetic to and will underwrite reasonable amounts of coverage if other facts about the case are in order.

Consider This:

First, what percentage of the insured’s annual income is being used for premiums?  The acceptable amount could be larger in cases where it is adequately demonstrated that living expenses will be met with what remains.

Second, the amount of death benefit will usually be limited by a formula that ties the face amount to certain financial criteria.  A common example would be:  Permissible coverage = 50% of the net worth attributable to investment assets + FMV of residence – coverage in force.

Because insurance is often purchased in situations where no death tax is anticipated, clients overlook the advantages of purchasing the policy in a trust.  A living trust will keep the proceeds away from the exposure and expense of the probate court while allowing for their distribution according to a testamentary pattern not practical through a simple beneficiary designation.  An irrevocable trust will protect the proceeds from creditors as well.

Fifty-one years ago last April the Beatles had the top five single recordings on Billboard’s Hot 100 Chart.  No group or singer has every come close to such domination.  Billboard Magazine reported that during the first four months of 1964 the Fab Four accounted for 60% of all single records sold in the United States.

For similar success in your line of work – call or write to discuss those carriers who are comfortable with the “RMD-to-Life Premium” concept and ask for a marketing piece that will help generate interest and sales – either at 706-354-0401 or tom@cpsadvancedmarkets.com.

The recent market volatility has prompted many advisors to look for Life Insurance solutions that can help clients achieve their goals while minimizing the impact of market fluctuations.

A product that has gained substantial traction is the Indexed Universal Life policy, a Fixed Life product that can offer clients the potential for growth and protection from market loss.

Product Benefits

Flexible death benefit guarantees.  Clients have access to a 20-year base policy death benefit guarantee (reduced for issue ages 65 and above) plus the optional Extended Death Benefit Guarantee rider.

Helps clients with a product that offers cash accumulation potential and minimizes the impact of market loss.  This product features cap rates as high as 12% and floor to allow advisors to give clients more stable returns over time.  The cap rate allows clients to maximize the interest credits they receive during up markets, while the floor rate protects them from loss during times of market decline.

Average of three market indexes.  Indexed UL uses an annual interest crediting strategy that employs monthly averaging to help protect the interest credited during periods of market volatility.  This strategy uses a blended average of market indexes (S&P 500®, the NASDAQ-100®, and the Dow Jones Industrial Average SM) and weighs them so that clients always benefit more from the better performing indexes.  It’s important to note that Indexed Universal Life policies are not stock market investments and do not directly participate in any stock or equity investments.

Some IUL carriers feature a 140% current participation rate which means that clients could potentially be credited interest at 140% of the actual index return, subject to the cap rate.

Additional Features

Competitive underwriting.  Underwriting options include simplified issue and guaranteed issue for corporate-owned and corporate-sponsored arrangements.

Access to an indemnity style Long-Term Care rider.  Advisors can help clients maintain control of their money and their independence by adding a LTC rider onto the policy for an additional cost.  The LTC rider may be known by different names in different states may not be available in every state and has an additional charge associated with it.

Target clients

Indexed UL may be a good fit for clients who are:

Seeking Life Insurance that offers guarantees and the potential for growth
Looking for more stable accumulation potential during volatile markets
In need of flexible death benefit options
Interested in planning for possible LTC expenses
35 to 55 years of age

If you have questions about this product or case design, please contact your Life Sales Representative today.

One of our A+ rated carriers has underwriting crediting program that will benefit more of your clients.

Here’s an example:

Seeking UL coverage
31-year-old male, non-tobacco
History of bicuspid aortic valve with a valve replacement 12 years ago
Favorable cholesterol 139, HDL ratio 4.0
Favorable height/weight 6’6” 222 lbs. (BMI 25.7)
Favorable blood pressure 117/70

Initial assessment is Table D, but with the application of this crediting program, a more favorable underwriting decision is possible.
Underwriting outcome; Table B!

Our Underwriting Team is here to help with all your impaired risk cases.  Please contact us today for more information about this carrier and how we can help boost your sales.

