One Bucket Or Two? - Another Long Term Care Option

When people are planning for retirement, one very important piece of the puzzle is often neglected. While thinking of once-in-a-lifetime trips and pickleball sound fun, long term care expenses have to be part of the equation. 

As mentioned in a previous post, the "no go years" happen when one's health deteriorates into a chronic illness. Caregivers are expensive in a facility and can cost even more to be in a client's home. In a short amount of time an entire retirement savings can be gone.

I like to say that people who buy Long Term Care insurance (LTCi) are "forward thinkers". And for many younger "forward thinkers", say under 40 years of age, it can be cost effective to look into a life insurance policy with "living benefits", which can be used for long term care expenses, instead of a traditional LTCi policy.  In other words, one could use their life insurance while they are still alive.

These types of policies come in different formats and pricing. Generally speaking, here are a few difference in these hybrid life/LTCi combo policies.

• Underwriting: Since the policy is a life insurance policy, the underwriting guidelines may be different. I've seen LTCi policies be declined, yet the client is approved for a life insurance policy. However, if the LTCi portion is a separate rider, it can be underwritten apart from the life insurance. 
• Benefit payments: Many of the policies with Chronic Illness riders or equivalent Living Benefits pay the benefits directly to the insured, but some with true LTCi benefits may require receipts for reimbursement. Check with you agent to find out which is best for your needs.

Traditionally, these "living benefits" were found exclusively on permanent life insurance policies, like whole or universal life. Recently we found a carrier who also offers a term life policy with the living benefits included. 

There is one important part of this combo life insurance/LTCi piece that needs to be covered. Generally speaking, if you decide to purchase one of these products, be aware that if you become chronically ill and need the benefits to cover the cost of your care, you may exhaust your life insurance benefits which could be of use to your survivors when you die.

This is where the buckets come in. Many of these policies have one bucket of money, and like stated above, can be used for either life insurance or long term care expenses, but not both. (I have seen a version that keeps a small amount of life insurance aside, say $10,000). 

On the other hand, there are also policies with two buckets of money, with each being able to pay out. For example, let's say you have a $100,000 policy and have a stroke. You can use up to the $100,000 for your care until that bucket is empty. If you should die, the second bucket is still full for your life insurance needs. 

The "two bucket" policy can cost more, and that is because of the potential for paying out twice (once for your chronic illness, again at your death). 

Let's try another example of the same $100,000 policy, but change things up a bit. Again, you have a stroke, but after using half of the money, $50,000, you pass away. At that point the life insurance bucket pays out it's $100,000, so the total payout is $150,000.

When I talk to clients about LTCi one objection is raised far more than others. "What if I die before I need it?" It's a reasonable question, because LTCi can be expensive and if someone were to suddenly pass away, the premiums would be for nought. However, with a combo plan, it will still pay out the death amount, so nothing is "wasted". 

Also, traditional LTCi policies have a claus that states that the insurance carrier has the right to raise the premiums of policies that are in force if they need to. This happened after the Great Recession of 2008. The insurance companies had invested heavily into the stock market, and when the market dropped so did the amount of money on hand needed to pay claims. Several companies raised premiums 15-20%, with at least one carrier going for a second premium rate hike not long after the first. With life insurance, your rate is locked in.

Combo products can be a useful part of an insurance plan for a lot of people but make sure you ask your agent or insurance broker about your options and how it will pay if you need it.

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 You Have A Rainy Day Fund?

We often hear about people who need funds in an emergency. Someone who has a medical emergency, for example, may need some quick cash for hospital bills, deductibles, co-pays. Along with that could be a shortage of money to pay bills while out of work. 

A general rule of thumb has been to make sure you have six months of money saved to pay bills, but many rarely do this. The solution has been to wait until an emergency occurs, then start a GoFundMe page and ask friends or family (or even strangers) to contribute. People who know I sell insurance will ask me "Why didn't you sell that person some insurance?"  My answer is "I tried but they didn't find it important enough at the time."

However, if one owns a permanent life insurance policy that builds cash value, asking friends and strangers to kick in doesn't have to happen. And by overfunding a policy*, building that cash value can happen faster. 

I knew of a gentleman who had quickly built a small fortune in a life insurance policy and would "warehouse" his money until he needed it. If he saw a piece of property he wanted to purchase he would call the insurance carrier and "borrow" against his policy, and within 6-8 months he would have the loan paid off. By using this method he avoided having to fill out loads of paperwork at a bank and, in most cases, he would have the money within a few business days.

The point of this is that life insurance that builds cash value can be used for emergencies, like a critical illness, or many other things. If you have questions about how this works, visit our site and book a short phone appointment to discuss. In the meantime, please stay healthy. 

*There are limits as to how much one can contribute to a policy which are set by the IRS. Tax penalties can apply if the policy isn't structured correctly.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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! 

Let's Keep Your Private Information Private

Last week, while on a work trip in Virginia, I saw a commercial on TV for life insurance. You more than likely have seen these ads as well. 

"Bob, 45, just got $2 million life insurance policy for $10 a month! Let us help you!" the voice over guy screams. A blur of fine print flashes across the screen. I'm not sure if I read it all correctly, but it implied that Bob got super ultra preferred rates because he runs marathons daily and is 4% body fat. In essence, Bob will never die.

I'm exaggerating a bit, but you get the point. The ad shows the best case scenario, but we all know that if we could have read the rest of that blur of words, it would also mention that all rates are subject to underwriting and your premium could differ. 

