Can I Take Out A Life Insurance Policy On Someone Else?

Every once in a while I will be having a conversation with someone who wants to know if it is possible to insure someone else, like an acquaintance. When this happens I don't really know if they are kidding or not, but I ask if there is some sort of relationship there between the two of them. Usually the answer is "no, you can't" which seems simple enough but people ask why.

Can you imagine the madness that would ensue if people just went around insuring the lives of people they didn't know but "looked sick"? And if insurance companies had to pay those claims they would be out of business quickly. 

There are some guidelines (and reasons for them) when it comes to insuring other people. One of the basic rules for this is that there must be an insurance interest. In other words, before you take out a policy on someone else, you must have a relationship, either familial, personal or financial, with that person. Of course we can take out a policy on a spouse or child, as people do that all the time.

And if you borrow money from a financial institution or an individual, they may require a policy to secure the loan. That is considered acceptable as well. 

Another piece of this is that most states forbid insuring someone over the age of 16 without their knowledge.  But if the insured is over 16 they must sign a form acknowledging they are being covered. This rule applies even if the insured is your 18 year old child.

Back in the old days big companies would buy life insurance policies on all of the employees, with the company being the beneficiary. The thought process was that if the employee died there would be "transition costs" associated with finding a replacement. These Corporate Owned Life Insurance (COLI) policies became controversial when family's in need began learning that the death of their loved one was profitable to their deceased loved one's employer.

The issues arose (as well as lawsuits) when the insureds were no longer in the employ of the company. At that point, any insurable interest went out the window. In the early 2000's several of these types of legal issues got some news publicity which shined a light on how many large corporate companies were secretly adding to their bottom lines.

Nowadays, COLI's are still used, but not covering every employee, including the janitor. (They were actually called "janitor policies" because of this). More often than not, COLI's are used to cover the lives of the top brass, like the board of directors or top executives, who are supposedly fully aware of the policy. I have even heard that the beneficiaries of the policies are split among the company and family members. That sounds much fairer.

With all of that said, here is a short list of people you can insure:

• Family. When the life insurance agent asks what your relationship is to the insured, immediate family is a no-brainer. Be aware that there are limits on insuring children but otherwise you should be okay.
• Former family. As in ex-spouses. If there are children involved the court may order that you maintain a life insurance on your former spouse to help with expenses if the former spouse should die.
• Parents. Yes, they are family but they may have let their life insurance policy lapse or expire and a final expense plan may be the best answer.
• Business partner. Buy/sell agreements are usually written up between business partners to help ease with the transition of responsibilities when one of the partners dies. These agreements are usually funded by a life insurance policy so one partner can buy out the deceased partners ownership. 
• Key employees. Key employees are the ones who contribute significantly to the business or may have some highly specialized skill. These people are difficult to replace and if they die unexpectedly the company could take a financial hit.

If you have any questions about any of these scenarios, ask your agent or drop us a note in the comments. In the meantime, 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 People Have Enough Life Insurance?

Many Americans do not have nearly enough life insurance to support their families’ needs. In fact, about 44% of families say they would face financial hardship in six months if the primary wage earner were to die, noted David Levenson, president and CEO of LL Global, in a recent video presentation. Now, a group of life insurance organizations is aiming to change that.

LL Global, the parent organization of life insurance researcher LIMRA and LOMA, is helping lead an effort with industry trade associations and more than 60 of their largest member companies and distribution partners to close the life insurance coverage gap. One initiative is encouraging financial professionals to engage with their existing clients to look at the adequacy of their protection. 

"Most people think it’s just to pay for funeral expenses; but the word ‘life insurance’ is really a misnomer," Elsie Theodore, a Virginia-based regional vice president of Primerica, told Investopedia. "Can anyone really insure someone’s life? No, ‘life insurance’ is really income replacement. Its purpose is to replace the income of the breadwinners in the household."

As a general rule, she added, “When you are trying to determine how much coverage you should have, you must first look at your annual income then multiply by 10. You make $100,000 a year, your life insurance should be at least $1 million.”

That number may seem high but the priority is making sure that loved ones can stay in their home, take care of the everyday bills and even provide for education costs if children are still in the picture.

