Life Insurance Beneficiaries Made Easy

I received a phone call recently from a friend (I'll call her Molly) who lives in another town. She said she had some questions pertaining to life insurance beneficiaries, specifically for her mother and brother's policies. 

Without going into a lot of detail, she explained that her mother, who was in her early 90's, was starting to have some health issues. "Mom" had a couple of small life insurance policies she had purchased years earlier and Molly had questions about the beneficiaries and how the policies paid out the death benefits. 

The wrinkle in all of this was that Molly's brother (we'll call him Dan), was listed as a beneficiary and he is currently in hospice with his own health problems. Molly didn't seem to think that Dan was going to last much longer, thus confusing things further. And just to make things even more complicated, the mother had taken out a policy on Dan when he was a child, with the mother listed as the beneficiary. What a mess!

Molly wanted to know who would get the death benefits if either her mom or brother died first. I suggested we discuss one at a time. Since her mother owned the life insurance policy on Dan, the mother could call the insurance carrier at any time and change the beneficiaries. I suggested that Molly help her mom contact the company and request a form, either called a "change of beneficiary"  or "beneficiary update" form, and get it completed as to her wishes as soon as possible. 

Many times the company will be happy to email (or snail mail) the form to the owner of a policy, but most require a "wet" signature to make changes. Digital beneficiary changes are rarely accepted. The nice part is that an owner of a policy can do this is at any time.

Molly also had questions pertaining to the policy on her brother. Even though Dan was not expected to make it much longer, what would happen if the mother died first? There were no other beneficiaries listed, according to Molly. 

Even though her brother was the insured, he had no real rights to make changes since he was not the owner of the policy. Again, the mother was in control. My suggestion to Molly was to get additional changes forms to update the beneficiaries on the policy insuring her brother. Her mother could add Molly as a "contingent" or "secondary" beneficiary. 

All of this is why we emphasize checking your policies from time to time and making sure your beneficiaries are correct. Updating this information can avoid a lot of headaches for your loved ones. 

Just so you know, beneficiaries can be prioritized, i.e. Primary, secondary (or contingent). In other words, if your primary beneficiary dies before you do, or at the same time, your secondary beneficiary would receive the funds. 

However, some people choose to split up their beneficiaries. A parent may want two people to share equally. When this happens, they can both be named as primary beneficiaries, but each receiving 50% of the death benefit. 

I try to convince my clients to keep things as easy as possible. Naming beneficiaries in order instead of dividing up things can be more helpful, especially when it comes to paying down debts, like mortgages and other bills. Also, as in the case of Molly's family, some beneficiaries may pass away before the insured. 

Another thing to consider is that children under 18 years of age should not be listed, as the insurance company will not send money to a minor. Many of our clients who are single parents tend to name other family members who will put the money aside for the child until they are responsible. 

Please keep your beneficiaries up to date and if you have questions, drop us a note.

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! 

What Is The Mix And Match Life Insurance Strategy? 2023

Can you imagine having one wrench in your toolbox that is supposed to take care of all sizes of nuts and bolts, but you know deep down that that wrench can't do all that the jobs it is advertised to do. It works fine on some things, but not all things. Your life insurance is like that as well.

When someone tells me that they only buy term life insurance or they only buy whole life I always asks why. The most common answer is something like, "That's what my mother always had." I want to respond that my mother drove an AMC Gremlin, but you don't see me with one. 

The other answer I get is that they heard a financial "guru" on television who is an "expert" in all things pertaining to personal finance. This guru suggested they "buy term and invest the difference". I won't go into that argument but I did cover it in the previous post.

This is why it is important to know about the different types of insurance and the needs they fill. Having only one type of insurance at a time, or for your entire lifetime, can be inefficient and expensive.

First and foremost, life insurance is at it's cheapest when you are young and healthy. Leveraging your age and good health can work to your advantage, especially when it comes to permanent life insurance coverage. In a perfect world, one could afford to buy all the life insurance they need when they are in their 20's. But our lives are not always ideal.

Some people will buy term coverage during their working years with the intent of buying permanent insurance, like whole life or universal life, when they "have the money" or retire. Others will try to buy an expensive plan when they are young, only to stop paying for it when they need the money for something else. 

