5 Times Your Income

When considering purchasing a life insurance policy many people aren't sure how much to purchase. There are many factors to consider like paying off debt and final expenses, but one part of the puzzle that often gets overlooked. 

I often meet people who say they just need enough to cover the balance of their mortgage with the idea that when they pass away, their families can stay in the home. Unfortunately, they fail to consider that while their loved ones are in a house that is paid for, there will continue to be bills and other expenses that need to be taken care of. Roofs and refrigerators will need to be repaired or replaced, as well as other expenditures that were paid with the income of the family member who has now died.

Considering lost income will definitely add to the total amount of insurance coverage, and in some cases may actually double the original face amount, and in turn, make the premium go up. But that increase won't be as important as ensuring that the family can stay in their home and pay their bills as well. 

When figuring in "loss of income", a simple rule is to multiply your income by 5. Let's use an easy example with round numbers. Suppose your income is $50,000 each year. Simply add $250,000 to your other numbers (debt, including mortgage, final expenses, etc). That extra amount may look scary but a term policy can be an affordable way to get the correct amount insurance and keep it within your budget.

Don't let a few extra dollars in premium keep you from purchasing the insurance your family needs.

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!

What The Heck Is An Elimination Period?

As you may know, I often refer to the "Holy Trinity Of Insurance", which consists of major medical insurance, life insurance and, of course, disability insurance. Many people have a disability insurance (DI) policy through their work, but unfortunately, not enough people who are contract employees, business owners and otherwise "self-employed" people (like myself) have an individual DI plan. That's a discussion for another day. 

I often speak to groups of employees when I am enrolling benefits, and when I discuss the DI plan, many of the employees ask what the elimination period is when they see it. 

Simply put, the elimination period is the time, usually in days, before the policy actually begins to pay out benefits. There are typically two numbers with a comma between them, such as "0,7" or "7,14". The first number is the number of days that need to elapse before the policy will pay for an accident, while the second number is the waiting period for the benefits to trigger during an illness.

In other words, the elimination period is like a deductible, but measured in time instead of dollars. So a 0,7 elimination period means that the policy will begin to pay benefits on the first day after an accident and the eighth day after a sickness.

Just like your deductible on your car or health insurance, the higher the number, the lower your premium. If you think you can "self-insure" for a month or two, your premiums can be reduced significantly. 

When one thinks of a disability, injuries from auto accidents come to mind. But consider that almost 90% of DI claims are for illnesses, like cancer. Treatment can last for months and can easily keep someone from working.  

If you have questions about Disability Insurance or other insurance products we offer, feel free to book a short phone appointment with us to discuss. In the meantime, please stay healthy!

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!

Does The Non-Breadwinner In The Family Need Life Insurance?

Recently I was reading an article on all of the reasons people fail to buy life, disability and other types of insurance. Apparently there are a lot of misconceptions floating about and I wanted to take the opportunity to hopefully correct these ideas. Taking them one at at time I hope to explain these misconceptions over the next few posts.

Last week I was talking with a couple who were doing okay financially. They realized that they were fortunate enough that one of them could stay home with their small kids while the other was the main breadwinner. In this situation, the wife worked and the husband stayed home and had a small consulting business, which by their estimation was "more of a hobby". I took that as meaning he didn't bring a lot of money into the household.

We discussed life insurance for the wife and ran the numbers to pay off the debt and replace her income for a few years. They both agreed that she needed to be covered. When I asked about the husband, there was a bit of confusion. "He really isn't contributing to the bills, so I don't think he needs a policy," the wife said.

The husband, who I thought would pipe up and say something, sat there nodding in agreement. I asked a couple of simple questions: If he were to die unexpectedly, how much would she need to pay for childcare? Or would she want to take time off from work to stay home with the kids?

This was obviously something neither had considered. Especially when neither of them had family nearby. The kids were young and only one was enrolled in school, so the other child would need to either be enrolled in a daycare or preschool, or they would need to have someone come into the home, like a nanny. 

When I explained what that kind of care costs, they were taken aback a little. I tried to ease their concern and let them know that a term life insurance would be much less expensive and, in the event of the husband's death, could cover the expenses for childcare plus his funeral costs, which they also failed to plan for. 

When a family member is not the breadwinner, it doesn't mean that they don't need life insurance. As a matter of fact, we even offer a disability policy on stay-at-home parents to help replace the costs of daycare. 

What are your thoughts? Leave us a comment below.

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!

3 Reasons Why Self-Employed Don't Buy Disability Insurance 2023

One of the most undersold insurance products is individual disability insurance (DI). The reasons for this vary, but many people think of disability as something they should buy through their employer as part of a group plan. There are around 15 million self-employed Americans, the vast majority of which do not have an individual disability policy. Why is this? Here are a few reasons why this is the case.

1.Business owners, contract employees and otherwise self-employed think that DI is expensive. The premiums of DI vary because of many factors. Your occupation is a huge factor in determining the rate you pay. In a nutshell, the more dangerous or labor intensive your job is, the higher your premium will be. It makes sense that a mechanic who works with heavy machinery will pay more than a banker who works behind a desk. 

Also, the amount of coverage you need will be based on your income. The more you earn, the more money you will need if you are out of work.

