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When a producer asks their client to visualize a disabling event, most will imagine the same scenario: A terrible, disabling car accident that causes complete paralysis.

They picture the rest of their lives spent in a hospital with lots of breathing apparatuses, tubes, and medical professionals providing 24 hour care.  Even though this is the most common scenario imagined, it is the least likely to occur.

Less than 10% of disability claims are as a result of an accidental injury.

All disabilities can fit into one or all of the following categories:

• Loss of Use – Presumptive: Permanent loss of eyesight, hearing or speech, use of hands and/or feet.
• Loss of Ability – Total: Inability to perform substantial and material duties of one’s regular occupation. Typical causes are heart attack, stroke or back-related injuries.
• Loss of Income – Partial: Loss of income due to inability to do all duties, or ability to do some duties for less time or less effectively. Partial disability may result from conditions such as multiple sclerosis, cancer, arthritis and diabetes.

The majority of disability claims are partial in nature.  It is important to always include a partial benefit or residual benefit whenever recommending income protection for your clients.

Contact your dedicated DI Specialist today to learn more about how you can offer your clients a complete income protection plan.

A bidder at an auction purchased a Stradivarius and a Rembrandt for what he felt was an unbelievably low price.  He took them to an appraiser to see if they were authentic.  The appraiser informed him, “Yes, they are authentic. It’s just a shame that Stradivarius couldn’t paint and that Rembrandt didn’t know beans about making a violin.”

The common legal definition for fair market value of an asset is the price on which a seller and a buyer can agree, neither being under any constraint and both being aware of all the circumstances.  Simple enough.  So why is there so much confusion with regard to valuation of an inforce life insurance policy?

The need for a reliable value occurs often in the business, estate and financial planning process.

And by “reliable” we mean one that the IRS will find acceptable, because usually the value is needed to calculate the tax consequences at the time of an ownership change.

The reason the IRS takes such an interest with life policies is, probably, because most transactions don’t involve parties whose opposing interests are characterized by a level of dynamic tension that will necessarily result in a fair and final value.

Consider This:

• An employer distributing a business-owned contract to an employee-insured (e.g. distribution of a key person policy at retirement) may appreciate the corresponding business deduction, but probably would be happy to undervalue it to augment the benefit to a long-time employee by decreasing the amount he or she must recognize as income.
• When a policy is distributed from a qualified plan, the stated value matters not at all to the plan trustee.  But to the participant who must recognize the value as income (perhaps even with a 10% tax penalty) the lower the valuation, unrealistically or not, the better.
• In a gifting situation the transferor of a policy is of a donative mindset anyway, so a lower value doesn’t reduce anything he or she might have received in return, except the size of a gift tax bill.  So the lower the better, again realistically or not.

The difficulty is that neither Congress nor the IRS nor the courts have put together a reliable set of laws, regulations and rulings that allow for easy or certain valuation of a policy.  Taxpayers must deal with a hodge-podge of criteria that vary with circumstances and with interpretation of the facts.

The good news for the insurance advisor is – it is not your responsibility to determine value, nor should you try.  Rendering an opinion is outside the scope of your legitimate professional activity.  The best you can, and should, do is offer to request from the carrier their “Form 712” valuations used by an executor in determining a policy’s value in an owner’s estate.  You will get back one or more numbers.

The most common is the interpolated terminal reserve, but many will also include: accumulated cash value, PERC value, premiums paid, cash surrender value, tax reserve, statutory reserve, etc.  Provide it to the attorney, CPA or appraiser to assist in their valuation.  You’ve done all you can and more than most would.

There is another story of an auctioneer who was interrupted when his clerk handed him a note.  Reading it the auctioneer announced, “A gentleman has lost a wallet containing $500 in cash.  If it is returned, he will pay a reward of $100.” After a moment someone in the audience shouted, “$150!”

Call with any questions concerning policy valuation.  We will make it worth your while.

Think of your book of business…  No two clients are alike, right?  Every client that you work with has a different background with a unique set of needs and financial goals.

The recent industry focus on a guaranteed death benefit product to cover all scenarios may be a good solution for some of your clients — but not for all.

Luckily, many carriers now offer competitive life insurance products that provide flexibility by meeting a wide range of needs.  Today’s insurance can be used to accumulate cash value with strong upside potential and protection against market downturns.

Plus, long-term death benefit guarantees and affordable Long-Term Care riders that allow clients to accelerate their life insurance coverage to pay for LTC expenses if they occur.

Think BEYOND the guarantees – come equipped to client meetings with comprehensive solutions to address your clients’ varied needs.

Contact your Life Sales Rep for access to the products and solutions that can secure your clients’ futures.