If you know what features each kind of life insurance work best, you can develop a better strategy for securing your family's financial future while keeping it in your budget. A great way to do this is to "mix and match" a couple of types of insurance. 

For instance, let's say that you have met with your agent have agreed that you need $500,000 of life insurance coverage. That would be an expensive policy if it was all in one whole life program. However, you also know that you may need some permanent coverage down the road when you are older.

At this point you could, assuming you are fairly young and in good health, purchase a $450,000 term policy, either 20 or 30 years, for a affordable rate. Then you could cover the difference of $50,000 with a permanent policy, like an Indexed Universal Life plan. That would make sense to most people and fit in their budget.

An important part of all of this is having an independent agent who can offer a wide variety of plans. Some agents only want to sell term life while others really push whole life to their clients. It's like going to a car lot that only offers sedans, but you need a truck. Why bother? 

Make sure that your agent has all the insurance products you need. If you feel as if he or she is pressuring you into one plan instead of giving you several options, look for someone else to help you. 

If you have any questions about this, let us know. 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!

Why Should I Update My Beneficiaries?

As I mentioned a few weeks back, updating your beneficiaries on your policies is an important part of owning life insurance. How often you should do these updates is up to you, but in a perfect world we would have a reminder.

When we change our clocks those two nights of the year, we're also reminded to check the batteries in our smoke detectors. What a great way to take care of the important task that could save the lives of your loved ones. And doing the "maintenance" on your life insurance policy is just as important to your family.

I recommend you pick a day, say Independence Day for instance, to review your life policies. By taking a few minutes you may realize that your the person you originally chose to get your death benefit is no longer in the picture. As our lives change from marriage, divorce and death, so do the people and situations that can impact your family upon your death.

My father passed away last year and we eventually found a few life policies. Unfortunately, none of the beneficiaries were up to date, leaving us in a position where the insurance company had to  pay the benefits into my dad's estate, instead of paying directly to his heirs.

One of the advantages of life insurance over leaving directives in a will is that the policy is a contract in the eyes of the law, thus taking precedent over a will. However, if the beneficiaries have predeceased the insured, you may have to wait for those proceeds.

While checking your life insurance policies, you may as well check all of your other policies as well. Many non-life policies also have beneficiaries that you may have forgotten about. Have a cancer plan through work? It's probably got a beneficiary. These types of policies, called worksite, voluntary or ancillary products, pay you a benefit directly, but if you die in the middle of medical treatments, the policy will pay any leftover proceeds to whomever you name.

I had a client in North Carolina who was in an accident and was eligible for benefits as he was in the hospital. Unfortunately he died a few days later and his family didn't realize there was an accidental death benefit until I mentioned it to them. The policy also paid his beneficiary for the other benefits while he was receiving treatment.

Just like you do maintenance on your car or home, take the time to do a quick check up on your policies, or ask us to take a look at them for you with no obligation. 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 Selling Insurance Hard? Pt 2

In the previous post I went over a few facets of what makes selling insurance, life insurance in particular, a difficult job. There is a hesitancy from people to purchase something they know they need, but generally speaking, do not want to purchase. In essence, asking someone to add to their monthly bills to protect their family from financial ruin is a hard job.

One of the many objections agents get when selling life insurance goes something like this. "I want to talk to the wife (or my husband, partner, significant other) before making a decision. I may need a few weeks." Where do I begin?

First, I have rarely met a spouse who did not want to be named a beneficiary on a life insurance policy. And by "rarely", I mean never. As a smart agent once proclaimed, "Wives hate life insurance but widows love it." 

A few years ago I met a woman who was in dire financial straits. Her husband had left his well paying job to start his own business. In doing so, he borrowed some money to get his business off the ground. The wife was fully aware of the situation and insisted he purchase a life insurance policy to cover the debts he had incurred if he were to die unexpectedly. He told he would "get around to it." 

After a few months went by, he told his wife that he had bought a policy. She never saw the paperwork or a policy but assumed that he was telling the truth. Not long after, the husband was clearing out some trees near their home when a log fell on him, crushing him to death. 

You can figure the rest out. There was no policy. She couldn't afford to repay the debt and lost her home. She was forced to take a small apartment and, even though she had been out of the job market for a long time, had to take a job as a teacher's aide in a high school. When I spoke with her she broke down in tears several times from the stress that could have been avoided if her husband had just purchased that policy.