Even though the price may seem high to some, realizing that DI is actually insures their income helps people see the actual value of the coverage. I ask clients what their greatest asset is and get answers like their car or home. Then I point out that their number one asset is their ability to earn a living, which makes one able to purchase the car or home. That's when they see the value of DI.

2. The application and underwriting process seem difficult. An application for DI is just a bit more involved. Like life insurance, there are health questions. Additionally, there are questions about income and the type of work one does (see above). Some insurance carriers will want to verify income at the time of the application, usually by obtaining tax records. Other companies will do this at the time of a claim. 

As a self-employed person, your income can vary from year to year. I discussed this with one claims rep from a company I represent. She understood completely and said, "We just want to make sure this person was working when they filed a claim." 

A few years ago I had a client who was a personal trainer. The application included a question which asked something like "Does your job entail heavy lifting?"  I had to write an additional letter to the underwriter that the client had to lift weights to demonstrate to his clients proper form. After much confusion the policy was eventually issued.

3. Agents don't always understand it either. I'm not trying to throw anyone under the bus here. As a matter of fact, this is one of the reasons why I personally don't do a lot of Medicare supplements. I would rather refer that out to another agent in our brokerage who understands the product and sell what the clients needs. 

I have met many good life and health agents who just do not feel comfortable selling individual DI policies. There are too many "moving parts" they say. Or they just don't understand how the policy works with Social Security disability, therefore, they can't explain it properly to their clients. Find an agent who is familiar with the product.

If you are self-employed, an individual DI policy may be a great way to make sure you can pay your monthly bills in the event that you are sick or hurt and unable to work. Let us know if you have questions, and as usual, please stay healthy!

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!

Disability Insurance Awareness Month Part 2

In the previous post I discussed what Disability Insurance Awareness month was and why Disability Insurance (DI) is important to have. Along with that was some very valuable information about how it is structured and the ways it can work for you. But I do want to pivot a bit and go over how you can figure out how much coverage you need, or if you need any DI at all. 

As mentioned previously, DI is considered to be "paycheck insurance" by many because it replaces your income if you are unable to work due to an accident or sickness. As I tell my clients, just because you are out of work doesn't mean the bills will stop coming. The stress of seeing bills pile up can make an illness even worse.

And speaking of illnesses, did you know the vast majority of disability claims are paid due to illnesses and not accidents? When we talk to people about being disabled they think of car accidents and such, but in reality, cancer, heart attacks and strokes, along with other dread diseases, are the reasons why most claims are filed. Even Covid has been a huge factor in DI claims.

For a few people, a DI policy is not necessary. Having passive income streams like rental properties or other investments can provide enough money to pay their bills. But for the rest of us we need every dollar we can get our hands on if we are not able to work.

How much do you need if you are applying for coverage? Generally speaking, most group plans that you get through work will pay up to 60-70% of your gross pay, which is about what your take home pay is after you deduct taxes. 

On the other hand, if you are self-employed or a business owner, your income may not be the same each year. A different way of calculating is needed. Luckily, we have a web based quoting system for determining the amount you are eligible for based on your income, which gives us a maximum benefit amount. Again, you can apply for "up to" that maximum, but you may not need the full amount. This is when we use the "HUG" system to work out the numbers. HUG stands for: 

• Housing. How much do you pay each month for rent or mortgage?
• Utilities. Electricity, water, gas and other maintenance.
• Groceries. Just because you are out of work doesn't mean you can't eat. At the same time, it doesn't mean you'll be going to Outback every night either.

Using the HUG method, you can determine a minimum amount of coverage you need to get you by while you're out of work. Remember, the more coverage you apply for, the higher the premium will be. 

A few years ago I had a real estate agent ask me a very good question. She wanted to know if she was approved for a policy during a year when she was making good money and got disabled during a year when the housing market was down and her income was lower, would she still get the benefit she applied for? I called one of our carriers and spoke to an underwriter about this dilemma who agreed it could be confusing, but in her words, "We just want to know if this person was working at the time of the disability." In other words, yes, she would get her benefit as long as the real estate agent hadn't quit her job.

If you would like a quote visit our site and drop us a note, or book a short phone appointment. In the meantime, please stay healthy!

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!

Disability Insurance Awareness Month Part 1

May is once again Disability Insurance Awareness Month, when the insurance industry tries to let the public know the importance of having a disability insurance policy. As I say whenever I sit with a client or talk to a group, the Holy Trinity of insurance is your life insurance, your health insurance and your disability insurance (DI). That's how important it is!

Think about it. If you are sick or hurt and are not able to work, your bills just keep coming. No one is going to let you have a free pass on your car payment, mortgage or phone bill because you are a nice person. In essence, having a DI plan in place is paycheck insurance. That's why people call DI "paycheck protection".

How does it work? Depending on your employment and how you get paid there can be variations. The more common scenario is that you buy a group plan through work or your employer pays for it or both. I have seen instances the employer pays for Long Term Disability (LTD) but the employee pays for their own Short Term Disability (STD) policy.