A major problem today, Theodore noted, is that many people rely solely on the group life insurance provided by their employer, which is often inadequate. Typically those policies only provide coverage for one or two years salary replacement. Also, they may or may not be portable, which means if the the employee changes jobs the policy might not be there when their family needs it most. 

According LIMRA’s research, about 60 million American households don’t have the proper protection for their families, with an average deficiency of $200,000.2

What's more, the problem is worse than it was in the past. While 63% of Americans had life insurance coverage a decade ago, that number had dropped to 54% by 2020, LIMRA says.

There are a lot of contributing factors to the incomplete coverage, including changes in individual life
distribution, employment-based benefits, worker participation rates, family and household make-up, and population demographics. People also have competing financial priorities.

In addition, there are misconceptions about price point, need, and ease of purchasing, particularly among Millennials. This is ironic when you realize that most of them grew up with phones and most agencies are trying their best to make insurance coverage accessible on mobile devices.

As LIMRA points out, the COVID-19 pandemic has highlighted the fragility of life and focused more Americans on the role of life insurance.

Theodore recounted one particularly sad situation: "After a few attempts to get this one client to sit with me and get her plan started, she called me because she had 13 members of her family die from COVID-19 and not a single one had insurance. That was an unfortunate wake-up call.”

The life insurance industry has also responded to the pandemic by adapting its sales practices. Companies have made significant advancements in the ability to deliver a fully digital purchase experience so consumers can choose to buy a policy when, how, and where they want. Understandably, insurance carriers are increasing the availability of web based applications and decreasing the requirements for in person medical exams. 

If you aren't sure if you have enough coverage, let us help. 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!

Is Your Agent Too Pushy?

Insurance agents have reputations as pushy salespeople similar to those who sell used cars. When I originally went into the business I was fully aware of this and was resistant to even get into the industry. To be honest, the first company I worked with was guilty of feeding into this stereotype. The reason for this was that instead of trying to be a consultant and helping the client structure a plan with a group of good policies we had to work with, we only had one product. And for the most part, we would only meet with the customer once.

We were trained to be aggressive and to get out of someone's home or business with a check in hand. As my coworker would say, "Your income is in their wallet and you need to do everything possible to get it out of there." We dubbed this "guerilla selling", since we would rush in, try to make a few bucks and get out. 

Unfortunately this left me with the impression that all insurance sales were like this. I was young and naïve. My 23 year old brain knew that I did not want to do this kind of sales for the rest of my career. So I got out of insurance and went into selling office supplies, then retail management. 

After a few years I decided to rejoin the insurance workforce, but this time things would be different. No high pressure selling for me. For the most part, things were much better than the first time around and I noticed that many of my coworkers were of the same mind as me. 

Sure, there were those agents here and there that insisted on being pushier than the rest of us. Those agents rarely stuck around for long because much of their sales did not stay on the books. One of the nice things about selling insurance is the residual commissions, but if someone cancels their policy too soon, those commissions go away. 

We had veteran agents who offered to mentor the newer reps. If we had a case we were working on, we could run it by them and get feedback. The most often asked question from them would be "Is this in the best interest of the client?" In other words, "Are you helping the client or yourself?" 

This gave me a much better perspective of what an insurance agent was supposed to be doing. That stereotype of a pushy insurance agent was fading from my mind. 

But why does that stereotype still persist? One answer may be the product itself. Let's face it, no one really wants to buy insurance. It is a product that we buy hoping to never use. Also, it's not tangible. You can hold your policy, but in essence, it's just a promise on a piece of paper. Unlike a car or a home or a video game, you can't enjoy it (unless you enjoy the peace of mind that comes with having it). 

I like to use the "saving up for" test when it comes to sales. Ask someone what the next big (or small) purchase is that they are saving up for. You will get answers like a down payment on a home or a new flat screen TV. No one saving up for Long Term Care insurance or a disability plan. 

And the fact that some insurance has to be mandated should tell you something. If a state government says you are required to have auto insurance, you can infer that if they didn't there would be a lot more uninsured motorists driving around. The same goes for mortgage companies requiring homeowners insurance.

Speaking for myself, I don't want to "high pressure" someone with something they obviously don't want but most like need. With that in mind I use what I call "good pressure" selling, which means that, like a family member who is looking out for their best interest, I'm going to do my best to help someone make the best decision, not just for my client, but for their family as well. 

