Time For a Change To This Blog

Not that many people noticed, but I took a week off from the blog last week as I tried to regroup a bit. I wanted to use the time to consider a few options. Partly from general burn out and partly because coming up with a new insurance related topic three times a week is harder than I thought, I mulled some stuff over and have decided to make a few changes. 

Part of the problem is that I continue to write another blog on sales and marketing twice a week. I appreciate that it makes me do research on new products and keeps my brain "flexing it's muscles", but it was becoming a bit much. 

After some consideration I will be changing the format here a bit. There will probably be only one (two at most) blogs each week, with less text and more video. This helps me because I'm a decent writer but I can knock out a short video on a topic in a minute or two, which is about the same time it would take you to read one of my blogs. 

I'm looking forward to sharing more information on life insurance, disability, long term care, accident and cancer insurance, as well as our other plans. 

To start us off on a lighter note, here is a good submission for you. If you have any ideas or suggestions, please leave us a comment. Thanks and please subscribe.

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!

5 Ways To Help Your Family From Beyond The Grave 2023

As an insurance agent I have come across a wide variety of opinions when it comes to people discussing their own deaths. I am constantly amazed at how people will open up with me so quickly. Maybe they trust an insurance agent more than their own family members.

Some of these folks believe they are heading into the afterlife, one way or another, while more than you would expect seem to feel that there is nothing after you die. But with all of these differing opinions, most do agree that their loved ones will still be around when they are gone and may have to pay some expensive bills as a result of their death.  

And here is the rub. If we agree that there will be some costs involved when we go to our great reward, shouldn't we try to minimize those costs ahead of time? Wouldn't it be in the best interest of our surviving family members? It seems like common sense to say "yes". Especially when we know that no one lives forever.

So what can you do to make sure your family doesn't go broke paying their last respects to you? Here are a few ideas of simple tasks that don't need to be put off any longer.

1. Have a will. Your will directs the courts to help settle your estate per your wishes. It's very important to keep it updated every few years as your situation changes. And most importantly, make sure your family members know where to find it. Is your will in a safe, or a file at your attorney's office? And never leave it in a safe deposit box unless other family members have a key. 
2. Have a living will. If you were seriously ill, would you want to be on life support or would you rather have the medical staff "pull the plug"? Your directives can keep your family from keeping you on life support when you would rather pass away.
3. Have a life insurance policy. As an attorney friend of mine always says, "A life insurance policy trumps a will." You don't have to wait for someone's estate to be settled because a life insurance policy is a binding contract between you and your insurance company. Remember that when someone dies, the funeral home, lawyer and others will have their hand out waiting to be paid. Your life insurance agent will be the one bringing you a check to pay those bills. 
4. Pre-plan your funeral. Instead of your kids picking out a Cadillac coffin, you can decide for yourself how modest you want your funeral to be. 
5. Pre-pay your funeral. My own father did pre-plan but didn't pre-pay. From the time he had planned his funeral to the time he actually passed away, inflation had done some damage. The funeral director shook his head and said, "I'll do the best I can on these prices", and I could tell it wasn't the first time he had run into this situation. 

This list may seem daunting, but it doesn't have to be. The first two items and the last two items can be taken care of at the same time. Having a plan and letting your family know what it is can save them substantial money and they will know that, even in death, you are looking out for their best interest.  

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!

I Sell Money

When I first got into the insurance business I didn't have a mentor or anyone to "show me the ropes" per se. I learned quickly that my sales manager had a financial interest in me selling, and one would think that he would want me, as well as the rest of the agents on his team, to succeed. And while it was true to an extent, I also learned that I needed a mentor who did not have any skin in the game when it came to my success. Basically I needed someone who could be objective and give me sound advice who would be looking out for my interests.

Since no one was stepping up to the plate to help me, I started reading books about sales and any information I could find about successful insurance agents. There were many motivational books and most of them gave the same basic information. One day, I came across an article about an agent who was deemed "The Greatest Life Insurance Agent of All Time". His name was Ben Feldman and his story was quite remarkable. 