These types of policies usually pay up to 60-70% of your gross income. Keep in mind that if your employer is paying for your policy and you should start receiving benefits, those benefits will be taxable. This is also true if you purchase your plan through a "worksite*" insurance company and they pre-tax your premiums. 

Short term DI usually pays for the first 3, 6 or 12 months of a disability, while long term DI will start paying after those dates. The key is to make sure you have coverage seamlessly throughout the time you are out of work, which is determined by your physician. 

Also, group plans will typically cover maternity for 6 weeks (8 weeks if a caesarean is called for). Too many people will drop their DI plan when they decide that they aren't having any more children. I always encourage people to keep their policy, as it is not "baby coverage" as many seem to feel.

On the other hand, if you are self-employed or a 1099 employee, like a realtor or insurance agent, you may need to look into an individual DI plan. These are structured a bit differently in that rates will be determined based on factors like:

• Your occupation. A welder or a roofer will pay more than a secretary because their job is more dangerous. 
• Your health, age and tobacco usage. Just like life insurance, the insurance company wants to know if you are a good risk or not. 
• Your income. Determining your benefit amount is dependent on how much money you earn, so the insurance carrier may ask for a copy of your tax returns. We have one company that ask for it when you file a claim. 

Another important factor is the "elimination period", which is like a deductible, but in time instead of money. If you have a 14 day elimination period, that means that the policy won't start paying out benefits until the 15th day of your illness or accident. Elimination periods can vary from 7 days to 6 months, and like the deductible on your car insurance, the higher you go, the less the policy will cost you.

Also, keep in mind that individual plans will not cover maternity.

In Part 2 of this topic we'll discuss how to determine how much coverage you need. In the meantime, please stay healthy!

*Companies that offer voluntary benefits like DI, dental, vision and other ancillary insurance products. 

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 Does The Disability Waiver Of Premium Work?

For many people, buying life insurance is a chore. Having to research the different types of policies, from term to whole life, as well as dealing with an agent and maybe even scheduling a paramed exam, can make the whole experience is less than enjoyable. And don't even start with the litany of "optional riders" that can be tacked on to a policy, increasing the cost and leading to more confusion.

But before you decide you don't want any riders, let's take a look at a few of them over the next few posts. You might decide which ones will work well for you in the long run. 

In this post I want to discuss the Disability Waiver of Premium (WP), which is available on nearly all types of life insurance, as well as other insurance plans too. Generally speaking, this rider makes sure that if you (or the payor of the policy) become disabled and are unable to work, the premiums will continue to be paid so that your policy does not lapse. Think of it as insurance on the life of your policy.

One of my favorite clients and I were discussing this rider one afternoon and he said, "I never thought of this before, but the last thing you need if you can't work is for your life insurance to get pulled out from under you. That's when you need it most." He was correct.

This rider is usually so inexpensive that I will urge clients to take it, as the cost is inconsequential. For example, a policy that may cost around $30 each month will see a premium increase of less than a dollar. Seriously, this is never a deal breaker. I have even worked with agents who don't even discuss it with the client and tack it on anyway. 

I have a client who purchased a policy from me about 10 years ago. A few years ago she was in a very bad accident that has left her permanently (as far as I know) disabled. Since we had added her WP rider on at the time of the application, she does not have to make any premium payments until doctor says she can go back to work. Every six months or so she receives a form from the insurance company (I get copied on all of this) that she passes on to her physician. The doctor completes the form saying that she is still disabled and she continues to get her life insurance paid for. 

Here's where things get really interesting. After discussing this situation with the insurance company, I found out that if the term of the policy ends (in her case it was a 20 year term) and she is still disabled, they will convert the policy to a permanent whole life policy for her at no charge. Needless to say, she was very relieved to hear this when I passed the information along. 

I have worked with other carriers that will convert in the middle of the term if someone is permanently disabled. The most interesting case was a fellow agent who took out a policy on his son when the boy was very young. Around age 4 the boy was diagnosed with autism and the father was able to get the WP to kick in and convert at the same time. 

The point of all this is that I don't want you to dismiss the rider when it can offer great value in a time of need. Discuss all of this with your agent or drop us a note on our website. In the meantime, please stay healthy!

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!

Do I Have To Pay Taxes On Disability Insurance?

If you have been receiving disability benefits from an insurance company you may be wondering if you are responsible for paying taxes on those benefits. The answer really depends on the type of coverage you have and how the insurance premiums are being paid.*

For instance, if you are receiving benefits through a plan that is offered through your employer and the employer is paying the premiums, then those benefits are taxable as income. However, if the premiums are being deducted from your paycheck your benefits are tax-free.

Another time it will be taxed is when it is deducted from someone's paycheck on a pre-tax basis. Yes, pre-taxing the premium will look like you are paying less, but having your benefits taxed when you need them most is not worth the savings. (FYI Life insurance should never be pre-taxed either).

Let's consider what happens if you have an individual disability policy that you have purchased on your own. In a nutshell, the same rules apply. If you are paying for the policy with after-tax dollars then the benefits should be tax-free. However, if you own a business and have the premium payments coming out of the business's checkbook, then those benefits will be taxable. 

