How Can I Use Life Insurance To Fund College Tuition Costs? 2023

During a discussion with a friend of mine, whom I'll call Bob, we talked about paying for his child's education costs if and when he went off to college. Bob had been divorced a couple of years and his son was in first grade at the time of our conversation. 

Bob has his own business and does pretty well financially, but he isn't a millionaire by any stretch of the imagination. He told me that he hoped that his son would get some sort of scholarships down the road, but due to his above average income, the child probably wouldn't be eligible for any financial aid when the time came. I agreed with him on this point. 

One of the first things we did was run an estimate* of how much a four year college would cost 12 years out. When I say "estimate", it truly is just that, because there are so many variables like the following:

• Will the child go to a public or private college?
• Will the school be in state or out of state?
• What if the child decides to get an associates degree at a 2-year school?
• What if the child doesn't go to school at all?
  
  
  

These are important things to think about because of the nature of our current college savings plans. Most of these plans, like the 529 or Coverdell plans, give tax breaks for setting aside money for college. And as most things that are "tax related" go, there is going to be plenty of paperwork and documentation involved. That means Bob and his child would have to disclose any college savings plans and the amount of cash accrued inside those plans. 

During this discussion I asked Bob if he had any life insurance, which he did. He had a term life policy that covered the mortgage on his house and his ex-wife was the beneficiary due to the court determining this at the time of their divorce. 

This is when I brought up using life insurance as a college savings plan. The reason I like to consider this is because it takes care of two problems at once. First, Bob needed additional life insurance as his term policy was not enough cover the cost of college for his son if he were to die too soon. Secondly, the cash value inside the policy would not need to be disclosed on any financial aid applications.

He agreed to look at some numbers. We had planned on taking money out of the policy during his son's freshman year, but a phone call gave us another strategy. My friend at the insurance company suggested a strategy where Bob's son apply for college loans. Since the loans wouldn't be due until he graduated, he could pay them back then with little to no interest in full. By waiting until the child was out of college to repay the loans, the cash value would have an additional four years to build cash value. 

Because Bob was healthy and an non-smoker, he was able to get more "bang for his buck" out of the policy. After some consideration, Bob and I agreed that the best way forward was to use an indexed universal life insurance plan, as a whole life plan would cost more and not build cash value as quickly. 

Another reason we liked the plan was that if the child, for some reason, didn't need the money, Bob could use the cash value to supplement his own retirement or take advantage of the living benefits** if he were to become chronically ill. 

If you have questions regarding using life insurance while you are living, drop us a note. In the meantime, please stay healthy!

*There are many calculators out there that can help you estimate the future costs of your child's education. We recommend this one.

**Living benefits are not available on all plans but were included at no extra charge in this case.

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life, disability, long term care, cancer, accident and other insurance coverages in North Carolina, South Carolina, Virginia, Tennessee and Georgia. He's also is a professional speaker helping sales people be more productive and efficient, and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog! 

How Can I Help My Kids Avoid College Debt?

The cost of going to college has soared in the last 25 years. For kids who who need financial help, loans are the first, and often last, resort to pay for an education. So if you have kids or grandkids or are the legal guardian of some college bound children, here are a few tips that may help ease the burden.

There are several things to consider when planning to fund your kids' education.

1. How much of the cost do you want? Some parents want to pay the full cost of tuition, while others say they want their children to at least pay some portion. I've had clients tell me they refuse to pay any of the costs. 

One of my clients used the last bit of logic with me one day, stating "I paid my way through college and she can do the same." I asked what the parent paid and found that father's tuition was never more than $500 a semester. Today, his child is looking at over $2000 each semester. When we added in books, room and board and other living expenses, that cost was closer to $5000. It was an eye opener to the parent who said, "I don't have that kind of money." Should we expect an 18 year old to have it?

2. No one has a crystal ball. I've heard parents say things like "My kid will get a football scholarship" or "She's going to Harvard". Mind you, the child is barely walking.  It's great to have hopes and dreams for your child, but be realistic.

Even though your child may still be in diapers you can still start a small savings account with some discipline. That means that you may have to treat it like a monthly bill and throw an extra $50 or $75 in each month. If, for some reason, you feel your child is not college material, you can use those funds for other expenses. On the other hand, if your child starts showing signs of brilliance in grade school you can move that money to a college savings plan gives tax breaks like a Coverdell IRA or a 529 plan.