When someone says they'll get around to it later, I share that story with them. And I make sure that their spouse or significant other is present to hear it as well. 

The other objection I deal with is "I need a few weeks to think it over". The logic is that if I have a few weeks to think rationally I will decide if I need a policy. This is one of the most ridiculous things I have ever heard. Did they need a few weeks to decide on the purchase of a TV, cell phone or clothing? Or how much time did it take to decide to drop $7 on coffee, which they do often? 

Imagine someone dropping $50 each month on coffee but not wanting to spend $35 to protect their family. As stated previously, the priorities are all out of whack.

So when the prospect claims they need a few weeks, I let them know that the insurance company will also need a few weeks to decide if they will approve them and what the rate will be. I will encourage them to start an application which can be submitted with no money. "That way the underwriting process can begin and a paramed exam can be completed in the meantime. And by the way, we pay for the exam as well, so you won't have to pay anything until the insurance company has done their due diligence. And that process could take a few weeks," I say. "So while you're thinking it over, so is the company."

People think of insurance agents as being high pressure sometimes. Personally, I feel that the vast majority of agents are trying to do the best thing for their clients and sometimes that requires "good pressure". And in the end, the beneficiaries of that policy are thankful for the agent's work. 

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!

Does A Tax Free Retirement Plan Exist?

Keeping with the theme of taxes this week, I wanted to share some information on a life insurance plan and how to use it to your advantage when it comes to taxes, or should I say "tax avoidance". One product in particular may help you supplement your retirement without having Uncle Sam reaching into your pocket. 

First, I have to again give the obligatory disclaimer that I am not a tax expert and if you have questions or concerns regarding any of this you should consult your own tax professional. 

As an insurance agent I have worked with many products and, for the most part, my clients are made up of middle class people. Many of them are small business owners (less than 50 employees) or self-employed individuals in sales or other related professions. In a nutshell, I'm not working with a lot of millionaires.

Life insurance for most of these people is usually term, which is affordable, but does not offer many other features other than a death benefit. When I ask about their retirement plans they usually have a small amount of money put away, but not much. (After the Great Recession of 2008 many used their 401(k) plans to pay their bills). 

With this in mind, I let them know that life insurance has a special status when it comes to taxes. The death benefit is almost always non-taxable. Once people figured this out they started taking advantage of this and companies developed policies like whole life and universal life insurance that could build some cash value internally.

These policies also allowed for "over funding", which means you can pay additional premiums into the policy, over and above the stated price of the insurance, with the intention of having some money accumulating. The IRS made some guidelines to prevent the abuse of this loophole, by declaring a policy with too much premium going in as a Modified Endowment Contract* (MEC). 

However, permanent life insurance policies do allow one to access that cash value inside the policy. How they access the money is the tricky part (it's not that tricky) to avoid paying any taxes on it. 

Taking the cash out of the policy as a loan removes the tax burden on insured person because everyone assumes that the loan will be repaid. And if the person dies before repayment, that loan is deducted from the death benefit. And this is where these policies are most effective. 

Because that loan is tax-free, one can over fund a policy to its maximum (without becoming a MEC) and use that money as a "retirement supplement" without paying a dime to the government. 

Here is where I have to give another disclaimer. First and foremost, these are life insurance policies and NOT investment vehicles. For years when the interest rates were high, agents sold universal life as a way to make money instead of protecting money. This practice is frowned upon in our industry.

And since it is life insurance, an insured age, tobacco usage and medical history can affect the cost of the policy, as well as the cash accumulation. A 30 year old healthy non-smoker will get much more out of this plan than a 40 year old obese smoker with high blood pressure and diabetes.

Even though this can be done with a whole life insurance policy, the most efficient way to do this is with an indexed universal life (IUL) policy. I will acknowledge that there are detractors to these policies who see the problems from the past when traditional universal life policies failed to provide the cash when interest rates began to fall. 

The secret here is to structure an IUL properly from the beginning. If done properly, an insured can access the money in the policy in the form of a loan for many years. 

If you would like information on how to use a life insurance policy a tax-free retirement supplement, let us know. In the meantime, please stay healthy.

*When a policy becomes a MEC it also becomes taxable. Since no one wants that too happen we, as life insurance agents, will run an illustration to get as close to a MEC without having it become one. 