I don't want to bore you with all of the details as you can look up the details on him with a simple Google search, but the simple fact is that he found a way to sell more life insurance as an agent than some entire companies at the time. When asked how he sold so many insurance policies he said, "I do not sell life insurance. I sell money."

You see, Mr. Feldman was able to clearly communicate what life insurance is. When a client buys a policy, they are actually buying a promise. That promise is that if the insured should die, the insurance company will pay a death claim which will exceed what the client has paid in. 

Mr. Feldman also was noted as saying to his agents, "Don't sell life insurance. Sell what life insurance can do." In today's world of life insurance, a policy can do a lot for a family when the insured passes away, but with all of the living benefits available nowadays, people can use them while they are still living. 

Let's face it, no one really wants to buy life insurance, or any other kind of insurance for that matter. It's not fun or something one can show off to their friends. But it is necessary, especially when others are dependent on us financially. Our children rely on us to provide housing and education, which costs money. Our parents, who always insists that they don't want to be a burden on anyone else, may ultimately rely on us to help with long term care costs if they haven't planned in advance.

And then there are others that may depend on us financially, like charities and churches. When a large donor passes away, that non-profit organization may need to find other donors to fill the missing gaps. And sometimes, those large donors will list the charity of their choice as a beneficiary on a policy.

Ben Feldman knew all of this and made sure he didn't sell just the steak, but the sizzle as well. Instead of saying he was selling life insurance, he would call it something like "a special educational package for your children's children."

So the next time you talk to a life insurance agent, remember, we don't just sell insurance, but we sell money, and a promise. 

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 Younger People Need Life Insurance? 2023

If you are a millennial or GenX'er you may wonder what kind of life insurance you should purchase. There are a few different types of coverage available. Term, universal, indexed universal and whole life. Term policies could be considered "temporary" as they only cover you during a specific amount of time, like 10, 20 or 30 years. There are even some companies out there offering 40 and 45-year terms for younger people. Term policies are much less expensive because they only offer a death benefit and there are no other features like loans or cash value. (Some term policies now offer "living benefits" which can help you if chronic or critical illnesses arise.)

Although term life insurance does not accrue cash value, it's affordable for working families during their working years. For instance, a healthy non-smoker in their mid-20's could expect to pay less than $25 each month for $500,000. (Rates are subject to underwriting and are not guaranteed)

On the other hand there are permanent policies, like universal life (UL), indexed universal life (IUL) and whole life (WL).  These policies are more expensive but they also cover for the rest of your life as long as you continue to pay the premiums.

Permanent policies also have various ways to build cash value internally. For example, the UL uses interest rates, but since rates are at historic lows (for now), it's not a great option. We have many younger clients who use IUL's in lieu of investing and are very happy. 

For those who are single with no dependents but own a home, a policy will allow you to keep that home in the family. Having parents or nieces or nephews who could use that home if you should pass can be beneficial and life insurance can pay off the balance of the mortgage. 

So how can you get a policy? You can usually get a policy through work if they offer one, however we always recommend you have additional coverage outside of work, in case you leave your job. Also, that coverage through work is rarely enough to cover all of your debt and replace lost income. If you have a family, you will definitely need much more.

A great way is to use a quoting tool (we have one on our website) which lets you enter your information and will give you several choices of coverages. If you like what you see, you can even begin the application.

A simple method to find out how much life insurance you need is to add up your expenses and liabilities, like the mortgage, car payments and other debts. That should be a minimum for your needs. You may also want to consider lost income if you are the sole breadwinner of the home, and future education costs if you have children. On our website, our life insurance quoting tool offers a calculator to help determine your needs.