3. 529 plans are great, but have drawbacks. For instance, when applying for financial aid or a scholarship, you have to disclose any and all college savings plans. If your 529 is loaded, it could keep you from getting that scholarship. Also, if your child doesn't go to school, you can transfer the funds to another child, but if used for something other than education expenses, expect a tax penalty on those monies.  Finally, remember that those funds are typically invested in the stock market. If your child is ready to go off to school and the market drops, that when you'll remember the...

4. Two-bucket approach. Some folks will partially fund a 529 plan and then have a second "bucket" of money, usually an overfunded cash value life insurance policy (see the next entry). If the market drops, you can use the life insurance cash value to pay for a year or so of college until the market rebounds. If you die, the death benefit can be used for college funding as well. Also, you don't have to disclose life insurance when applying for financial aid.

5. Life Insurance. Whole life has been sold for years as a "forced savings plan", which is a good concept but may be too conservative for the kind of growth you made need. If a parent is healthy and doesn't smoke (this is life insurance after all, so there is underwriting involved), we typically suggest a Indexed Universal Life (IUL) policy. With an IUL you can "over fund" it by paying additional premiums that are capped by the IRS. 

I recently had an appointment with a single father whose daughter was in the first grade. He truly wanted to help her fund her education (as much as possible) so we looked at an IUL on him. The cash value grew well up to age 18, when his daughter would be going to school, but the cash value grew even more between the ages of 18 and 22, when she would be (hopefully) graduating. Since repayment of college loans wouldn't start until she graduated, she could secure loans and repay them all at once when she left school by using her dad's policy.

6.  Roth IRA. Did you know that you can withdraw money from your Roth IRA for education costs without a tax penalty? And if your kids don't go to school, you can use that money for your retirement.

In this economic environment we are experiencing currently budgets are tight. For those who are fortunate enough to have a little bit extra each month it can be tough to decide where to allocate it. Most of us who are "forward thinkers" are trying to plan for several things at once, like our kids' educations, retirement planning and more enjoyable things too, like that once in a lifetime vacation.

I once had a conversation with a client who had enough in the budget to pay for either retirement or college funding.  She said, "My child can borrow for college, but no one is going to loan money for my retirement."  She had a point.

If you have questions about helping to fund your child's education, let us see if we can help out by booking an appointment from our website. In the meantime, stay healthy.

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

Getting Our Priorities Straight During the Holidays

With the holidays right around the corner I thought it would be appropriate to share a story from years ago when I was working for a very large insurance carrier. The agents were required to meet once a month and discuss our sales production numbers, and part of the process was that the veteran agents would give advice to the newer sales reps. 

As was usually the case in December, sales were down across the board. People generally don't buy much life or disability insurance before the holidays, with the exception of signing up for their benefits through work, so the agents were not too happy. I was one of them.

I shared how I would sit down with a couple to discuss life insurance, for instance, and would hear interesting excuses for not buying. "The holidays are coming and I need the money to buy a television," or "The new Iphone is coming out this week." 

That made no sense to me. "You have a wife and kids and a mortgage. If you were to die unexpectedly in the next few days, that cell phone isn't going to help your family stay in their home," I exclaimed to no avail.

Herein lies the problem for us insurance agents sometimes. We deal with people who mean well, and want to do right by their families, but their priorities are out of whack. The short term goals have overtaken the long term goals. Living in the moment is their mantra because "who knows what the future holds?" If they really want to know what is in store for them they should ask their elders. 

As I expressed these concerns to my colleagues at our sales meeting, a veteran agent laughed. "I know what you mean. Everyone is living in the moment, especially younger people. They think they are going to live forever and nothing will happen to them," he said. "But you have to help them understand that is wrong."

He continued to talk about the whole situation. "The holidays should be a time to emphasize the family. That should be their focus and if it isn't, then you need to make it their focus." It made sense. 

Of course we all want to have some nice gifts under the tree for the kids to open on Christmas morning. But trying to outdo ourselves (or anyone else for that matter) isn't what the holidays are all about. Wiping out our bank accounts at the end of the year over a phone or a television actually can make our festivities (and the new year) miserable. 

