Blog Archives - Page 27 of 32 - CPS Special Risk Services

Nonqualified Plans for Business Owners: Who Really Benefits?

September 26, 2026March 23, 2021 by Tim Fuller

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

Nonqualified plans are great for rewarding key employees. But for a business owner who wants to use one for themselves, the tax rules often erase the advantage. Here’s why, and what may work better.

Key takeaways

Qualified plans are deductible and tax-deferred but capped and must include eligible employees.
For a sole owner, deferred compensation and executive bonus plans usually offer no real tax advantage, whether the business is a pass-through or a C-corp.
A personally owned, overfunded life insurance policy may be a more useful alternative for owners.

The tax code, not the owner’s position, creates the double standard: what works for employees often doesn’t work for the owner.

Qualified plans: deductible, but limited

Qualified retirement plans give the employer an immediate deduction while participants defer tax until they receive benefits. For an owner, the drawbacks are contribution limits and the requirement to cover qualifying employees, which can make the plan less attractive for the owner’s own retirement.

Nonqualified plans: flexible, but the deduction waits

Nonqualified plans usually take the form of deferred compensation or executive bonus plans. The employer can choose who participates and how much each receives. But the employer’s deduction only happens when the amount becomes taxable income to the employee.

No owner advantage in a pass-through

For an S-corp, partnership or LLC taxed as one, executive bonus premiums are deductible to the business but show up on the owner’s W-2 that year. Amounts held back under a deferred comp plan are still reported on the owner’s K-1 in the year earned. Either way, the owner pays tax now. See 162 bonus plans for S-corp owners.

C-corp owners can fare even worse

In a C-corp, executive bonus premiums are again deductible but reportable on the owner’s W-2. Deferred comp is less favorable: money held back is first taxed at the corporate rate. When it is paid out, the company gets a deduction, but the owner is taxed again at personal rates.

A more useful alternative

For many owners, a personally owned, overfunded cash value life policy works much like a Roth IRA without its income or contribution limits. See how overfunded UL compares to a Roth IRA. Our advanced markets team can help you evaluate the right structure for your client.

Frequently asked questions

Can a business owner benefit from a deferred compensation plan?

Usually not much if they own 100% of the business. In a pass-through, deferred amounts are still taxed to the owner that year; in a C-corp, they may be taxed twice.

Is an executive bonus plan useful for an owner?

The premium is deductible to the business but taxable to the owner, so there is little net tax benefit. The value comes from the policy itself, such as its cash value and death benefit.

What is a better option for owners?

Many owners use a personally owned, overfunded cash value life policy for tax-deferred growth and tax-free income access, alongside their qualified plan.

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

Reviewed by Tim Fuller on 2026-09-26

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.

Connect on LinkedIn →

The Living Benefits of Permanent Life Insurance

September 26, 2026March 22, 2021 by Tim Fuller

Happy family of four laughing together on the couch, representing life insurance protection

Permanent life insurance is often sold on the death benefit alone. But many clients get the most value from what a policy can do while they are alive. Explaining those living benefits helps clients see one plan addressing several needs.

Key takeaways

Properly structured permanent life can provide tax-deferred cash value and tax-free income through withdrawals and loans.
Riders can accelerate the death benefit tax-free for chronic illness or long-term care costs.
Unlike qualified accounts, cash value has no required minimum distributions.

One plan can protect a family, build tax-deferred savings and help pay for long-term care.

What “living benefits” means

Living benefits are the ways a permanent policy delivers value before the insured dies. They include cash value that grows tax-deferred and can be accessed, and riders that pay part of the death benefit early if the insured has a qualifying illness or needs long-term care.

Cash value access

Tax-deferred growth on the policy’s cash value.
Tax-free income through withdrawals up to basis and policy loans, when structured properly and the policy is not a MEC.
Flexible premium payments on many designs.
No required minimum distributions, unlike IRAs and 401(k)s.

Loans and withdrawals reduce the death benefit and need monitoring to avoid a lapse.

Chronic illness and long-term care benefits

Close to 70% of people turning 65 will need some long-term care. CareScout’s 2025 national medians put in-home care at $35 an hour and a private nursing home room at $10,798 a month. An LTC or chronic illness rider lets clients use part of the death benefit, generally tax-free, to help cover those costs. Learn more about LTC riders on life insurance.

Who to talk to

Successful clients aged 30 to 50 with young families are often ideal candidates. Look for clients who value a plan that covers multiple needs rather than simply the lowest price. Some carriers also offer wellness programs that reward healthy habits with premium savings; confirm current availability. Our team can help you compare products for a budget of a few hundred dollars a month.