If you think your agent is too pushy you don't have to do business with him or her. But be aware that most are looking out for you and your family. By asking questions and building a rapport we hope to earn your trust and dispel the idea of the pushy salesperson. 

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! 

4 Things You Should Take Care Of Before You Die

As they say, nothing is certain but death and taxes. And as your tax rate may be able to go up and down, there isn't much you can do about your death. But you can make it a lot easier for those you leave behind if you have your affairs in order ahead of time. Depending on your situation, you can take care of some or all of these items early on and it doesn't have to cost you a fortune. 

The basics of taking care of things before you go to your eternal reward are not too complicated. Ask yourself the following questions.  

• Do I want a funeral? If so...
• Do I want to my family to have to pay for my funeral?
• Do I have any assets that need to be transferred at my death? For example, a home, business, collections, etc. 
• Do I want anyone to be excluded from those assets?

In other words, do you want to make these decisions now or do you want your family to have to try to figure it all out after you are gone? 

Years ago my mother passed away. She had a small collection of jewelry that included a few rings and broaches. I discussed this with my father and suggested he distribute the jewelry as he wished while he was still alive to hear "thank you" from the recipients. But I had ulterior motives as well. I didn't want to be the one having to figure out which family members would get what.

My father never followed through. At his passing the jewelry just got distributed, and I'm pretty sure that some family members were overlooked while others received small items that were intended for others.

With this in mind, here's a short list of things you should take care of before you die.

1. Buy life insurance*. Sounds obvious, but making sure your family can pay for your final expenses is very important. When you die, people will have their hands out asking for money, like the funeral director and the lawyer. The only one bringing you money will be the insurance agent. Make sure your beneficiaries are up-to-date and keep in mind that you can "assign" part of the proceeds to the funeral home.
2. Pre-plan/Pre-pay for your funeral. My father went to the funeral home and picked out his casket in advance as well as other items on his "final wish list". He failed to pay for any of it, leaving my sister and I to front the money until we received the life insurance proceeds.
3. Have a will. This keeps your estate from ending up in probate, which can be costly and puts your estate at the mercy of a judge. A will can alleviate any disagreements between family members as to who will receive proceeds and how much. For instance, if you own a business and one child actively works there while another child does not, you can put directives in the will that address the issue.
4. Have a living will. Again, you can alleviate a lot of tension in the family by making decisions ahead of time when you are lucid.

Making sure that you have taken care of these kinds of issues in advance will keep your family on speaking terms (as much as possible) and avoid conflicts. 

Nowadays, people have extended families, businesses, investments and other obligations that are hard to untangle if someone were to die unexpectedly. Letting attorneys and courts make those decisions can be costly and unproductive. Make sure your intentions are known and your loved ones will remember you fondly. 

If you have questions or comments, please let us. In the meantime, stay healthy!

*Life insurance trumps a will since it is a legally binding contract. 

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!

6 Term Life Insurance Issues To Be Aware Of

For years there has been a debate in the financial services industry over which type of life insurance people need. One side says to "buy term and invest the difference" while the other says that cash value life insurance is a safe way to lock in a rate and let your money grow. I'm not going to argue the pros and cons of either in this post because I think that it really depends on what the client's situation is. In other words, despite the financial gurus who like giving generic advice, I prefer having a discussion with a client to find out what their needs are.

With that in mind, this post will be about term life insurance and things to be aware of when purchasing it. Here are a few things to keep in mind when buying a term life policy.

1. Make sure you're buying enough. That small policy that is offered to you through work probably isn't going to be enough coverage. Take into consideration things like the balance of your mortgage, replacing your income, paying off credit cards and other debt (like car payments). If you have children, include education costs. In other words, make sure that your family can continue to comfortably live in their home, without worrying. 

Also, if you have a 2-income family, make sure to insure both spouses. Those two incomes are typically combined to pay the bills. When determining how much you need to replace income, a simple formula is to take your annual income and multiply it by 10. It may sound high, but it is realistic.