You may or may not be required to have an exam. It really depends on several factors, like the carrier and the amount you are applying for. Many companies have decreased their usage of exams during the pandemic, but they still reserve the right to have your medical records transmitted to them. And if there is no exam, you could have to answer a lot of medical questions during the application process. The secret here is to be as truthful and honest as possible, especially when it comes to questions about smoking (tobacco or cannabis) and your family's medical history.

If you have questions about what type of insurance you need or how to apply, let us know. In the meantime, please stay healthy!

Want to know how much disability insurance you need? Drop us a note and we'll send you our free PDF!

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! 

Wrapping Up Disability Insurance Awareness Month

Memorial Day is upon us, which is the day we recognize all of the men and women who served in our military and made the ultimate sacrifice. It is an important day and too many of us don't take the time to appreciate these people. If you have an opportunity to attend a ceremony, you will be happy you did.

As it's also the end of May, we can close the books on another Disability Insurance Awareness Month (DIAM), which is when the insurance industry promotes the importance of disability insurance. Unfortunately, disability coverage is not top of mine for most people. Part of this is due to misconceptions of why to buy it and what it does.

For example, most group disability plans cover a few weeks "maternity" coverage, immediately after a child is born. I have worked in some of these groups, like schools and municipalities, when the employee decides to drop her coverage because "I already had my kids." I try to plea with people to keep their policy, not because I'm will lose a commission (I'm on a salary), but because there are so many other times when that policy will be useful.

One of my old sales managers would tell us that when people hear the word "disability", they think of someone in a wheelchair who has been seriously injured in a car accident. The truth of the matter, however, is that over 85% of disability claims are for illnesses, with cancer being the leader in that category. (Heart disease and other cardiovascular illnesses are not far behind.)

Of course there are those people who do get injured. I spoke with a teacher in western North Carolina who had been in a car accident. Someone "t-boned" her car and broke her femur. She was out of work for four months while she went through physical therapy. Of course, her policy did what it was designed to do, which made her a strong advocate for disability insurance among her coworkers.

But what is your disability policy designed to do? Your policy is actually "paycheck" or "income" protection. If you were to get sick or hurt and were unable to work, your policy would help you pay the bills. And we all know that those bills don't stop coming just because you are a very nice person. 

There are those people who don't necessarily need a disability insurance policy. They may have passive income, like rental properties or other investments, that will provide some money to pay monthly bills. For most people, though, this is not the case.

If you have an employer who offers a disability policy, take a good hard look at it. And if you are a business owner, a contract employee or otherwise self-employed, you may want to consider an individual disability policy. They have a few differences from the traditional group plan but can be an integral part of your financial plan.

Have a great Memorial Day and remember those who gave all for our freedoms.

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!

Making Insurance Accessible To All

As we all know, the internet has changed the way people do business. More importantly, it's also changed the way businesses do business. 

Not that long ago if you needed someone for a specific service, you "let your fingers doing the walking in the Yellow Pages". Now I make that reference to my college age daughter and she doesn't know what I'm talking about. Everything from entertainment to financial services has gone digital, and for those who aren't offering some sort of web-based platform, they may as well be throwing a chunk of their marketing dollars into the garbage. 

This struggle is real in the insurance industry as well. The old school method of getting a referral, meeting with them in their home or office over several appointments, and hoping to get an application completed (along with more referrals) has lost some of it's appeal. For younger, more internet savvy consumers, doing their own research and making online purchases is the norm. 

At the same time, these younger people are less interested in selling insurance, mostly because of the old school methods that still are being taught in training offices throughout the country. According to a 2017 article by the World Economic Forum, the average age of a life insurance agent was 59. Considering that agents tend to sell to those around their own age, millennials are, for argument's sake, not being properly attended to when it comes to their own life insurance needs.

In 2007 I went to work for a large life insurance company. We were the "best of the best" according to the management, so you would think that we could attract agents who would succeed and thrive. Our managers boasted that we were ahead of our competitors in agent persistency, because we had a rate after three years of 17%, opposed to 10-15% by our peers. This meant that if they hired 100 agents today, a whopping 17, on average, would be around after three years. And they were actually proud of this.