Mountain climbing, scuba diving, auto racing, aviation… Adventure enthusiasts may find themselves faced with an extra rating and increased premiums if they participate in any of these types of higher risk activities.

But a recent Upgrade Program may help to remove an extra rating of up to $2.50 per $1000 of coverage for certain avocation scenarios.  This program is available for both permanent and term plans.

For example:

• 37 year old male, non-smoker
• Seeking $1 million of Term coverage
• Healthy with normal build, blood pressure and cholesterol
• No adverse family history
• 12 years of experience in trail, rock and mountain climbing – participates only in groups, never alone
• 4-5 climbs annually in the Pacific Northwest
• Highest elevation 13,000 ft
• YDS (Yosemite Decimal System) class 5.0 to 5.4

Initial underwriting assessment included a $2.00 per $1000 permanent flat extra rating.

Under the program, this case was eligible for an upgrade to Standard NT without a flat extra rating.

Contact the Underwriting Team for help in finding the best possible underwriting outcomes on your avocation cases.

Selling Long-Term Care Insurance to small business owners is not like the emotional roller coaster sale it is when selling to individuals.  Business owners tend to look at this as a logical discussion of how you can help with their business finances.

Many are always looking for a way to save on taxes so a great way to open the door to an LTC sale would be, “If I could show you something that could help your business reduce its tax burden, would you be interested?”

All businesses can deduct LTC Insurance premiums paid using business dollars.

Depending on the tax structure of the business, the owner can either deduct the actual premium or eligible premium.

How?

• Owners of C corporations can deduct the actual premium paid on a LTC Insurance policy for the owner / employee, spouse, dependents and a designated class of employees.
• Self employed business owners such as sole proprietors, partnerships or LLCs can deduct the eligible premium paid for the owner, spouse and dependents.  The eligible premium is established annually based on the medical care components of the Consumer Price Index.

This opportunity allows you to approach any type of small business because you are able to offer a money saving solution.  Be sure to approach small business owners with a plan that provides essential LTC coverage and allows them to take advantage of federal tax incentives.

For more information about selling LTC to small business owners contact your LTC Specialist today.

Key Person Replacement Insurance is necessary to business owners who want to maintain the strength of their company if a key employee were to become totally disabled.

If an employer takes out a Key Person Replacement Policy and the insured key employee meets the definition of total disability, the owner of the policy (the employer) receives either a lump sum payment or a combination of monthly and lump sum payments to cover the costs for the loss of the employee and to train a replacement.

To meet the definition of total disability, the insured must not be able to perform the duties of their key person occupation and are unable to work in any other occupation which is comparable by duties and/or earnings for the business.

Some benefits of Key Person Replacement Insurance offered by our carriers include:

• Guaranteed Premium – The premium cannot increase due to changes in the insured key employee’s health.
• Flexible Payment Methods – The policy can be set up to provide benefits in a lump sum payment or a combination of monthly and lump sum.
• Waiver of Premium – After the insured key person is disabled and meets the elimination period, premiums are waived.
• Interrupted Elimination Period – It is possible to combine different periods of disability to help reach the policy’s elimination period. These periods of disability must occur within a period that is twice as long as the elimination period, but less than one year.

To learn more about Key Person Replacement Insurance contact your Disability Income Specialist today.

The 24-year old actor James Dean was the iconic Rebel Without a Cause, the image of teenage angst, who already had three blockbuster movies under his belt before a misplaced 1950 Ford Tudor blocked the intersection on US Route 466 that would serve as a premature end to the meteoric rise of the young star.  It is reported that “Humphrey Bogart, who also knew a thing or two about image making, once said: ‘Dean died at just the right time. He left behind a legend. If he had lived, he’d never have been able to live up to his publicity.’”  Sometimes in the entertainment world death is a good career move.

And we tend to view buy-sell agreements the same way.  The best “move” the participants can make in triggering its fulfillment is for one of the participants to die.

Fund the event with life insurance that provides tax-free dollars that are used to purchase the inherited interest from the estate (with a step-up in basis, no less) and everyone goes happily on their way to a new and more cash-flushed existence.

Consequently the death of an owner is the contingency on which we focus too exclusively when planning.

The fact is that a business owner usually doesn’t die. They often leave the business for one reason or another that initiates a buy-out that usually takes the form of a down payment (maybe) and an installment sale for an agreed number of years at an agreed interest rate.

Even then life insurance is important.