The IRS says that Social Security disability benefits may be taxable if one-half of your benefits, plus all of your other income, is greater than a certain amount which is based on your tax filing status. Even if you are not working at all because of a disability, you would still have to count any unearned income such as tax-exempt interest and dividends. If you are married and file a joint return, you also have to include your spouse's income into the calculation, even if your spouse is not receiving any benefits from Social Security.

This all may sound confusing but the concept is a simple one. If you are paying for your disability coverage, whether it comes from your personal bank account or through payroll deduction, you more than likely will not have to pay taxes on the benefits if you should need to file a claim. However, if the premium payment is coming from your employer or you decide to pay it out of your business account, then it will probably be taxable. 

You may not have a choice when it comes to your employer offering to pay for your coverage. I have seen instances when the employer pays for a Long Term Disability (LTD) policy, which does not start paying benefits until 3 or 6 months after the date of the disability, so the employee needs to fill the gap for those first few months without coverage with a Short Term Disability (STD) policy. 

The key here is awareness. If your policy is being paid by your employer, and if you are out of work due to illness or injury, your benefits could be much less than what you would expect. Using easy math for an example, let's assume you make $100 each week. Your disability policy pays 60% of the gross pay, so if you need to file a claim you should be receiving $60, but if it's taxed, that could drop to below $40. Ouch! And finding this out after the fact makes matters even worse if you have tried to set a household budget in place. 

With all of this in mind we still think of Disability Insurance as part of the Holy Trinity of insurance (with life and medical insurance). It's an important yet overlooked part of a financial game plan, especially in the midst of a pandemic. If you have questions about coverage, drop us a comment. In the meantime, please stay healthy!

*The advice here is in general terms and we suggest you consult your tax professional for specific information.

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!

Have Life Insurance? You May Need More

You probably need life insurance if others are depending on you. If the only coverage you have is through your job, though, you may not have enough.

Fortunately, buying life insurance has gotten easier in some ways during the pandemic. Plus, coverage may be cheaper than you think.

The rising COVID-19 death toll has led more people to at least think about their life insurance needs, and many have taken action. One in  four Americans who have life insurance say they purchased or increased their coverage because of COVID-19, according to a NerdWallet survey conducted Oct. 29 to Nov. 2 by The Harris Poll. Many of those who purchased or increased their coverage were motivated by fear of being diagnosed with the disease (30%) or knowing someone who had (29%).

A survey by insurance industry trade group LIMRA this summer found nearly 6 in 10 Americans (58%) say they have a heightened awareness about the importance of life insurance, and about 3 out of 10 (32%) who were shopping for life insurance said it was in response to COVID-19. The number of term policies, the most popular type of life insurance, rose 10% in the third quarter compared with a year earlier, LIMRA found. That was the largest increase in 18 years.

“Obviously, the pandemic is making people much more sensitive to their mortality,” says Alison Salka, LIMRA research director. “So we see more people aware of the need for life insurance.”

This is very similar to the months after 9/11 when people realized they could die sooner or unexpectedly.  

Still, LIMRA has estimated that 30 million American households don’t have coverage, and another 30 million don’t have enough. The average coverage gap between what people have and what they need is about $200,000, LIMRA says.

People think that if they have life insurance through their job it is more than enough, but they haven't really crunched the numbers to see how much their family will need if they die prematurely.

Employer-provided life insurance policies are typically capped at certain dollar amounts, such as $20,000 or $50,000, or limit coverage to one to two times an employee’s annual pay. That may seem like a lot, but parents with young children may need 10 times their salary or more to replace their incomes until the kids are grown.

Even if your need is more modest — your partner requires your income to pay the mortgage, for example — an employer-provided policy might fall short. Plus, you typically lose your coverage if you lose your job, as many Americans have during the pandemic.

Having your own policy means your beneficiaries will remain protected. And thanks in part to the pandemic, you may be able to get coverage faster and without a medical exam (no needles!).

Increasingly, insurers are automating and accelerating the application process, LIMRA’s Salka says. Instead of sending someone to your home to check vital signs and collect blood and urine specimens, some insurers are waiving exams or are exclusively using exam and lab data provided by the applicant’s physician. This trend was already underway, but social distancing and other pandemic challenges mean more insurers are adopting these practices.

Life insurance is often cheaper than people expect. A 30-year-old woman in excellent health might pay $193 a year for 20-year term policy for $500,000. A 40-year-old man, also in excellent health, might pay $341 for the same coverage.

Term insurance covers people for a specified period of time, which is typically 10, 20 or 30 years. (In a previous post we mentioned there are now terms up to 40 and 45 years) Term policies are significantly less expensive than permanent life insurance, which has additional features such as a cash value that can be borrowed against and that grows over time.

But the higher costs of permanent policies can tempt some buyers to skimp on coverage. If you do need life insurance — and you probably do if someone would be financially impacted by your death  — then your priority should be getting enough.

How much do you need? We usually consider things like:

• Final expense and other costs associated with death. For instance, if you were in the hospital before passing away.
• Debt. Items like the balance on your mortgage, credit cards and car loans. 
• Education costs if you have kids and want to take care of  your education. 
• Income replacement. Your family will still have day-to-day bills to take care of, like car repairs or needing a new stove. 