There is a growing movement among health care providers that underscores something we in the Long-Term Care industry have known for years: helping chronically ill people receive the care they need while remaining in their homes is not only what people prefer, but can also be more cost effective than facility care.

Compassionate Care

According to an article in The Atlantic magazine, home based care is gaining traction as “a more humane, effective, and affordable health care system” than traditional nursing home care.

We understand that your clients want to maintain their independence.  They want the freedom to make decisions about how and where they receive care.

While health and long-term care insurance differ in services that they provide, we believe that home care benefits are very important.

Today’s LTCi policies contain many benefits that will help your clients remain at home: access to a care coordinator, respite care to give volunteer caregivers a break, homemaker services, caregiver training, as well as extra funds to help pay for home modifications, medical alert systems or durable medical equipment.

These built in benefits are a compelling reason to purchase an LTCi policy, especially for high net worth clients, as they provide added peace of mind for family members.

Start focusing on the benefits instead of the premiums – call your LTC Sales Rep today for further discussion.

As the 2021-2022 football season is ready to start at full throttle, now is the perfect time to share a case study for an NFL running back we worked on.

In this case, the NFL Running Back being drafted in the second round of the NFL draft and completing three successful seasons, the player was approaching free agency and his biggest paycheck to date.  To protect himself and his future income, he needed an insurance policy in place before he hit the field in the fall.

Assessment

Due to the physical nature of the sport, it was made apparent that if the player suffered an injury or illness resulting in a permanent total disability before he signed a new contract, his future income would be lost.  The first policy placed covered $5 million in benefit, but his recent stellar performance moved the advisor on the case to request an increase in disability benefit at the time of renewal.

Solution

Our Disability Income Support Team worked with the player’s Agent and Insurance Advisor to develop a $10 million permanent total disability policy, which would soften the blow in the event the player became permanently totally disabled before his next big contract was signed.

Result

This tax-free benefit gave the player peace of mind – if he suffered a serious injury or illness while playing football, his future contract and lifestyle would be protected.

The premium for this case was roughly $90,000 plus taxes and fees.

Even though NFL super-stars need specialized coverage due to the nature of their sport, it’s important to remember that high-earning individuals have a gap in disability income protection as well.

Contact your DI Sales & Marketing Specialist for more information on unique DI solutions.

How much does an insurance company think that your client is worth?  Many times it is much more than your client does, and you have their underwriting guidelines to prove it!

Insurance companies don’t want to over-insure someone.  Too much coverage can often result in someone falling down a flight of stairs before their proper time.  Carriers set their financial underwriting criteria to limit the amount of insurance someone can buy, not to try to increase the size of the sale.  So financial guidelines are a carrier’s attempt to standardize the process for determination of the reasonable worth of an applicant based on their situation.

The most common insurance need among prospects and clients is to replace the income survivors would have anticipated had premature death not occurred.

The starting point for calculating the amount of coverage a carrier will issue for purposes of income replacement is determined by a multiple of current annual compensation based on the proposed insured’s age.

The multiple deceases with age, understandably, because death denies a person fewer potential income-producing years as they get older.  Multiples vary from company to company.

Consider one of the more conservative examples:

Age
Multiple

20-29
20-25

30-39
15-20

40-49
12-15

50-54
10-12

55-59
8-10

60-65
5-8

Over 65
2-5

The table can help a client to realistically focus on just how big a pool of money the survivors would need to survive over the remaining years should a wage-earner pass away.  And the client can “fatten up” a little in that the compensation figure used is usually the pre-tax earnings which in the calculation process translates into an amount of untaxed death proceeds.

Carriers will usually only take earned income into consideration unless it can be shown that the insured’s death might have a direct affect on unearned income.   Non-working spouses can usually get a minimum of one-half the coverage on a working spouse.

At young ages the calculation can result in a large death benefit.  But it is what the client needs and if he or she is healthy the competitiveness of current term insurance rates make sufficient coverage affordable to all.

Call with any questions concerning financial underwriting questions that may arise in case planning or when dealing with carriers.