For the consumers, though, this is bad news as well. How many times have you purchased life, disability or other kind of insurance, only to find out that your agent is no longer with the company?  

As a society, we have become numb and/or jaded when it comes to having bad service. This is why a growing number of people are cutting their ties to agents and buying financial services from the internet. The television is full of ads letting us know to get car insurance, life insurance and investments straight from our computers. Convenient and quick. 

But what about the personal service? What if we have questions or concerns or need to file a claim? Are we destined to having to call an 800 number each time we need something. Even worse, what if we have to speak to someone who is out of the country? Is that good customer service?

At Surf Financial Brokers, we have tried to combine the best of both worlds. Our quoting tools for life insurance, dental, vision and hearing plan, cancer insurance, hospital indemnity insurance and accident plans make it easy and quick for people to find a policy within their budget. And if they like what they see they can start an application.

At the same time, if they want a more personal touch they can book a short phone appointment with one of our agents who can help with our products, including others like Long Term Care and disability insurance. We want to help anyone who recognizes they need insurance to be able to get it in the way they want. 

Let us help you find the right product for your needs.

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!

Has Covid Made You Rethink Your Insurance Coverage?

When the pandemic struck last year some people were too distracted by the news to take a look at their existing insurance coverages. Having major medical coverage is good, but if one were to be seriously ill and hospitalized, out-of-pocket expenses like deductibles and coinsurance could quickly take their toll on a family's finances. 

And the loss of income from being out of work could also lead to unpaid bills piling up. Extra stress doesn't necessarily help a situation like this. 

That is why many people took a second look at their insurance policies in the last year or so. It seems that almost everyone knows someone who has had the virus. Even though most managed to have mild symptoms and rode it out at home, we also know those who have been seriously ill from it and even died. 

Over the last year people have begun purchasing more disability insurance, along with hospital indemnity plans, and even increasing their life insurance coverage. I recently met with a group of teachers who all had some level of interest in at least one of the above mentioned plans because they had co-workers who had fallen ill due to Covid. I suppose it hit home for them.

Putting these policies together, some agencies have constructed a loosely knitted "Covid package" plan to get the message out. Sales for these plans have increased, especially the hospital indemnity plan. The weird part was that many people I spoke to seemed to have never heard of this policy before, so I would assume that the agents were not discussing them with their clients. 

Hospital Indemnity plans are exactly what they sound like. They help defer the out-of-pocket costs of being admitted and confined to a hospital. We offer a fine plan that has good benefits. If you would like a quote or more information, click here. 

Aside from the plans mentioned above, our agency has had an increase in sales of our Short Term Home Health Care (STHHC) Plan. Due to the very high rates of infections in assisted living and skilled nursing facilities, more people are wanting to make arrangements to stay in their own homes when they get older. The STHHC policy does just that, by helping to pay for cost of caregivers in the home. To watch a short video on the policy, click here.

The cost of having in-home caregivers is about double of that in a facility. Taking the burden off of family members makes these kinds of plans especially attractive, plus the family members don't have to worry about putting their own careers (and families) on hold.

Of course, everyone could use additional life insurance. Studies have shown that of those who own life insurance, up to 40% don't have the amount of coverage they actually need. And it isn't nearly as expensive as people think it is.

If you aren't sure if you have enough coverage for Covid or the next pandemic, drop us a note or book a short phone appointment. We'll be happy to look over your existing coverage and see if you need to fill any gaps. 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 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!

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!

Who Brings Your Family Money When You Die?

Last year when my father passed away, I found myself as the executor of his estate with many responsibilities. In addition to finding a realtor to handle the sale of my father's home and hiring contractors of various sorts for quotes and repairs, I was also on the hook for making sure bills got paid. Where was that money supposed to come from?