Frequently asked questions

What are living benefits in life insurance?

They are features that pay value while the insured is alive, such as accessible cash value and riders that accelerate the death benefit for chronic illness, critical illness or long-term care.

Are accelerated death benefits taxable?

Benefits paid for qualifying chronic illness or long-term care under IRS rules are generally received tax-free, within limits. Clients should confirm with their tax advisor.

Does cash value life insurance have RMDs?

No. Unlike IRAs and 401(k)s, cash value in a life policy is not subject to required minimum distributions.

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

Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Chronic Illness Riders: How They Differ From LTC Riders, With a Case Study

September 25, 2026March 19, 2021 by Tim Fuller

Advisor supporting a couple as they review living needs benefits paperwork together

Some clients can’t qualify for stand-alone long-term care insurance or an LTC rider. For many of them, a chronic illness rider still provides meaningful protection, but it works differently, and advisors should explain the differences.

Key takeaways

Some carriers include a chronic illness rider automatically on universal life, even for table-rated clients, with no extra underwriting.
Many chronic illness riders have no upfront charge; the cost is taken as a fee or discount when benefits are paid.
Chronic illness riders often require the condition to be expected to be permanent, unlike most LTC riders.

Denied for traditional LTC riders because of osteoporosis — but approved at Table 2 for UL with a chronic illness rider included.

How chronic illness riders differ from LTC riders

Tax basis: LTC riders are generally qualified under IRC section 7702B; chronic illness riders under section 101(g).
Triggers: both usually require inability to perform two of six ADLs or severe cognitive impairment, but many chronic illness riders also require the condition to be expected to be permanent.
Cost: LTC riders usually carry an ongoing charge; many chronic illness riders have no upfront cost and instead apply a fee or discount at claim.
Underwriting: chronic illness riders are often included with little or no additional underwriting.
Licensing: selling chronic illness riders may not require LTC continuing education, depending on the state.

More in the nuances of LTC and chronic illness riders.

Case study

Female, age 57, non-smoker
Applied for $500,000 of universal life with an LTC rider
Osteoporosis diagnosed by DEXA scan in 2006, with worsening follow-up results
Denied for traditional LTC riders

Result: one carrier approved the UL at Table 2, with its chronic illness rider automatically included.

When to use it

For clients declined or rated for LTC coverage, especially for conditions like osteoporosis, arthritis, or back problems that weigh heavily in LTC underwriting. See why LTC and life underwriting differ.

Frequently asked questions

What is a chronic illness rider?

A life insurance rider that lets the insured accelerate part of the death benefit if they become chronically ill, typically unable to perform two of six ADLs or cognitively impaired.

Is a chronic illness rider the same as long-term care insurance?

No. It’s often cheaper and easier to qualify for, but may require the condition to be permanent and may pay less than an LTC rider.

Does a chronic illness rider cost extra?

Many have no upfront charge; instead, a fee or discount is applied when benefits are accelerated.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Talking to Adult Children About Their Parents’ Long-Term Care

September 25, 2026March 18, 2021 by Tim Fuller

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

Adult children often see a parent’s care needs coming before the parent does. They’re also the ones who will carry the burden if there’s no plan. That makes them one of the most motivated audiences for long-term care conversations.

Key takeaways

In one carrier survey, 85% of consumers agreed it’s irresponsible not to plan for long-term care, yet most hadn’t acted.
Adult children often become the caregivers, and pay the price in time, money, and career, when parents don’t plan.
Advisors can help adult children open the conversation and explore options, including insuring parents while they can still qualify.

85% agree it’s irresponsible not to plan for long-term care. Most still haven’t. Adult children are often the ones who get the conversation started.

Why adult children should care

When parents have no plan, their children usually become the plan, providing care themselves or paying for it. Costs are significant: in 2025, national medians were about $74,400 a year for assisted living and about $129,600 for a private nursing home room. See current care costs.

The planning gap

In a survey by one of our carrier partners, 85% of consumers agreed it’s irresponsible not to plan, 75% said other concerns kept it from being a priority, and 60% agreed long-term care insurance is the best way to handle the cost. Most people won’t act without someone prompting them.

How advisors can help

Coach adult children on how to raise it with parents; see eight ways to ease into the talk.
Quantify the risk to the parents’ assets and the family.
Present options that insure some or all of the risk, including coverage adult children can help fund.
Review the adult child’s own plan at the same time.

Frequently asked questions

Can I buy long-term care insurance for my parents?