If you have need any help or have questions drop us a note or book a phone appointment. And in the meantime, 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 Term Or Permanent Life Insurance?

Life insurance gives you a way to protect your loved ones avoid financial stress surrounding your funeral and help ease the transition to life without you.

When you’re shopping for life insurance, you have options. You can choose between multiple insurance providers. You can pick the amount you want your policy to pay out when you pass away. You’ll also need to make a decision about how long your policy will last, and that usually means choosing either term or permanent life insurance.

When it comes to term vs. permanent life insurance, what’s the difference? Which policy type is best for your situation? Hopefully this will help you understand the basics to both permanent and term life insurance policies.

What Is Term Life Insurance?

Term life insurance gives you life insurance for a set term. That means you choose a policy and a death benefit (the amount your beneficiaries will get when you pass). But you also choose a term associated with your policy.

At the end of that term (e.g., 10, 20, 30+ years), your policy is set to expire. At that time, you have options. You can let the policy expire, renew it for a new term or — assuming your insurer allows — convert it to a permanent life insurance policy. Many carriers will give you an option to convert your policy to a permanent policy during the term.

Why would you choose life insurance that will expire after a certain time? Simple: term life insurance policies are significantly cheaper than permanent life insurance policies. And, in some cases, you may feel you only need life insurance for a certain time.

For example, some people buy term insurance with a term that lasts the length of their mortgage or until their kids will be done with college. That way, your family can get through major financial milestones with or without you. Once the house is paid off and the kids are educated, you may not be as worried about leaving your partner without your income.

The amount you’ll pay for your term policy depends on a few things: your current age, the term of your policy and the size of your death benefit.

CNN Money has a helpful example to give you a ballpark idea. They say that a healthy 35-year-old male buying a 20-year term policy with a death benefit of $500,000 will pay about $430 a year. At 50, that same male will pay $1,300 annually for the same policy.

Most term life insurance policies (97%,according to the Insurance Information Institute) are level-term policies, meaning you decide a term with your insurer and your death benefit stays the same throughout the term.

But there are other types of term life policies, including yearly renewable policies and return-of-premium policies. 

Of course there are pros and cons to term life insurance. 

Pros: Less expensive, flexibility in choosing a plan that meets your needs and it's easy to understand. 

Cons: Policy expires at the end of the term, which could leave you with nothing. Also, it lacks cash value.

What is Permanent Insurance?

You can probably guess from the name: permanent life insurance is a type of life insurance that stays in effect throughout your entire life. Once you buy your policy (assuming you pay your premiums), your death benefit is guaranteed for your beneficiaries, whether you pass away in 10 years or 80.

But there’s more to the puzzle here. Most permanent life insurance policies come with a cash value component. As you pay your premiums, that money accumulates with your insurance provider. Depending on the type of policy you choose, you might get returns on that cash value in the form of dividends.

There are three different types of permanent life insurance:

• Whole life insurance: You get permanent life insurance plus a cash value component that essentially functions as a savings account. You earn dividends on your policy’s cash value component.
• Universal life insurance: With this policy, you get permanent life insurance plus a cash value component that earns interest based on money markets. You may also be able to adjust your policy’s death benefit (assuming you pass a medical exam). There are a couple of versions of Universal Life and in recent years have proven to be very suitable for many people. 
• Variable life insurance: This gives you the most flexibility — but also the most risk. You get permanent life insurance and you can invest your cash value component how you want (stocks, bonds or money market mutual funds). The issue is that if your investments don’t perform well, the losses can eat into your death benefit.

The cost of your whole life policy depends on a bunch of different things: your age, your current health, the type of permanent life insurance you choose, the amount of your death benefit, the insurer you choose — the list goes on. We’d love to give you a figure for how much you can expect to pay, but there are too many variables here.

Generally, be prepared for permanent life insurance to cost between five and 10 times more than a term life policy. For all that extra money, you get a policy that won’t expire and a potential earnings vehicle while you’re alive.

There are also pros and cons of permanent life insurance.

Pros: Policy will last for life and accrue some cash value. And if you have some medical concerns after the policy is issued, it won't affect your policy. 

Cons: More expensive, can be more complex and difficult to understand, and the cash value may disappear if the policy isn't structure correctly.

Despite what the financial "gurus" in the media profess, there is no "one size fits all" approach to this. Everyone has different issues, like medical conditions, the budgets and other financial considerations which may determine the face amount of the policy. 

A short conversation with us can help determine how much coverage is needed in your budget. Book a phone appointment to have a quick talk to determine your needs and how we can help you secure your family's financial future. 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! 

Are You Protecting Your Lifestyle?

Disability insurance is often misunderstood. While almost everyone gets the need for life insurance, not everyone understands the importance of having disability insurance. Insurance agents have the opportunity to help their clients understand this important coverage. 

Disability insurance protects your earning power should you become disabled and unable to work. It can help protect your lifestyle from a full or partial loss of income. As you well know, the probability of you becoming injured or disabled during your working career is much higher than your probability of dying.

The odds are about three to five times greater that you will become disabled for at least 90 days or longer than the odds are of of you dying. Disability insurance can help bridge this gap in income during a period of disability.

Disability insurance typically comes in two varieties, short-term and long-term.