Unfortunately for me, my father had not updated the beneficiaries on any of his life insurance policies in over 40 years, which is insane and downright criminal. All of his named beneficiaries has died way before him, including my mother who had died nine years earlier. That left us creating his estate's bank account with the little cash that was in his checking account and waiting a few months for the policies to pay to the estate instead of his heirs. 

In that time, I realized that when someone dies there are a lot of people with their hands out wanting money. Here are a few: 

1. Contractors. As previously mentioned, we had to figure in the cost of repairs and upgrades to the house. Some we dealt with and others we passed along to the prospective buyers because they were just too much for us to afford.
2. Attorneys. Our attorney let us know from the beginning of the process what the estimated bill will be at closing, so I have to make sure that money is on hand when we need it.
3. Accountants. Be prepared to pay someone to handle your deceased loved one's tax preparation for up to 2 years (if they died before filing the previous years taxes plus the preparation of tax forms for the years in which they died), plus possible estate taxes. 
4. Funeral costs. I've mentioned before how my father pre-planned his funeral but didn't pre-pay. In other words he made a wish list. Inflation took it's toll from the time he chose his casket to when he would actually use it. 
5. Lien holders. This was one I didn't expect but a deceased person still may have debts to be paid off. My father was taking money from a Home Equity Line of Credit (HELOC) which we were unaware of until his death. We settled up with the bank after the sale of the house but I can imagine other people have all kinds of debts that need to be taken care of with cash.
   

Of course with everyone coming forward and asking for money was stressful, however the one bringing us money to take care of these things was the insurance company. When all the others have their hands out, one is bring the much needed check. 

Think about your family for a minute and consider them being in a situation like that. Having to handle funeral directors, lawyers and other bill directors while grieving is a tough situation to put them in. You can avoid it by making sure you have enough life insurance available for them to handle easily and without going into debt or needing a GoFundMe page. 

To help you determine how much life insurance coverage you need, we have included on our quoting software a calculator. It asks for numbers regarding your debts, including mortgage, as well as how much savings you have put aside. You may find out that you don't need as much as you previously thought.  

If you have questions about making sure your life insurance will ease the burdens on your loved ones drop us a note. 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 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!

How To Make Life Insurance Work

Life insurance has come a long way since the days when it was known as burial insurance and used mainly to pay for funeral expenses. Today, life insurance is a crucial part of many estate plans. You can use it to leave much-needed income to your survivors, provide for your children’s education, pay off your mortgage, and simplify the transfer of assets. Life insurance can also be used to replace wealth lost due to the expenses and taxes that may follow your death, and to make gifts to charity at relatively little cost to you.

To illustrate how life insurance can help you plan your estate wisely, let’s compare what happened upon the death of two friends: Neil, who bought life insurance, and Bob, who did not. (Please note that these illustrations are hypothetical.)

Life insurance can protect your survivors financially by replacing your lost income

Neil bought life insurance to help ensure that his survivors wouldn’t suffer financially when he died. When Neil died and his paycheck stopped coming in, his family had enough money to maintain their lifestyle and live comfortably for years to come.

And since Neil’s life insurance proceeds were available very quickly, his family had cash to meet their short-term financial needs. Life insurance proceeds left to a named beneficiary don’t pass through the process of probate, so Neil’s family didn’t have to wait until his estate was settled to get the money they needed to pay bills.

But Bob didn’t buy life insurance, so his family wasn’t so lucky. Even though Bob left his assets to his family in his will, those assets couldn’t be distributed until after the probate of his estate was complete. Since probate typically takes six months or longer, Bob’s survivors had none of the financial flexibility that a life insurance policy would have provided in the difficult time following his death.

Life insurance can replace wealth that is lost due to expenses and taxes

Neil planned ahead and bought enough life insurance to cover the potential costs of settling his estate, including taxes, fees, and other debts that his estate would have to pay. By comparison, these expenses took a big bite out of Bob’s estate, which had to sell valuable assets to pay the taxes and expenses that arose as a result of his death.