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! 

Can Cannabis Users Get Life Insurance?

I recently had a conversation with one of our marketing partners on the subject of how various life insurance companies deal with insuring cannabis users. It was a good talk and I learned a few things (which is always a good thing).

A little background first. Back in the 1990's, only around 24% of the population was in favor of legalizing (actually "decriminalization" is the correct term) marijuana, but views have changed a bit and that number is currently around 66%.  With more and more states making cannabis legal in some form or fashion over the last 20 years, the insurance industry has had to adapt and alter their own guidelines. 

So how does all of this affect the rates of cannabis users? Can they get a life insurance policy and what happens to the rates?

You actually may be surprised to know that there are plenty of carriers out there who are insuring cannabis users, and they are not just limited to those no-exam companies.

Actually, one can still be approved a traditional life insurance policy if they use marijuana. Like policies for tobacco users, which have slightly higher premiums, many companies treat cannabis the same. 

But there are a few factors to figure into the equation when they determine rates. Some of these are gender, general health condition and if the applicant is using marijuana recreationally or as a medical prescription. 

When you consider that tobacco has more known negative health affects than marijuana, the rates can be comparable to "smoker" rates, or even less in some cases. Ultimately, the most successful way to get the best life insurance rates is to shop around and compare multiple insurance companies. That way one can find out what policies are out there and best suit their needs.

At Surf Financial Brokers we offer a very easy-to-use quoting tool that asks about cannabis use, with a good selection of carriers, their rates and other information. And if someone sees a policy they like, they can even start an application.

Keep in mind that when it comes to calculating insurance rates for cannabis users there is not a homogenous answer. Each company sets it's own rates and underwriting guidelines. Therefore, how companies view marijuana use will vary from carrier to carrier.

One thing to keep in mind is that marijuana is used to treat a wide variety of medical conditions, from pain to anxiety. The insurance company's underwriters may be more concerned with those medical conditions that require treatment with marijuana than the actual prescription. 

This means that one's premiums could be higher as a result of health risks like cancer or auto-immune diseases which are being treated with cannabis, instead of the cannabis use itself.

But there are those people who use marijuana not for medicinal purposes but just recreational use. For those folks, many insurers will still issue a policy. How the policy is issued (as a tobacco smoker or non-smoker) is determined by usage, frequency and other factors. As mentioned earlier, each company has their own guidelines.

Underwriters may as more questions concerning how one uses marijuana (edibles, smoking, tincture, etc.) and quantities. They may also be concerned about any other drug usage, including alcohol. Much like long term care insurance underwriting, they might try to "connect the dots" to see if the applicant has general "lifestyle" concerns. 

Most of the underwriter's questions will be about frequency. The less often one partakes of cannabis, the lower their life insurance rates can be potentially. Someone who smokes once a month will have a lower rate (in some cases it doesn't affect the rate at all) than the person who enjoys a joint daily.

If you are an occasional user and still need life insurance, let us know. Or take a look at our quoting tool and run a quote for yourself. 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 The Right Life Insurance?

Each February the life insurance industry deems the month "Life Insurance Awareness Month" (DIAM). The Valentine's Day theme, "Insure Your Love", is used to get their message out: Life insurance really is not for the person who is insured, but instead, their loved ones.

Making sure that your are doing the best job possible in that respect means ensuring that you have the right coverage. As I stated in a previous post, after an insured dies, especially unexpectedly, their beneficiary and I will have a conversation. Usually this person is a grieving spouse and nearly all of the time they ask a simple question. "Will I be okay?"* How do want your agent to answer that?

Knowing how important life insurance is to making sure that your loved ones can stay in their home and maintain their lifestyle, you definitely want to make sure you have the right coverage. Here are a few items that you may need to consider. 