Short-term disability coverage typically provides income replacement for an injury or disability that lasts anywhere from 30 days to one year. The time frame will vary based on the policy. Short-term disability coverage is a common employee benefit, some employers offer it at no charge. 

Long-term disability policies typically cover a disability that lasts three months or longer. This also includes a permanent disability that limits the covered individual’s ability to work on a permanent basis either in part or totally.

For those who are employed, many employers offer both short-term and long-term disability coverage as part of their employee benefits menu. It’s common for these policies to replace 50% to 60% of the employee’s compensation once the coverage kicks in.

This group coverage generally comes at a reasonable cost and will be sufficient for many of your client’s needs. However, some clients may have situations for which this type of coverage might not suffice. And of course, others who are small business owners, contract employees or otherwise self-employed might not have access to group coverage.

Group disability policies typically have a very broad definition of disability that often refers to the ability to do any sort of work. The policy might require you to work at any sort of job you might be able to do, and then pay you for the difference in your salary from your old job and the new one. In an extreme case this might require someone who is used to white collar employment to work in a fast food restaurant to receive policy benefits.

Disability coverage purchased privately will often have a narrower definition of disability. For example, an oncologist will be considered to be disabled if they can’t work in their field or something extremely close to it. Same with an attorney and many other professions.

Group coverage may not cover some forms of variable income such as commissions or incentives that many salespeople or high level executives might count on as a key portion of their overall compensation. The group policy might limit the covered compensation to the policyholder’s regular compensation.

We recommend that if you have a group plan to avoid having your premium payments deducted "pre-tax", as this can make your benefits taxable if you should become disabled and need to file a claim. Saving a few dollars in payroll tax could decrease your benefits considerably.

Along with that, note that your benefits can be taxable if your employer is paying for your coverage. 

You will need to shop around for a policy and insurance company offering the coverage that best fits your situation. In general, the narrower the definition of disability, the higher the premium. Privately issued policies will as a rule be more expensive than group coverage.

There are a number of factors that will impact the cost and even the availability of a disability policy for you. These include:

• The elimination period. This is the waiting period until coverage kicks in. The shorter the elimination period, the higher the premium. Think of it as a deductible in time.
• Definition of disability. As discussed above, a policy with a narrow definition of disability will cost more.
• Your occupation may factor into the equation, especially if you work in a field that is more likely than some others to result in a disabling injury.
• Your income. The higher the income the higher the premium as the insurance company would have to pay a higher benefit level for a disability claim.

Social Security offers disability benefits, but they are very hard to qualify for. This is not something you should depend on to cover you in the event of a disabling condition.

Should you find yourself disabled and unable to work for a prolonged period of time, this could be financially devastating without the proper coverage in place. 

During these times of Covid, it's more important than ever to make sure you can cover bills like housing, utilities and groceries. In the upper right of this blog is a "Get A Quote" button. Run your own quote and see how much it would cost to insure your lifestyle. If you have questions, drop us a note. 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! 

Cash When You Die, Cash When You Live Part 2

In the previous post I explained how Indexed Universal Life (IUL) is a great alternative for those who would like their life insurance policy to be useful while they are still living. The growth in the policies, which builds cash value, is based on an index of the stock market rather than interest rates. That means the growth inside the policy can increase faster in this low interest rate environment.

How is the IUL a way to help you in your retirement years? First, let's acknowledge that this is first and foremost life insurance. There is underwriting involved and for those who are young, healthy and do not smoke, the rates will be much less expensive. With that in mind, the growth of the cash value of the policy will greater as well for those in good physical shape.

One of the concepts of permanent life insurance is "over funding", which means that one can contribute additional premiums to the policy. This has to be done within certain limits, per the IRS (life insurance has a special tax status that can be discussed at another time), but it helps accelerate the cash value. Accessing that cash can be beneficial if one has emergency expenses, as it can be surrendered or taken out of the policy as a loan. 

Taking the money out as a loan has advantages and disadvantages. The money taken from the policy is tax-free, as it isn't income. On the other hand, if you die, your beneficiaries will get the death amount of the policy, minus the loan amount. Also, the interest can be a bit high, usually around 8%.

But there are other ways to use an IUL to your advantage when it comes to retirement. Let's compare it to a Roth IRA, which is one of the better vehicles out there. The Roth IRA has the following features:

• Post tax dollars are contributed.
• Tax-deferred growth.
• There is a limit as to how much can be contributed ($6000 for 2021).
• You have to be at least 59 1/2 years old to access the money without tax penalties.

On the other hand, here are some the features of an IUL.

• Post tax dollars are contributed.
• Tax deferred growth.
• There is NO limit on contributions.
• You can access your cash value at any age.
• There are living benefits for chronic illness and critical illness.
• If you die, the policy will pay your beneficiaries the face amount, minus any deductions or loans.

As you can see, an IUL can be a great alternative to a Roth IRA. People who are younger, healthier and don't smoke can make the most of this type of life insurance policy, so it obviously doesn't work for everyone. It also helps if the insured has the means to over fund the policy.