2. Don't wait too long to buy life insurance. By putting off a life insurance purchase, you are actually paying more in the long run. As you age, your premiums increase, so waiting five years to buy a policy will actually cost you more. More importantly, you can leverage your good health by getting coverage when you're younger. Odds are good that you will not be any healthier in the future as you are now and it only takes one health event, such as a heart attack to leave you either uninsurable or with a rate that is out of your price range.

A friend of mine, who is in his early 40's, recently had a mild stroke. Luckily he had coverage in place, but if he didn't, the chances of him getting another policy would be difficult and probably out of his price range.

3. Don't buy too short of a term. Unless you have a specific need in mind, like a 10-year note that needs to be secured, you should be looking at longer term periods. Consider how many years it will take to pay off your mortgage and get the kids out of the house (they may "boomerang" back). A 20 or 30 year term may be what you need. We even offer a term policy that locks in until age 65, which may be the perfect solution for a younger couple. 

4. Be careful with riders. The majority of policies have different riders you can add to your policy, such as a disability rider or accidental death. I personally think that a disability waiver of premium rider is a great value, because it continues to pay your premiums for you if you are deemed "disabled" and can't work. The last thing you need in that situation is your life insurance pulled out from under you.

Depending on the carrier, some riders will be included at no charge, such as accelerated death benefits. We have a term life policy that includes a chronic illness rider with no extra charge. 

5. Review you policy every few years. The fact is that as time passes, your financial situation may change. If you bought a policy 10 years ago, you may now have a totally different status. You may have received a raise, relocated, had twins, or become fabulously wealthy. 

Also, making sure your beneficiaries are up to date is very important. If the individuals you have chosen are deceased or no longer in your good graces, you can replace them at any time. 

6. Find a policy that is convertible to a permanent policy. The convertibility option of a policy is important because your term policy will eventually run out. Having the option to convert your policy to a permanent policy without any health questions makes sense in case you have some change in your health status. 

Term life insurance can be affordable and can be great helping your family if you were to die too soon, but keep in mind that the vast majority of term policies never pay a claim because the term expires before the policy holder. If you have questions or concerns look us up on website and book an appointment to discuss your needs. 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! Thanks!

Is My Agent Looking Out For My Best Interest?

A few years ago a friend (whom I'll call "Bill")  heard I was selling insurance. Bill and I hadn't been in contact for a few years as he had moved out of town, so getting a call from him was a bit unexpected. We chatted briefly and then he gave me his personal situation. Bill was doing well financially with a successful business, was considering getting married and had a few investments here and there. We discussed my practice and what I offered.

Then he asked, "What's the best insurance plan you have?" 

Knowing he was an analytical thinker I replied with, "What are you trying to accomplish?" 

He laughed and said, "That's the answer I was looking for. If  you had blurted out a specific product I'd know that you were probably looking out for you instead of me." He suspected, and perhaps rightly so, that a life insurance agent would push the product that would pay the highest commission. 

When someone calls in and asks for a specific product, say a 20-year term life insurance policy for $150,000, I know that they probably have done some research. I may ask a few questions to make sure it's what they need, but I do my best not to pressure someone. They have a need and a budget and I do my best to keep them happy. 

On the other hand, if you have an agent who aggressively promotes one insurance product constantly, they are not looking at your "big picture" holistically. A good example is the financial "advisor" who only pushes annuities. The commissions on these can be big and agents like to sell them because there are no health questions. Herein lies the problem. Not everyone needs an annuity, but the agent will make it sound like everyone does.

One of my former coworkers at a life insurance agency loved to take applications on clients who were tobacco users. He said it was a "premium enhancer" because their rate would increase, thus making his commissions go up as well. I watched him one day as he was getting basic information from a client. He asked if she smoked and she said that she did. "Good for you!" he said enthusiastically and patted her on the back.

On another occasion, a client answered that she did not use tobacco. He frowned a bit and said, "Too bad, all the cool kids are doing it." He tried to make it a joke, but I got the feeling he was disappointed in the client's good habits.

All of this leads back to that dirty word, "commissions". Unfortunately, people hear that word and think that someone is trying to take advantage of them. And yes, the higher the price of a policy, the more I make, but it's true in other professions too. 

Realtors work off of a percentage of the sale, but that doesn't mean I don't trust them. As I'm currently working with a realtor to sell some property I can say that he has gone above and beyond the call of duty and has put in a lot of hours. Having a rough estimate of what his commission will be doesn't give me pause. I know he's working in my best interest. 