Consider two instances:

• The remaining owners buy out a departing partner under an agreement funded with life insurance.  The coverage on the departing partner can be kept in force to provide remaining owners funds to pay-off the loan balance should the seller die during its term.  It also relieves the departing partner of any concern whether or not the balance will be paid to his family should he die.  This arrangement may be cleaner if the policy is transferred back to the insured and a collateral assignment is given in the amount of the loan balance.  If so, tax issues and premium-payment arrangements would need to be ironed out.
• A younger key person buys out a retiring owner-employer.  The retiring seller wants to be sure of payment in the event of the death of the key person-buyer during the term of the loan.  Carriers do not recognize a creditor’s insurable interest in a debtor, so they won’t allow the seller to purchase coverage on the borrower.  However, the borrower can buy coverage, justifying it as personal insurance, and give a collateral assignment for the balance and term of the loan.

We recently assisted in a case similar to situation #2.  We advised with regard to structuring the personally-owned coverage on the purchaser.  We advised concerning the drafting of the collateral assignment.  We laid a good predicate with the carrier to assure they understood the case – and then the selling owner placed the business through another agent and, consequently, another general agency.  As my Mother used to say, “No good deed goes unpunished.”  I say simply, “A pox on his house!”

Every business you represent should have in place an updated documented transition plan.  If one doesn’t, then tell the owners they go to bed every night unsure of who they will be in business with the next morning!  Then call us to assist you in all matters of their buy-sell planning and funding.  Remember, we will get on the phone with you and talk directly to both your clients and their advisors if you think it beneficial.

“Old Insurance” Vs. “New Insurance” – Which Do Your Clients Own?

While the death benefit is quite often the most important feature of life insurance, there are many products available that provide additional features and benefits.

The term “old insurance” applies to policies that don’t have much additional value beyond the death benefit, while “new insurance” would refer to life insurance where clients do not need to die in order to receive a benefit.

We advocate regular reviews of your clients’ insurance policies, to ensure they have the most appropriate and effective product solutions to meet their ever-changing needs.

A policy review may uncover that the existing amount of coverage is no longer reflective of their true need and/or that there’s opportunity to enhance their coverage via the inclusion of living benefits.

Take for example the following:

• Long-Term Care, Chronic Illness and Critical Illness Riders are just a few examples of “new insurance” benefits not commonly available at the turn of the century.
• The evolution of Index UL can provide your clients with tax-favored accumulation and tax-free income – which can serve as an alternative solution to the Roth IRA if they are restricted by contribution limits or earn too much income, making them ineligible for the Roth IRA altogether.
• For younger clients concerned about retirement income, cash value life insurance makes for a great addition to their investment portfolio by providing a diversified source of accumulation.

Most clients only know about “old insurance,” and would likely consider a replacement if they were aware of the enhanced benefits available through “new insurance” products.

Don’t let your clients hear this story from another agent or advisor.  We can provide you with turn-key policy review materials, and will help you to create a list of key talking points you can use to initiate discussions with your clients about their existing policies.

Contact your Life Sales Rep today for more information.

An Underwriting success story about how a postponed case was turned around.

Here are the details:

• 71- year- old female looking to replace $1 million of guaranteed UL coverage
• Postponed informally due to recent labs in the APS showing severe anemia

Case was discussed in more detail with the carrier underwriter who took the time to provide recommendations regarding how to re-package the case to obtain an offer:

• Request a letter from the client’s MD on the cause of the anemia
• Secure a current, favorable CBC panel (complete blood count)

Fortunately, the client’s doctor identified the anemia as iron deficiency.  Subsequently, the client was started on iron supplements which resolved the anemia.  This was confirmed by a normal CBC panel she completed.

New Decision: Standard!

With the updated favorable medical evidence, this carrier was able to offer Standard rates which resulted in a placed case!

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

No can predict the future, but if the need for long-term care should arise, how much would it cost – and how would your client pay?  The Alzheimer’s Association estimated end-of-life care costs in 2016 were between $217,820 and $341,651.

Simply put, long-term care is expensive.

Common long-term care options & the average annual cost:

Nursing Home: Private Room
$102,930/year
3.1% average annual increase

Nursing Home: Semi-Private Room
$91,615/year
3.2% average annual increase

Assisted Living Facility
$47,064/year
2.1% average annual increase

Home Health Care Aide
$32,760/year
1.5% average annual increase

Adult Day Care
$20,540/year
1.5% average annual increase

Long-Term Care Insurance was designed to cover the costs of assisted living – giving the insured peace of mind that they will receive the care they deserve, without putting a financial burden on their loved ones.

And don’t let your clients make the mistake of believing Medicare will cover long-term care costs.  It doesn’t.  And while Medicaid, the government program designed for people who truly don’t have any money, will cover long-term care expenses, it should never be a first choice.  Doctors all over the country are reducing the number of Medicaid patients they accept each year, making access to healthcare far more difficult for Medicaid recipients than those with private insurance.

Contact your LTC Associate today for additional information, options, and pricing.

*Costs can vary greatly depending upon what area of the country you live in. Please call for state availability.