Years ago I had a client who used an IUL in an interesting way. Since he had been over funding it early on, it had plenty of cash value within a few years. This gentleman, who loved to look for a good investment, would see a parcel of land and decide to purchase it. He didn't want to go to the bank and fill out a loan application, as that was too long of a process, so he would call the insurance company and borrow against his policy to make the down payment on the property. Usually he would get his check within a few days.

He would repay the loan amount within a few months and do it again if he saw another good investment property. In essence, he was "warehousing" his money in the IUL for future investments. In the meantime, he still had plenty of coverage in case he died.

If you would like more information on IUL's or a quote, stop by our website and fill out a contact form so we can get back to you. 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! 

It's Hard To Be Thankful In 2020

This has been a tough year for everyone. Of course, we have all had the Covid pandemic affect us either directly or indirectly. Not only has it been deadly to hundreds of thousands of people, but it has also devastated our economy. Unemployment has been high due to the vast number of businesses that just can't stay open in this environment. And I can't remember another instance in my lifetime where food lines were prevalent. 

In my own case, the year started off on a horrible note when my father, who had been suffering from Parkinson's Disease for the last few years, suddenly took a turn for the worse and passed away. And while he was in the hospital during that time, I also ended up in the hospital for almost a week. That all happened in February, and a few weeks later the Coronavirus got bad enough to begin a series of shutdowns. 

We all know the rest of the story. Businesses shut down, people were laid off, the economy spiraled downward and, of course, thousands of lives have been lost. Needless to say, 2020 has sucked.

So here we are at the end of the year. Thanksgiving is upon us and there really isn't a lot for  people to be grateful for. But for me and mine, we can find some silver linings. 

My business took a hit, like many others, but I'm still standing. My income took a hit, but I still am able to pay my bills. And even though I spent some time in the hospital, I can actually say that I now have my health. My family is doing okay and we all have made adjustments. 

I try to keep things in perspective. And through it all I have learned to be grateful. For my home, my family, my work and even the two cats that live with us. I'm grateful that my daughter is working and going to school at the same time. And I have special gratitude for my clients who continue to do business with me, especially now that I have made the change from a traditional agency to a virtual agency. 

But one of the things I'm most grateful for is this blog, which gives me an outlet to get things off my chest, and more importantly, the great (and very forgiving) people who read my rants. Originally created to help bring some much needed attention to my business, the blog has given me a reason to write more. As I write I formulate thoughts that I can, in turn, use when talking with my clients. 

When I write about a cancer plan, I have to actually take the time to learn about that plan. This also applies to our disability insurance or any of the other products offered at Surf Financial Brokers. Doing the research on products so I can discuss them in this blog works in my favor. And my clients enjoy knowing that I know my products too. 

It's understandable if you have had a bad 2020. But at some level there is always going to be something to be grateful for. It really depends on your perspective and how hard you look. With a vaccine hopefully being available sooner than later, I think things will start to turn around for all of us. And for that I am grateful.

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! Thanks!

Do I Need Business Overhead Expense Insurance?

 

When I speak to groups about their insurance, I often mention "Holy Trinity" of insurance, which is their medical insurance, life insurance and disability insurance. The last one, disability insurance, I tell them, is just is important as the other two, because if one were to get sick or hurt and couldn’t work, the bills don’t stop coming and will need to be paid. Disability is basically paycheck insurance.

But what if you are, like me, self-employed, a 1099 employee or a business owner and don't have access to a group plan? What would happen to your business if you were unable to work?

Which is why I like to bring up Business Overhead Expense  (BOE) coverage. It’s an insurance product most people probably haven’t heard of before even though it's been around for a long time. And it definitely one of the most undersold policies out there, probably because there are agents who don’t even know about it.

Business overhead expense insurance is designed to keep things going when a disability or illness requires you to be temporarily absent. This is different from personal disability insurance, which makes payments directly to you to replace lost income if you can’t work.

If you own a business, it’s important that you understand how BOE works so you can decide if it’s something you need.

BOE is a type of insurance that pays benefits to your business if you’re unable to work. For example, if you’re in a car accident and are seriously injured, or you’re diagnosed with a serious illness, your policy’s benefits could kick in to provide the business with cash flow while you recover.

This type of insurance is typically used to help manage your business’s day-to-day expenses. It helps your business continue as usual even when you can’t be there.

What BOE Insurance Covers

BOE is business-specific, meaning it applies to expenses related directly to running your business. The types of expenses you can use business overhead expense insurance to pay include:

• Rent or lease payments
• Loan payments
• Insurance premiums
• Utility bills
• Custodial services
• Payroll for employees
• Tax obligations
• Business credit card bills

There are, however, some things that overhead expense insurance is not designed to cover. For instance, these policies don’t extend to expenses related to improving or expanding your business, such as buying new equipment or opening a second location.

Overhead expense insurance also doesn’t cover your salary. That’s why you would need an individual policy on yourself.

It’s worth considering purchasing this type of insurance if you’re the person who’s primarily in charge of running your business. Having an overhead expense insurance policy in place means the bills continue to get paid for the business when a disability or illness puts you on the sidelines.

Depending on the terms of your policy, your insurance company could pay benefits for up to two years after you file an eligible claim. That can be helpful if you have a serious disability, illness or injury that requires extensive rehabilitation or physical therapy.