I have learned from experience that when I can satisfy the client with my work I'll get referrals, which leads to more clients. And that is how I make my living, by looking out for the client, not my paycheck. 

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!

Is Life Insurance Taxable?

About once a year or so I will have someone ask if they have to pay taxes on life insurance proceeds. It's an interesting question, but generally speaking most life insurance benefits are not taxed, but there are a few exceptions. Here are a couple of things to look for.

Most of the time an insurance company will pay a death benefit in one lump sum. However there are times when the policy pays out in installments. The principal is held in an interest-bearing account and pays the benefit over a series of years, like an annuity. The original death benefit is tax free but the interest is taxable. 

Another way it can be taxable is if your life insurance is part of your estate, but this is only a problem if  your estate value is above the estate tax limit, which is over $11million this year. Not a problem for most of us, but one way to avoid this is to make sure your beneficiaries are updated. For instance, if your beneficiaries have died already, the company will generally pay the estate instead of surviving heirs. 

An exception is if the surviving spouse is the beneficiary, as spouses are generally exempt to estate taxes, even if they exceed the estate tax limit.

Generally speaking, life insurance involves two people - the insured, who is also the owner (and payor) of the policy, and the beneficiary. However there are times when there is a third person in the mix. This happens when the insured and the owner are two separate people. When this happens the IRS considers the benefits to be a "gift" from the owner to the beneficiary. 

The good news is that because of the way the gift tax works, you probably wouldn't have to pay it anyway. The tax wouldn't be due until your death and unless your estate is over that $11million threshold.This being said, you should still report any sizable gifts to keep track and stay honest with the IRS.

There is also the issue of "cashing out" permanent life insurance policies, like whole life or universal life. These policies build cash value internally and feature the option of letting you take out some or all of the proceeds if needed. A rule of thumb is that if you don't take out more than you have put in, you should be fine. 

The other option is to take out the funds as a loan. I know of clients who use this option instead of getting a loan from the bank, mostly for the convenience and not having to fill out a lot of paperwork. They will repay the loan and sometimes then repeat the process, as they "warehouse" their money in the life insurance policy. Be aware that if you "cash out" part of the face amount or take it as a loan, when you die, the insurance carrier will pay the benefits minus the amount you borrowed or cashed out.

One thing to keep in mind is that permanent cash value life insurance policies have the possibility of becoming a Modified Endowment Contract (MEC) by the IRS guidelines if you overpay your premiums. With life insurance having a special status, some people will take advantage of paying in more than the stated premiums and the IRS will allow this up to a limit, but beyond that limit your proceeds could be taxable.  

As I stated earlier, the tax liability of life insurance proceeds rarely is an issue, but for those clients who have in depth questions I always suggest they talk to a CPA or even check the IRS website. 

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!

Insurance News and Updates

With Covid looming over us, there have been a spate of changes in the life insurance business. Some companies are suspending sales of certain products while others are thriving. We recently got word of two changes that probably won't affect a lot of consumers but from an agency point of view, we hope it's not a trend.

First, we learned last week that Prudential has decided to suspend the sales of their PruLife UL Protector product. This was a universal life policy with growth based on interest rates, and with rates so low the company states that "we have decided that we can no longer offer UL Protector in a way that provides strong consumer value and prudently supports our business objectives." 

Translated to English, that means that the low interest rates were not sustaining the policy enough, which would have probably led to premium increases that would have made the policy less competitive price wise. Given that there are still potential claims to be paid on "in force" policies, Prudential decided to cut their losses. 

Another recent victim in the insurance industry isn't an insurance carrier, but an ancillary paramed exam business, EMSI. One of the major players in home health exams for insurance companies, the downturn in volume has forced them to shutter their doors, and their website. 

According to a press release, they ceased operations on July 3, 2020 and stated that "COVID-19 has disrupted families, communities, and businesses in our country and around the world. EMSI has become a casualty of these unprecedented times, as the pandemic has severely depressed service volumes. As a result, all company operations ceased on Friday July 3, 2020. We are thankful for all our customers and to EMSI staff and partners for their service to EMSI and its clients."