1. You only have insurance through your employer.  For the most part, life insurance through work can be incredibly cheap, especially if you work for a large company. I encourage people to get plenty of coverage. However, relying solely on group life insurance can be a huge mistake. This coverage is generally just term life and you may not be able to take it with you when you leave your job. If you develop any health conditions while you are working there you may not be able to get coverage later. Instead of thinking of your group life insurance plan as your only coverage, think of it as a supplemental policy. 
2. You don't have enough coverage. More often than you would think, people will have a specific amount of coverage in mind when I talk to them about their life insurance. "I only need $100,000 because that will pay off the house," for instance. By doing a quick analysis and asking some questions, I discover that they need much more coverage. Life insurance, when formulated correctly, should be able to pay off the mortgage and other debt, replace income for a few years, pay for funeral costs and other expenses related to death. Also, if there are small children in the picture, the proceeds can pay for future educational needs. Talk to your agent or use a handy life insurance calculator** to find the actual amount of coverage you need.
3. Your term life insurance policy is not covering your long enough. One of the crazy things about our lives is how much a situation can change in just a few years. In the span of a decade one can go from being single and renting an apartment to married with kids and a mortgage. In that time, financial needs vary drastically, meaning that your life insurance needs will too. This is why a life insurance "check up" may be a good idea every year or so. If you realize you need more coverage you can purchase more coverage, or you can convert some or all of your current term plan to something permanent. 

A few years back I worked with a rep who had a great way of helping people who already had coverage through another agent. "It won't hurt to have a second set of eyeballs look at your coverage," he would say, reinforcing the idea that having the most adequate plan was a priority. If you would like a second set of eyeballs, drop us a note. We'll be happy to help.  

*I will dig deeper into that topic in the next post.

**We have a calculator available on our life insurance quoting tool on the upper right side of this blog.

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! 

When Your Life Insurance Won't Pay

Life insurance, as well as disability insurance and any other type of insurance is a promise. It's a promise made on behalf of the insurance company to pay you for a loss, whether you lost your life, your ability to work or anything else stated in the policy. But more than just a promise, which can be broken, your life insurance policy is a contract. Legal and binding, it has plenty of legal jargon involved, which you, as a policy holder, should be fully aware of.

When you look at a brochure for an insurance policy there is usually a section in the back that describes "limitation and exclusions", or something to that effect. This list can be long or short, but either way you should take a few minutes to understand what is covered and what won't be covered if you suffer a loss.

A good agent will be happy to discuss this with you beforehand. At first glance, most of the items are common sense, but some can be confusing. And some will be altered or "re-interpreted" if need be. 

For example, almost every life or accident insurance policy I have seen has an exclusion for loss as a result of terrorism. This was widely seen and described by agents in the following scenario: You go to the Middle East and a bomb goes off. If you die, the company isn't paying. 

However, shortly after 9/11, with thousands dying as a result of a terrorist act, life insurance waived this exclusion. Their explanation was that the exclusion was for "foreign" acts of terrorism, in another country, even though that was not stated in the contract at all. Personally, I think they made the exception because they knew it would be a public relations nightmare if they enforced the terrorism exclusion when emotions were already incredibly high. 

If you take a look at the list of exclusions, some make sense. For example:

• Losses due to acts of war. Life insurance, as well as other types of insurance, rarely cover you if you are hurt or killed in a war. Some will even state that the war can be "undeclared", which is broad. The military does offer some small policies, but be aware of what you're buying.
• Losses due to self-inflicted injury. This makes sense. If you stab yourself, you should not expect the insurance company be on the hook for you. Accidental deaths will usually be covered.
• Suicide. Generally speaking, life insurance companies will pay, but after a "contestability period", which can be a few years, as stipulated in the policy. Things can get tricky if the insured dies of a drug overdose during that time and the insurance company would need to have proof that the overdose was intentional.
• Losses that occur while committing a crime. If you decide to rob a bank and the guard shoots you, don't expect the insurance carrier to pay your loved ones. 
• Murder. Believe it or not, there is a "slayer rule", which means that if your beneficiary kills you, the policy does not have to pay them. Go figure.

One of the other reasons why a policy won't pay is if you are not truthful on the application. The insurance company's underwriting department will try to find out as much about your medical history and lifestyle as possible during the application process, but they can't look under every stone. If you have misrepresented yourself (nice way of saying you lied) on the application, the insurance carrier may not pay the death benefit.

The best advice is to be honest with your agent and the underwriter (they may conduct a phone interview) when they ask about your medical history, alcohol and drug use, travel plans and risky activities. 

By spending a few minutes looking over your policy you can save you and your family a lot of confusion and heartbreak. If you have questions about any of this, feel free to look us up on the web and drop us a note. In the meantime, stay healthy!

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