More importantly, all the gifts in the world can't make up for the loss of a loved one. So my message for you this year is this: It's fine to splurge a bit. This year has been tough on everyone, but remember that the holidays are about family, whether they are immediate, extended or otherwise. Make sure your priorities are in the right order. 

My job, as an insurance agent, is to make sure that your family will be able to continue to live comfortably if something should happen to you. Your priority should be making sure that your family is able to stay in their home and continue without you were to die unexpectedly. 

As I talk to my friends and clients I am learning that many have decided to cut back a bit on expenses this year. One less stocking stuffer or electronic gadget won't be missed. My wish for you and yours is to enjoy your family as much as you can. And please stay healthy! 

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

Do I Need An Accident Insurance Plan?

Everyday thousands of people seek medical attention for accidents large and small. From getting cut while making dinner and needing a few stitches, to serious automobile accidents, urgent care centers and emergency rooms are filled with people needing medical attention. 

I first got into the insurance business selling accident plans door-to-door in rural areas. And even though I didn't care for the policy at the time, I did see the value as our customers in the farming community would get hurt doing day-to-day chores. When I went to work for a large worksite benefits company I heard stories from people everyday about how they used their policies often, not just for themselves, but for their families. 

These stories were interesting and sharing them helped me to get more people to understand why they needed a good accident plan. For example, one nice lady was married to a firefighter and had purchased a plan that covered the entire family. Her husband was constantly getting hurt on the job, which was understandable. Burns, lacerations and other perils were a given in his line of work.

But when he was off the clock, he was just as vulnerable. He loved to hunt deer, and apparently had an issue with falling out of the deer stand on occasion. His wooden boat, which he used for fishing when the weather was good, had some rusty nails that he sat on several times. It got to the point where the wife felt bad for contacting me every time he needed to file a claim and made copies of her own claim forms. 

If you are active or have kids who play sports, an accident plan may be the right fit for you. Unfortunately, people sometimes forget they even have an accident plan. During a chance meeting with a client of mine he mentioned that his daughter had been playing basketball at the local rec center a month earlier. She went in for a layup and her legs were cut out from under her by another player. At the hospital she was treated for a small cut but had to have some minor surgery to repair a muscle tear. 

My client lamented that his medical insurance payed the majority of the expenses, but only after the deductibles and co-insurance minimums were met. When I reminded him that he actually had a policy in place to help offset those out-of-pocket expenses he lit up. We filed a claim and he was very happy with the results. 

Your occupation usually isn't going to be a factor and since there are no pre-existing conditions for accidents, people are covered right away. My clients come from all kinds of backgrounds, such as realtors, mechanics, artisans and business professionals. And you can choose coverage for off-the-job or 24 hour on or off-the job. 

Most of these policies even cover dismemberment and cover loss of sight, limbs (such as arms, legs, fingers and toes). There are even benefits for accidental death, which doubles if you were to die in a "common carrier", like a bus or plane. 

There is also an optional rider for disability income, which can help replace lost wages due to an accident. That can be important since for most of us, our most valuable asset is our ability to earn a living.

And just to add a little more value, there's also a wellness benefit. You're going to get a check up once a year anyway, so go ahead and get a few more dollars sent to you for that. 

Recently I met a woman whose husband had died while cutting down some trees in his yard. A large log rolled onto to him and he passed away in the ambulance on the way to the hospital. She told me that he had just turned down an opportunity to purchase an accident plan a few weeks before he died. Even though it was too late for him, she made a decision to purchase a plan for herself. 

I hope you seriously consider an accident plan. Especially since all the benefits go directly to you to spend how you need to, and not to the doctor or hospital. For a quick recap of some of the coverages from one of our carriers, click here. And if you have any questions please let us know. 

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

Life Is For Living (Great Video)

As we go through September and wind down another Life Insurance Awareness Month (LIAM), I hope you all are doing well and keeping your spirits high. There is a lot going on in the world that can add stress to all of our lives. The Covid-19 pandemic, racial strife and political tensions are just a few things that are in the news. But there is also all of the daily issues we deal with personally, such as employment and financial burdens. 