Keep in mind that not every business owner may qualify for this type of insurance. If you’re self-employed as a freelancer and run a business from home, for example, you may not be able to purchase a policy. You may have to stick with a regular personal disability insurance policy instead.

There are advantages associated with having this kind of insurance for your business.

Here are some of the key benefits of BOE insurance:

• Your business can remain open even when you can’t be there to run it
• Essential business expenses can be paid for using policy benefits, allowing you to preserve your business’s cash reserves
• Being able to meet payroll means you have a better chance of retaining key employees
• A BOE policy decreases the odds of having to dip into personal savings to cover business spending
• Premiums paid for coverage may be tax-deductible
• Business expenses paid with premiums may also be tax-deductible

In terms of the downsides, here are a few things to keep in mind:

• Policies don’t pay benefits to you directly so you’ll still need separate disability coverage for that
• Benefits typically have a time limit of 2 years and can’t be paid indefinitely
• Any benefits you receive may be considered taxable income for the business
• Policies may enforce a maximum monthly benefit limit, which may be less than what you need to continue operations

As you can see, the pros generally outweigh the cons but they still need to be factored in. And you also have to consider the potential return on investment for purchasing this kind of coverage. Having it can be a safety net if you get sick or become disabled but if you never end up using your coverage, you may feel as if you’ve paid premiums for nothing.

The key advantage to having a BOE is that it gives you time to make a decision if you are disabled. You probably won’t know when or if you’ll recover, or if you should shut down the business, sell it or keep it open. That 2 year benefit window gives you time to figure it all out.

If this is something you think you need, drop by our website and make an appointment to have an agent call you. Or you can leave a question on our contact form. 

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! Thanks!

How Do The Self-Employed Get Benefits?

I am very comfortable working in the group benefits market. Helping people who work for large companies, school systems and municipalities has been part of my world for nearly 20 years now, and making sure they have the right benefits is a task I welcome.

At the same time, I focus the majority of my efforts toward those people who don't have a large corporate employer. As a 1099 contract employee, I realize that it is up to me to find my own affordable benefits that will help me and my family in the event I should get sick or hurt, or worse, die. That is why I enjoy helping other business owners, entrepreneurs, sales professionals and the otherwise self-employed get the coverages they need.

There are a few differences in the types of products available. Those large group products have less underwriting, and in some cases no underwriting. "Guaranteed issue" means that the insurance will cover a person with no questions (except tobacco usage). "Simplified issue" is another option, which means there may be just a few health questions. Those "knockout questions" will decide whether or not a policy gets issued. One "yes" can do you in.

But policies that are issued on a guaranteed or simplified issue basis typically take on more risk, and that risk is passed on to the employee of the group in the form of higher premiums. One of the tricks agents us when selling in the group insurance field is to quote the premium based on pay frequency. If you are paid weekly, $10 each week sounds a lot better than $45 each month. 

For the rest of us, having to find coverages that aren't deducted from our checks can be overwhelming and daunting. It doesn't have to be that way though. Use a couple of our tools and watch our product videos to see what is available and how these products work. 

Let's look at a few of these insurance products.

• Life insurance. We suggest that you take a look at affordable term life insurance while you're working, but maybe also get a small permanent policy for final expenses. For our younger clients we offer a term life insurance policy that will carry them out to age 65! And there is no medical exam* for policies under $250,000. 
• Individual Disability insurance. This should be called "paycheck insurance", because that is the purpose of this policy. When trying to determine how much coverage you should apply for, I suggest the "H.U.G." method by figuring out much monthly expenditures are for housing, utilities and groceries. (Note: individual disability policies generally don't cover maternity unless the doctor deems it necessary during the pregnancy.)
• Business Overhead Expense insurance. This is another version of the previously mentioned Disability insurance, but the benefits cover the bills of your business, not your personal bills. If you rent an office, have utility and payroll expenses, this plan gives you the time to think your options over if you get sick or hurt and are not able to work. You may recover, retire or sell the business, but you won't be rushed into a decision.
• Cancer insurance. I have found that when working with large groups of employees, cancer plans are popular through word of mouth. If one employee is diagnosed the other staff members realize how expensive the out-of-pocket costs are. We have a couple of different options for cancer insurance, one being a traditional reimbursement plan, as well as a lump-sump plan. Both can cover deductibles and co-pays and offer a wellness benefit. (One of our plans also covers several other diseases as well, like meningitis and tuberculosis.)
• Cancer, heart attack and stroke insurance. These plans give you the option to choose if you want coverage for one, two or three types of illnesses.
• Accident insurance. Coverage for any type of accident, from cutting your hand and needing a few stitches to serious automobile wrecks. As long as you get some medical attention these plans pay a benefit. Great for active people or if you have kids who play sports.  

If you are interested in learning more about these products, visit our Products and Quotes page from our website. There you can run your own quote for life and disability insurance, as well as watch some short videos about some of our other products. If you have any other questions, leave us a note on our contact form or book an appointment for us to give you a no-pressure call.  In the meantime, stay healthy!

*Medical records will be requested and may result in some clients needing an exam. 

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! Thanks!