In recent years, several insurance companies have used less paramed exams due to the cost and have made changes in their underwriting requirements. One of our carriers doesn't require an exam for any of their policies with a face value of under $250,000 for younger applicants. They have also put in a limit for their disability plans. This eliminates a lot of exams, and in turn, overhead. The nurses who work for these companies are usually freelancers and get paid only when they do the tests. Luckily for a few of them, they can contract with various companies at once.

Like I mentioned earlier, in the short term neither of these changes will have an impact on you as a potential buyer. You can still apply great life insurance plans and go through the normal underwriting processes. However, if the current situation with Covid-19 persists, and if economic conditions continue as they are, we will see more changes like these in the insurance business, as well as in the other businesses that are connected. 

One of our jobs at Surf Financial Brokers is to stay on top of these changes so you don't have to. Just as you would want your doctor to stay up-to-date on medical issues, you would want us to be informed as much as possible when it comes to your "financial wellness". We do our homework and know that you want to deal with a professional organization.

If you find this blog helpful, please subscribe and send the link to a friend. And as always, 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.

The Infamous Buy-Sell Agreement and How To Fund It

One of the groups of people I love to help is small business owners. As a entrepreneur (I have an insurance agency and a consulting business), I can relate to these people. Many have left the corporate world to take on the day-to-day struggles of owning their own operation, and in that process they wear a lot of hats. Every once in a while I will come across a business that has multiple partners with each partner filling a role that the other partners don't want or aren't as good at performing. In other words, less hats. 

My father used to say that "the worst ship to sail on is partnership". He wasn't nearly as witty as he thought he was, but I understood what he was trying to say. Years earlier he had opened a small engineering firm with someone and apparently it was a horrible experience for him. His version of events was that he was doing all the work while the other guy just took half the profits. I don't know how accurate this was, but I do know that he rarely spoke of the other partner and that the business was dissolved after a couple of years. 

I have also had some shady dealings with "partners" who didn't quite carry their part of the workload and couldn't get out of their fast enough. After losing money and feeling stressed I decided to work solo from that point on. Now I just have what I like to call "professional business arrangements", in which my income isn't reliant on the production or work ethic of someone else. 

This doesn't mean that partnerships are bad for everyone. I've seen many that work, with partners who are college friends, family members or spouses. With businesses such as hotels, real estate firms, restaurants and others, partners find a way to make the most of each person's strengths and weaknesses. And in the process, they put their egos aside and share the success of their work. 

On those instances when I do get the opportunity to work with business partners I eventually ask if they have a contingency plan if one of the partners were to die. You see, people typically think long and hard about starting a business, but few consider exiting a business, much less having a person they rely on for their income to die too soon. The responses I get are varied, from "I'm not worried about it" to "I never gave it much thought". Scary.

An old friend told me that his nephew had opened a sports pub/wing joint with a distant cousin. Neither of these two was married and both were questionable when it came to their character. "Sounds like they could use a buy-sell agreement," I said. 

A buy-sell agreement is a legal document that states that if one partner dies, the other partner has the option of buying out the dead partner's stake in the business. This is important because the surviving partner may not want to be in business with the deceased partner's widow or next of kin. Especially if they never got along in the first place. 

Sometimes the buy-sell agreement is part of the legal documents that form the business, but if not, a good attorney can write a short document that can fit the bill. The most common way to fund the buyout of dead partner's stake in the business is with a life insurance policy. 

I met with the two cousins separately. The first one I met with was cordial and I explained that if his partner were to die he would be in business with the guy's mother. He frowned and made it clear that wasn't  something he would want. He knew the guy's mother and wasn't very fond of her. 

The second partner had a different view of the world. "If you're cousin dies, you're going to be in business with his grandmother." The grandmother was a tough lady who was known for being an even tougher businesswoman.  He shrugged his shoulders as to say "so what?" 

As the first partner saw the value in what I was presenting, the second one had no desire to buy a life insurance policy on his cousin. The deal never happened, mostly because they couldn't get on the same page when it came to this or other topics. Shortly thereafter their business shut down. 

When I talk to business partners, I throw out a "worst case" scenario. "How would you like to be in business with your dead partner's widow and her new boyfriend?" As bad as it sounds, it happens more often than you would think. A good buy-sell agreement funded with an affordable life insurance policy can be a simple fix to a potential nightmare. 