The holiday season can be crazy in a normal year. As I watched the news a few nights ago I was struck by a story about how shopping for gifts will be different this year. A lot more online sales, less people in the malls and shopping centers. Of course, we all know that the emphasis should be on our families and loved ones, not spending money we don't have. 

I think back to a sales meeting years ago when I was working with a large insurance company. Most of the agents, myself included, were bemoaning the fact that no one wanted to buy life insurance during the holidays. No one wants to take on another bill when there's a flatscreen TV to be purchased. 

Our manager was leading the meeting and rolled his eyes at our complaining. "You don't get it," he said as if we were a bunch of crybabies. "You say you sell life insurance, but you don't understand who you are selling it for or why you are selling it!"

Then the manager launched into a lengthy diatribe which made sense to me. I will spare you all of the details but the essence was that we, as life insurance agents, were not communicating our message properly, that we were not selling something to be used by the client (assuming that was who we are insuring), but instead it would be used by the client's family. The only thing the client would get out of it was the peace of mind knowing that if something should happen to them, their spouse and children would be able to stay in their home and continue their lifestyle without more financial worries thrown onto them. 

It all made sense to me, but how does one communicate that message during the holidays? As a father and husband I have my policies in place, but I also want my family to enjoy a few gifts that I can offer. The most important present, of course, is not one that can be opened (unless one opens a policy packet). 

So I ask you to do one thing for your family from now. If you do not have life insurance, use our life insurance quoting calculator in the upper right of this blog and get a ballpark estimate* on how much it would cost to ensure your family would be okay if something were to happen to you. There's even a button on there to find out how much you need. 

And if you do have insurance already, check to see if you have enough. Odds are you don't, and that is okay, as long as you do something about it. 

Check out the video and book a phone appointment with us to discuss how we can help you can give your family the best gift this year. 

*All rates are subject to underwriting.

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

The Courageous Conversation About Life Insurance

Last week I had lunch with an old friend who also happens to be a client of  mine. He has been very successful working in the computer industry for about 20 years but is starting to get restless. Apparently his work has become, in his opinion, very boring. I asked him to tell me what he liked and didn't like about the work. "I do the work, I get paid, and then I have to put in a bid again to do the work again," he said. 

He began to "pull back the curtain" about his job and tell more details about who his clients were, how he acquired them and what he was paid for his time. Then he threw me for a loop and said, "So give me some of the secrets of your work."

Actually, there are not a lot of secrets. I try to keep everything as transparent as possible. My friend did not looked convinced. He said, "Do you use a bunch of high pressure sales techniques?" 

"All the time but apparently they are too subtle for people to pick up on," I said, laughing at the absurdity of it all. There was a time when life insurance agents had a reputation for being "high pressure". My first job in the business, selling accident plans door-to-door, was like that. We were trained to be like attack dogs, not to take "no" for an answer. If someone gave us an objection we had a binder full of memorized rebuttals throw back at them. 

As I have mentioned in an earlier post, I have replaced high pressure sales with "good pressure" sales. That means that I want to do what is right for a client, but sometimes, the client doesn't understand what is in their best interest. 

For example, let's say I am in the home of a young couple who has a couple of kids and a mortgage. One spouse may insist that they only need $100,000 of coverage but I think they definitely need more. That $100,000 won't cover the balance of the mortgage, much less cover other things, like funeral costs, replacing income and paying off cars and credit card debt. My job is to make those items part of the discussion. 

The reasons why the client is resistant to increase the amount can vary, but it usually comes down to cost. That's when I realize I have not done my job correctly because I haven't explained the value of my product in a way that this client can appreciate. 

"So if your spouse is stuck with less money than they need to keep the family in their home they love, has to take a second job, and has to go into debt to bury you, is that something you're okay with?" I ask, making sure the spouse is present. Is that "high pressure"? I don't think so. It's a reality check. In the business we call that a "courageous conversation" because most people don't know, or want to know, what really is going to happen when they die. 

As a professional insurance agent, I have to help them face the reality of the situation. There is no yelling or subliminal messages going on. My intentions are good in that I want this family to feel secure. I realize they may have a budget, and I can work with that. "Let's put it like this. If you purchase this coverage and died next week, your spouse will come to me and ask me, 'Will my family be okay?' What do you want me to tell them?" 

That's what my job is all about.