Adult children can help pay premiums on a policy their parent owns, if the parent qualifies. Hybrid policies are also options for older parents.

How do I talk to my parents about long-term care?

Start indirectly, such as discussing a friend’s situation or asking for their advice, and focus on their wishes rather than money.

Who pays for a parent’s long-term care without insurance?

The parent’s savings first, then often family members, and eventually Medicaid after assets are spent down.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Avoiding Sticker Shock in Disability Insurance Sales: Keep Premiums Near 3% of Income

September 25, 2026March 17, 2021 by Tim Fuller

Professional working confidently at her desk, representing disability income protection

Few things stall a disability sale faster than a premium the client didn’t expect. The good news is that DI is highly adjustable, and a well-designed plan rarely needs to be expensive.

Key takeaways

A common guideline is to keep disability premiums at or below about 3% of annual income.
Adjusting the benefit amount, elimination period, and benefit period can lower cost significantly.
Blending base coverage with a Social Insurance Substitute (SIS) rider provides protection at a lower premium.

Keep the premium near 3% of income or less. Above that, clients hesitate — and policies they do buy are more likely to lapse.

The 3% guideline

When premiums go much above about 3% of annual income, clients are more likely to balk, and if they buy anyway, more likely to lapse. That leaves them unprotected and you without renewals.

Ways to bring the premium down

Right-size the benefit to essential expenses such as housing, utilities, and groceries. See the M.U.G. plan.
Lengthen the elimination period. Most fully underwritten policies use 90 days; clients with savings may choose 180.
Blend base and SIS coverage. A Social Insurance Substitute rider pays when Social Security or other social insurance doesn’t, and its lower cost reduces the total premium.
Consider a shorter benefit period. Many disability claims resolve within a few years, so a five-year benefit period can offer strong value.
Choose riders carefully. Include those that truly serve the client, not every option available.

Get help designing the plan

We can run several designs side by side so the client can choose the balance of cost and coverage. For clients who dislike paying for coverage they may not use, see return of premium.

Frequently asked questions

How much should disability insurance cost?

A common guideline is about 1–3% of annual income, depending on age, occupation, and design.

How can I lower my disability insurance premium?

Choose a longer elimination period, a shorter benefit period, a smaller benefit, fewer riders, or a blend of base and SIS coverage.

What is a Social Insurance Substitute rider?

A rider that pays when the insured isn’t receiving Social Security or similar benefits, costing less than equivalent base coverage.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

How to Convert More Life Applications Into Paid Policies

September 25, 2026March 15, 2021 by Tim Fuller

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

There’s nothing worse than weeks of underwriting ending with an offer the client won’t accept. Most of those surprises, like a family history issue or driving violations, could have been spotted before the application.

Key takeaways

Most underwriting surprises come from information that could have been gathered at the first meeting.
Only a small share of applicants qualify for the very best rate class; most are approved at Standard or similar.
Impairment fact finders and informal pre-screens let you get tentative offers before recommending a carrier.

Don’t assume Preferred Best. Only a small share of applicants reach the top rate class — most are approved at Standard.

Start with a needs analysis and budget

A basic life needs analysis and a clear picture of the client’s intended premium let us work backward, maximizing the benefit without exceeding the budget, even if the underwriting offer comes back less favorable than hoped.

Ask the right field underwriting questions

Family history, driving record, medications, and avocations are the most common sources of surprises. Asking about them up front lets you quote realistically. More on quoting the right rate class the first time.

Use impairment fact finders

We offer one-page fact finders for dozens of common conditions. Completed forms are reviewed by our Underwriting Department, and when needed an underwriter will call you with targeted follow-up questions. The goal is tentative carrier offers before you recommend a carrier or take an application.

Set realistic expectations

Clients who expect Standard and receive Preferred are delighted. Clients who expect Preferred Best and receive Standard often walk away. Setting expectations early protects the sale and your relationship with the client.

Frequently asked questions

What is a good placement ratio for life insurance?

It varies, but the higher the better. Accurate quoting and pre-underwriting are the most reliable ways to raise it.

Why do life insurance applications end up not taken?

Most often because the final offer is worse than the quote the client was shown, usually due to health, family history, or driving history not gathered up front.

What is an informal inquiry or pre-screen?

A review of a client’s details by underwriters before a formal application, used to get a sense of likely offers from different carriers.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Answer the Underwriter’s Questions Before They Ask: A Financial Justification Case

September 25, 2026March 12, 2021 by Tim Fuller

Picture this application: a 35-year-old woman, retired, no income listed, net worth blank, applying for $8 million of term with no stated purpose. Any underwriter would stop and ask why.