If you have a business partner, or multiple partners, and don't have a buy-sell agreement in place, I highly recommend you have an attorney draw one up for you. And let us know if we can help you put a policy in place to help you fund that agreement. In the meantime, stay healthy and feel free to comment below. 

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.

Things You Probably Didn't Know About LIfe Insurance

Most of us know the basics when it comes to life insurance. We know, for example, that you pay a premium, and when you die, the insurance company pays your beneficiary. That's about as basic as it gets. But there is a lot of other information you can use when deciding how much you need, what fits into your budget and other considerations. 

Did you know that, according to Policy Genius, only 54% of adults even have life insurance? And 27% only have group coverage through their work, and sometimes that isn't portable, which means you can't take it with you if you leave your job. Generally, we as a society, just don't have enough life insurance. 

I met a nice lady recently who became a widow unexpectedly a year ago. Her husband was killed in an accident and she was left with three kids, his car payment, a mortgage and no life insurance to help pay for the funeral, much less the other bills . Luckily for her, she has a job that helps her "manage", but it's clearly not enough. Now she is considering getting a policy on herself because she understands how much of her stress could have been avoided.

One of the most prolific sales people in the history of the life insurance industry was Ben Feldman. When asked how he was able to sell so much of an intangible product he responded, "I do not sell life insurance. I sell money." When you think about it, that is exactly what life insurance is. You are buying money for the future, not for yourself, but for your loved ones at the time when they need it most.

Mr. Feldman was the epitome of a salesman who could find a great way to describe his product. While everyone else was talking about the features of life insurance, he was telling his prospective clients about the benefits. Like they say, "sell the sizzle, not the steak". 

But people still are put off at the prospect of buying an intangible product they can't use. Or can they?

If you have read some of my recent blog posts, you will remember that life insurance can be used for several things while you are still living. We offer policies that can be used for expenses associated with being chronically ill, for critical illnesses like heart attacks and strokes, or for a retirement supplement. You can even use the money for helping fund your child's higher education costs. 

Products have evolved since the days of Ben Feldman and keeping up with many of the changes and new policy features can be too much for the average person who just wants to make sure their family can stay in their home if they die too soon. That's where my job is important. I rely on my carriers to keep me up to date on changes and new lines that may be a great fit for a client. 

Another great resource we use is our network of agents. Like medicine, one can "specialize" in a certain type of insurance, and we use that to our advantage. If I have a client who needs information on a policy that has been offered through their work, and I'm not familiar with it, I can pick up the phone and ask someone who may have the information I need. That gives Surf Financial a strong advantage when it comes to how we can help a client. 

Let us help you keep your family financially secure, and as always, 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.  

Memorial Day and Insurance (short post)

On Memorial Day we remember those who made the ultimate sacrifice to secure our liberties. These men and women left their families and loved ones for foreign lands to put themselves in danger. We call them heroes in honor of what they gave up for the rest of us.

With that thought in mind, we too can be heroes to our families and loved one by making a very small sacrifice. The purchase of an insurance policy can also give us security to know that the people we care about can continue to live in their homes and educate their children. For a few dollars, we can take the steps to show that, just like those we memorialize from wars, we too can make a lasting difference. 

Everyday I talk to people who tell me that a parent "took care of things" by having enough coverage, whether life, disability or  long term care, and that forward thinking saved their family. 

As we remember the fallen military personnel who sacrificed for all of us, remember that you can also make a very small sacrifice for your loved ones. 

Stay healthy and have a safe Memorial Day. 

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

Another Real Life Story For DIAM

As it is still May and still Disability Insurance Awareness Month (DIAM) I wanted to share yet another story and testimonial from someone whose life was greatly impacted due to a disability.

When Scott Rider was diagnosed with Parkinson’s disease at just 47, the life he once knew as a financial advisor and avid runner changed forever. His family's lifestyle didn’t have to change thanks to disability insurance.

I love working with clients who figure things out without me having to explain them. Several years ago I was helping a local business owner with his life and disability insurance. He said, "You know, if I die my family will bury me and have life insurance to move on with their lives. But if I get disabled and can't work, then I'm a burden. I'm not able to contribute and someone is going to have to take care of me. And that's going to cost money, either by paying someone to help me, or in lost income."  