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

Are You A Client Or A Patient?

Earlier this week I was chatting online with a sales guru who posed a question on his Facebook page. The question was "Do you have clients or customers?" Only a few people responded so I felt obligated to jump into the fray with "I'd love to call them patients, but the law says I have to call them clients."

The sales guru immediately responded, wanting an explanation for my comment. I told him that as a doctor promotes "wellness" and preventing disease, I like to tell my clients about "financial wellness", but instead of preventing disease, I help people find the potential problems they will face in their financial plans and remove those hurdles. Needless to say, he was impressed.

It all reminded me of the old concept of thinking holistically. When another insurance agent tells me they only sell one product I instantly cringe. "Specializing" in my world is an issue, because if all an agent sells is, say term life insurance, then he or she is not addressing all of the other potential landmines that could be in front of the client. 

Thinking holistically means looking at as many scenarios as possible, prioritizing and facing them head on. 

Would you go to the doctor that only prescribes one thing for all of his/her patients, or do you want the doctor to give you a complete check-up and get to the root of the problem?  Of course, you'd prefer the latter option. So why would you want to deal with a financial advisor who only sells mutual funds or an insurance agent who thinks everyone should "buy term and invest the difference"? 

Can you imagine going to a shoe store that only selsl size 7 shoes? What if you need a size 10 or a size 5? Making your foot fit "one way or another" does you no good. With that logic, if you need a disability policy, the agent who only sells term life is useless.

Our philosophy is that every investment and insurance product has a need somewhere, but not everything is for everyone.  An indexed universal life may be a great fit for someone, where a term life may fit the bill for someone else.  When certain financial "experts" give blanket advice in the media, they are doing a disservice to those who take that advice to heart.

Which is why we want to talk to you. We want to know what your goals are, what is important to you and, of course, what your budget is, so we can find the right insurance product for you. By doing a little fact finding and asking questions, we can find the solutions to solve your insurance needs. That is what we do. 

No two financial gameplans are the same.  People are different.  Their needs are different.  Their loss tolerance levels and time horizons are different.  At Surf Financial Brokers, we take the time to find out what your goals are - personal, professional and financial.  From there, we start a conversation that can change as situations change.  Events like the birth of a child, loss of a job or elder care make a financial plan a moving target.  

Let us help you with a free consultation. We have even made it easier by adding our calendar to the Surf Financial website. You can schedule an appointment that works for you and one of our agents will give you a call, with no pressure whatsoever. We just want to ask questions that will help us understand what your goals are and make "financial wellness" work for you.

 

Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!

Life Insurance and Education Planning (Use Our Free College Calculator)

When I sit down with parents to discuss life insurance, we try to determine the face amount needed by calculating items like debt, mortgage, costs associated with death (funeral expenses, hospital expenses if sick, etc) and loss of income. I also ask people if they would like their children to be able to go to college if the breadwinner were to die unexpectedly. And even though I've had a few parents tell me that their kids will have to pay their own way, most want to contribute to their kids' education costs.

Planning for your child's college expenses can be daunting. First there's the issue of whether or not your child will be attending school at all, much less where they'll go. Technical schools, universities and grad school can be confusing as none of us has a crystal ball to foresee the future or what tuitions will be. 

When discussing education with a client I either talk about using life insurance to fund the education if someone dies, or using a permanent policy to help fund the costs. There are several ways to do this and either option is good and it really depends on the budget we are working with.

A good friend of mine, a single dad with a first grade daughter was looking into college planning a few years ago. We found an indexed universal life (IUL) policy that worked beautifully. By overfunding the policy, he could have enough ready when she was ready to go off to school. On the other hand, if she decided not to attend college, or even better, got scholarship moneys, he could use those funds as a retirement supplement. 

Most people don't realize that when applying for student loans or financial aid, they are required to disclose any college planning funds, like a 529 plan or a Coverdell plan. However, you don't have to disclose any life insurance plans. 

One of the items I use is a college calculator, which determines how much student debt will cost. If you have kids who may want to go to school, check out our calculator (below our retirement calculator). To use it, click here. 

As always, stay healthy and let us know if we can help you.

Chris Castanes is the president of Surf Financial Brokers, as well as a professional speaker helping sales people be more productive and efficient.