Key takeaways

Large face amounts need a clear financial justification, especially when income or net worth isn’t obvious.
In this case the client had just inherited a large estate and needed coverage for estate taxes, which fully justified $8 million.
The five key questions: purpose, how the amount was set, owner and payer, total coverage in force, and supporting documents.

Retired at 35, no income, $8 million of coverage. Without an explanation it looks alarming. With one — a large inheritance and estate taxes — it’s justified.

The case

Female, age 35, listed as retired with no annual income
Net worth left blank
Applying for $8 million of term coverage, purpose left blank

The explanation was simple: she had just inherited a very large estate and left her job, and estate taxes were a concern. Based on the inheritance, $8 million was justified. The application just didn’t say so.

The five questions underwriters will ask

What is the purpose of the insurance?
How was the face amount determined?
Who is the policyowner and premium payer?
How much coverage is in force and applied for?
What documentation supports the amount?

Put the answers in a cover letter

Answering these up front, usually in a short cover letter, prevents weeks of back-and-forth. We can write the letter for you, but the most important source of information is you, since you know the client.

Frequently asked questions

What is financial justification in life insurance?

Evidence that the amount of coverage applied for is reasonable given the client’s income, net worth, and the purpose of the insurance.

Can someone with no income get a large life insurance policy?

Yes, if there’s another justification, such as a large estate, inheritance, or business interest. The purpose needs to be clearly explained.

How can I speed up approval on a large case?

Provide the purpose, how the amount was set, ownership details, existing coverage, and supporting documents with the application.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Aging in Place: How Long-Term Care Coverage Helps Clients Stay Home

September 25, 2026March 11, 2021 by Tim Fuller

Close to 70% of people turning 65 will need some form of long-term care, and most want to receive it at home. Aging in place takes more than a caregiver: it takes a safe home, the right equipment, and help with daily life. Long-term care coverage can pay for much of it.

Key takeaways

Aging in place is the top preference for most older adults.
Many policies cover home modifications, safety checks, medical equipment, and medical alert systems.
Help with household tasks, medications, and caregiver training keeps clients home longer.

Ramps, grab bars, a medical alert system, and someone to help with meals: the things that make staying home possible.

What aging in place requires

Staying home safely often means changes to the home and support with daily tasks, not just medical care. Families frequently underestimate how much is involved.

Benefits found in many policies

Home modifications, such as ramps, grab bars, and bathroom changes
Home safety assessments
Durable medical equipment
Medical alert systems
Caregiver training for family members
Household help: laundry, meal preparation, and bill paying
Medication management

Some home care agencies also provide transportation to appointments, social activities, and updates to family after doctor visits. Coverage varies by policy.

Why it matters in the sale

Emphasizing these benefits speaks to clients’ desire for independence and quality of life. See in-home care benefits and planning for couples without children, for whom aging-in-place support is especially important.

Frequently asked questions

What is aging in place?

Living in your own home safely and independently as you age, often with modifications and in-home support.

Does long-term care insurance pay for home modifications?

Many policies include a benefit for modifications such as ramps and grab bars.

Can LTC insurance pay for a medical alert system?

Some policies cover medical alert systems as part of home care or safety benefits.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Adding Disability Buy-Out Coverage to Buy-Sell Planning

September 25, 2026March 10, 2021 by Tim Fuller

Most buy-sell agreements are funded with life insurance alone. That works if an owner dies, but an owner is more likely to become disabled than to die during their working years, and life insurance won’t pay for that buyout.

Key takeaways

Life insurance funds a buyout only at death; disability buy-out insurance funds it if an owner can’t work.
It provides cash for the business or co-owners to buy the disabled owner’s interest, and pays the disabled owner for their equity.
Reviewing existing buy-sell plans is a natural way to add disability, key person, and personal DI coverage.

If a partner becomes permanently disabled, life insurance pays nothing. Disability buy-out coverage funds the purchase.

The gap in most buy-sell plans

If an owner becomes too sick or injured to work but doesn’t die, the business still needs to buy them out, and the disabled owner needs to be paid for their equity. Without funding, that means loans, installment payments from cash flow, or conflict. See also using an LTC rider to fund a buy-sell.

What disability buy-out coverage does

Provides funds to purchase a disabled owner’s interest after a defined elimination period, often 12 to 24 months
Pays the disabled owner for their equity, as a lump sum or installments
Complements life insurance within the same buy-sell agreement

The agreement should define disability consistently with the policy.