He got it. He understood the importance of having a disability policy and knew how devastating it could affect his family if he was permanently disabled. And the money would come from an insurance company, not his savings account or his spouse's income.

Let us help you plan for those unforeseen landmines that can get in the way of your family's financial goals. 

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

The Differing Types of Life Insurance, Part 2 (The Term Life Talk)

In a previous post we discussed the reality that there are different types of life insurance and that all are good for some people, but not all are necessary for all people. As this series progresses, we'll take a look at each type of life insurance and discuss their pros and cons. For now let's look into term life coverage.

Term life is, as it's name states, good for the term of the policy. A 20-year term is good for 20 years, and in that 20 years, the price won't go up on you. At the end of the term, in this case 20 years after the purchase date, the policy will typically end. In some cases the insurance company will continue to policy as an annual renewable term (ART), which means each year the price will increase.

When is it a good idea to buy term coverage? Most people will purchase this during their working years, which is usually when they can quantify the time they need coverage. For instance, if you are pretty sure that your home will be paid off in 20 years and in that same amount of time your kids will be grown and on their own, a 20 year term policy is appropriate.

My favorite term life story is about a friend of mine who told me he borrowed money from a relative and needed to secure the loan with a life policy, in case he died before he was able to repay the loan. The insurance carrier required a paramed exam and my friend's wife was confused when the nurse showed up at their house. Apparently he did not tell his spouse about the loan and had to come clean.

Term life can be very affordable, as it is only coverage for death and builds no cash value. You can't borrow against it either. With this in mind, it's can still be a great value.

There's a school of thought that states that people shouldn't buy permanent coverage, which we'll discuss later, but instead should buy term and invest the difference in premium. My experience shows that people will purchase the term coverage and say that they'll do the investment part at a later date, which never comes.

A great feature of most term policies is a conversion feature. This allows you to convert all or part of the coverage to a permanent policy with no health questions or additional underwriting. Let's assume that in 10th year of a $500,000 policy you have a heart attack. Even though you've survived, the heart attack may prevent you from buying additional coverage. But you can convert, say $25,000, to a permanent policy. The remaining $475,000 will still be there, but now you have some coverage for final expenses that will always be there for you, as long as you pay the premium.

Note: When you convert a term policy, the premium is based on your age at the time of the conversion, not the age you originally purchased the policy.

Term life insurance can be a great fit for young families and people on a budget. If you aren't sure if term would work for you, drop us a note. Or you can book your own phone appointment from our website. We want to make buying insurance easy for 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!

The Differing Types of Life Insurance Part 1

For years agents have debated the merits of different types of life insurance. Some prefer to sell term while others push for permanent types of insurance, such as whole life or universal life. And for the consumer, the differences can be confusing. At least once a month I'll have a client ask me to explain what sets one apart from the others.

Why would an agent push one type over another? Perhaps they were trained to believe that whole life, for instance, is the panacea that cures all financial ills. Or maybe they've bought in on the "buy term and invest the difference" mantra.

The other obvious reason is that they work for a company that wants to promote one type over others, and may not even offer the other types. I knew a husband and wife who ran an office for a carrier that didn't offer whole life, so they trashed the product. "We wouldn't do that (sell whole life) to our clients!" they would proclaim, as if it was unethical.

The truth is this:  All insurance products have a need somewhere, but not all insurance products work for everyone. For example, a universal life policy might be a great fit for one person, but not necessarily for everyone else.

 An agent worth his or her salt will have the product that fits for you, and won't try to make something else work when they don't have what you need. I use the analogy of the shoe store that only carries even numbered sizes. If you wear a size 5 shoe, will they send you to another shoe store? No, they try to make a size 4 or 6 "fit".

When you hear a life insurance agent say "I'd never sell that product" it's probably because they aren't educated enough on the product to understand when it is suitable or their company doesn't carry it. On the other hand, if all if they sell is one type of insurance, run as fast as you can. Imagine a doctor who only prescribes penicillin, and for everything from headaches to broken bones. That doctor would be run out of town on a rail for malpractice.

In my next posts, I'll discuss go over the various types of life insurances. Hopefully this will help you decide which products is best for you and your family's 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!