Life insurance lets you give to charity, while your estate enjoys an estate tax deduction

Using life insurance, Neil was able to leave a substantial gift to his favorite charity. Since gifts to charity are estate tax deductible, this gift was not subject to estate taxes when he died. Bob always dreamed of leaving money to his alma mater, but his family couldn’t afford to give any money away when he died.

Life insurance won’t increase estate taxes — if you plan ahead

Before buying life insurance, Neil talked to his attorney about the potential tax consequences. Neil’s attorney told him that if his estate was large enough, it could be subject to federal and state estate taxes, depending on the applicable law at the time of his death. Neil and his attorney put a plan in place that would allow Neil’s survivors to use his life insurance policy to help pay for some of the potential estate taxes that might be owed at his death.

Be like Neil, not like Bob

Throughout his life, Bob worked hard to support his family. Neil did, too, but went one step further — he bought life insurance to protect his family after his death. Here’s how you can be like Neil:

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• 1. Use life insurance to ensure that your family has access to cash to help them meet both their short-term and long-term financial needs.
• 2. Plan ahead — buy enough life insurance to cover the potential costs of settling your estate and to ensure that the assets you leave to your survivors aren’t less than you intended.
• 3. Consider using life insurance to give to charity.

As you can see, these are just a few ways to make sure your life insurance policy is used efficiently. If you have any questions or comments, let us know. 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!

Why Younger People Should Invest In Life Insurance

Younger adults have always been a difficult market for life insurance agents. They typically feel they are indestructible and will live forever. On top of that is the feeling that life insurance is unnecessary because they tend to marry later in life and don't have the responsibility of family. Nothing could be farther from the truth though.

Our young adults are missing one vital piece of information that could really work in their favor and that is they could be leveraging their good health and young age. Just because they don't think they have a need for life insurance now doesn't mean that they won't need it in a few years. 

Life insurance is cheaper for those who are younger, healthier and don't smoke. Everyone knows that. And for those who are in their 20's, taking advantage of this could really benefit them as they age. Whether they are looking for just a term policy or something that can build cash value down the road, there's a good probability that our younger people can get a great deal.

For instance, purchasing an Indexed Universal Life (IUL) policy and overfunding it from a young age offers a much better opportunity of growth than a traditional whole life policy would. These policies also include features like early withdrawal for income streams, living benefits that you can use while you're still alive, and some tax advantages. 

I often tell the story of a young attorney who really didn't care about the life insurance portion of the policy as much as he wanted a safe place to put his money and retire a bit earlier than most. The illustration I rand for him showed some great tax-free withdrawals (in the form of a loan) as well as the peace of mind knowing that if something were to happen to him his wife would be okay financially. 

That same policy for one of his colleagues who was just a couple of years older but was overweight and a smoker couldn't produce the same results. For him, the "cost of insurance" would have been taken most of the gains of the policy off the table. Again, health matters.

But let's say you don't have the income to spare like the young attorney did but you still want to lock in on a great rate for life insurance. Traditional term policies were always the way to go for coverage during your working years. The problem was that the terms usually maxed out at 30 years, leaving people uninsured (or uninsurable if their health got bad) when they needed the coverage most. 

For these people, we now have a carrier offering a 40- and 45-year term policy, which can lock in a rate to age 65 or even 70 years old. Of course, underwriting is still applicable, but it's still a great deal. These policies are aimed at the "millennial" market who are forward thinking and know that the future will be here faster than expected. 

If you are young, healthy and don't smoke (or know someone who falls into this category), use the "Get a Quote" button on the upper right of this page to see if a term policy would fit in your budget. And if you want an illustration for our IUL product, book a a phone appointment and we'll be happy to talk with you to find out what your goal is. 

In the meantime, stay healthy and let us know if we can help you secure your family's financial future.

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!