A success story

A producer asked us for a basic term life policy on a business owner. When we raised disability in the continuation plan, the result was an individual DI policy for the owner, with plans for the key executives underway. It was the producer’s first DI sale with us.

Getting started

Offer clients with existing buy-sell policies a complimentary review. We provide fact finders, valuation questionnaires, and approach letters. The review often leads to key person disability and personal DI sales.

Frequently asked questions

What is disability buy-out insurance?

Coverage that funds the purchase of a business owner’s interest if they become totally disabled, under a buy-sell agreement.

How long is the elimination period for disability buy-out insurance?

Commonly 12 to 24 months, to confirm the disability is long-term before the buyout.

Does life insurance cover a buyout if an owner becomes disabled?

No. Life insurance pays only at death; disability buy-out insurance covers the disability scenario.

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

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Term Conversion: Turning One Term Sale Into Several

September 26, 2026March 8, 2021 by Tim Fuller

Most term policies include a conversion privilege that lets clients switch to permanent coverage without new medical underwriting. Too often it’s ignored until the term is about to expire. Planning conversions from the start serves clients better and creates new business for you.

Key takeaways

Conversion lets clients keep their original health rating for life, with no new medical underwriting.
Permanent premiums are based on attained age at conversion, so earlier is cheaper.
Partial conversions over time keep costs manageable, and each conversion is a new sale.

The worst time to discuss conversion is after the client’s health has changed — plan it at the point of sale.

What the conversion privilege does

Term coverage lasts for a set period, such as 10, 20 or 30 years. Most term policies let the owner convert some or all of the coverage to a permanent policy without new medical underwriting, within the carrier’s conversion window. The client keeps their original risk class, no matter what happens to their health.

Plan it at the point of sale

One of our brokers talks about conversion during the first sales meeting. Together with the client, they decide how much permanent coverage the client will eventually want and how quickly they can afford to convert. Because permanent pricing is based on the client’s age at conversion, converting sooner costs less.

Use partial conversions

Clients don’t need to convert everything at once. For example, a client with a $1 million, 10-year term policy might convert $500,000 next year, another $250,000 in five years, and then decide near the end of the term whether to keep the last $250,000. Each step fits the budget and adds flexibility. Conversion rules, windows and eligible products vary by carrier, so check the contract.

Stay proactive

Many clients don’t know their term policy can convert. Reaching out is a reason to stay in touch, and it can lead to referrals from family and friends. Each conversion is a new permanent sale with new compensation. For clients whose needs have changed, see our life events that should trigger a coverage review.

Frequently asked questions

Does converting term life require a medical exam?

No. Conversion within the policy’s conversion period generally requires no new medical underwriting, and the client keeps their original risk class.

Can a client convert only part of a term policy?

Often, yes. Many carriers allow partial conversions, so a client can convert in steps as budget allows. Confirm minimums with the carrier.

How is the premium set on a converted policy?

The permanent premium is based on the insured’s age at the time of conversion and the original risk class, so earlier conversions cost less.

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

Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Qualified plans: deductible, but limited

Nonqualified plans: flexible, but the deduction waits

No owner advantage in a pass-through

C-corp owners can fare even worse

A more useful alternative

Frequently asked questions

Tim Fuller

We’re Here to Help

What “living benefits” means

Cash value access

Chronic illness and long-term care benefits

Who to talk to

Frequently asked questions

Tim Fuller

We’re Here to Help

How chronic illness riders differ from LTC riders

Case study

When to use it

Frequently asked questions

Tim Fuller

We’re Here to Help

Why adult children should care

The planning gap

How advisors can help

Frequently asked questions

Tim Fuller

We’re Here to Help

The 3% guideline

Ways to bring the premium down

Get help designing the plan

Frequently asked questions

Tim Fuller

We’re Here to Help

Start with a needs analysis and budget

Ask the right field underwriting questions

Use impairment fact finders

Set realistic expectations

Frequently asked questions

Tim Fuller

We’re Here to Help

The case

The five questions underwriters will ask

Put the answers in a cover letter

Frequently asked questions

Tim Fuller

We’re Here to Help

What aging in place requires

Benefits found in many policies

Why it matters in the sale

Frequently asked questions

Tim Fuller

We’re Here to Help

The gap in most buy-sell plans

What disability buy-out coverage does

A success story

Getting started

Frequently asked questions

Tim Fuller

We’re Here to Help

What the conversion privilege does

Plan it at the point of sale

Use partial conversions

Stay proactive

Frequently asked questions

Tim Fuller

We’re Here to Help

Tim Fuller