These ads are for insurance agencies which represent multiple companies. When someone goes online and looks for a quote, the agency gathers your information. But what does it do with that information, like your date of birth and email address? That information is sold to an insurance agent who has purchased that lead. 

Here is where things get weird. Many insurance agents will purchase leads. They think it will be worth the cost to avoid having to prospect for clients or advertise. Personally, I have never had much luck with leads of any kind. 

I used to work with a life agent, who we will call Pete. Pete paid a service approximately $300 for a year's worth of leads. Part of this deal was that Pete could choose up to three zip codes, and if the leads were in those zip codes, the agency would email him the prospects information. The problem was that there could several agents signed up for the same zip code, and they would each get an email.

According to Pete, he needed to wake up early enough to get the email and be the first agent to call the prospect. If he was too late, even by a few minutes, the poor prospect, who didn't understand what was going on, would yell at him. "I was looking at life insurance in the middle of night because I couldn't sleep. I didn't realize I was going to get five agents calling me!"

Pete also told me that most of these leads were from people who were "kicking the tires" to see how much insurance would cost and had no intention of actually buying a policy. And if they did, the premiums would be so low that his commissions would never make up for the $300 he paid for this "service". 

We do things a bit differently. If you go to our website, we also have all of the big name insurance companies, and our site compares rates as well. And, yes, we do gather your information as well. But that is where any similarities end. 

If someone likes a quote on our site, they can start an application. We don't sell data to agents. We will contact prospects to let them know we are available if they have questions or if the insurance carrier has any underwriting questions. And if someone would like to speak with an agent, they can always contact us.

Everyone is trying to stay within a budget, even when it comes to making sure that their family can stay in their own home if tragedy should strike. But one should make sure they are purchasing the amount they need as well. Our quoting engine has a calculator to help find out how much coverage is needed, which is important. Too often people don't apply for enough coverage. 

Do you know someone who needs a little more life insurance? Pass along our website and help them protect their family's financial future.

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!

What Is The Convertibility Feature In Term Life Insurance?

People who buy term life insurance usually do it because it is extremely affordable and it fits well within their budget during their working years. At some point down the road, however, a permanent policy that can build cash value may seem more attractive. Perhaps the insured can afford to pay a bit more or they just don't need as much coverage. In other words, situations change.

Most term life insurance policies include a stipulation that one can "convert" the policy to a permanent policy, either a universal life or a whole life, within a specific time frame. Instead of purchasing a new policy, one can convert all or some of their current policy, which is much easier. That is because with a conversion there are no health questions or exams. Yes, the new policy will be based on the age of the insured at the time of the conversion, but that would be the same if one were to purchase a new policy.

Without having to worry about health questions, one can convert their policy regardless of changes in health. For example, say you purchased a 20-year term policy 10 years ago, but since then your health has declined significantly. A heart attack, cancer or diabetes would probably keep you from getting a new policy or have one issued at a higher premium . However, you could convert some or all (depending on the insurance carrier) of the face amount without being concerned if your current health situation will affect the rates.

In other words, if you were healthy when you bought the term policy, the new permanent policy will be priced as if you were still healthy, even if you are not.

Why do people want to convert a term life policy? The first reason is to lock in on a premium that will not increase. At the end of the policy's term period, the rate will jump up dramatically and will do so each year. This becomes an "annual renewable term" (ART) which in essence is a series of 1-year term policies. No one really wants that. 

On the other hand, permanent policy will stay the same price as long as you continue to pay the premiums. No more having to worry about outliving your life insurance.

Another reason people will convert a term policy is to start building some cash value. That money grows inside the policy tax-free and can be used down the road for all kinds of purposes*. The earlier one converts the policy the faster the cash value grows. 

The important point is too find out when you purchase a policy as to what your options are. Some carriers will only let you convert in the first 10 years while others will allow for a conversion anytime before the term ends. 

Also, find out what kind of policies you can convert your term policy to. You may not want a traditional universal life policy and that may be your only option, while other companies only have whole life. These are good questions to ask your agent, or drop us a note and we'll help you out. 

Know what your options are when purchasing life insurance! 

*Depending on the amount of cash that has accumulated in a policy, the funds can be either surrendered (cashed out) or borrowed. Surrendering the cash value could have tax implications, but getting the money in the form of a loan is a great way to use the funds for a retirement supplement. Any outstanding loan amounts will be deducted from the face value of the policy at the time of death.

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!

The Cost of Waiting

People generally don't want to have to take on a new monthly bill, especially if it is for something they do not plan on using, like life insurance. But putting off the purchase of a policy can cost you more money in the long run.

Life insurance, as well as disability and other types of insurance, are based on your age. As we get older the rate goes up until you "lock in" on a rate. Life insurance rates are based on risk, and the risk of you dying each year goes up as you age, thus making the premium increase. Buying life and disability insurance when you are younger can save you money in the long run while giving you the coverage you need in case something should happen to you.

This is the first reason why you should not put off buying insurance. As we age our health declines. Unless you are one of the few people who decide, in the midst of a mid-life crisis, to get back into shape, your health will more than likely get worse as you age. 

I currently have a client who is in desperate need of more life insurance, but her health issues have made it nearly impossible to find a policy for her that fits in her budget. Over the last 20 years that I have worked with her and her family, she has had tremendous weight gain which has brought on an onslaught of other issues, like diabetes, high blood pressure, cholesterol and joint pain. 

If she had taken a serious look at a policy when I first met her she would have had the coverage she needs now. Unfortunately, her best bet down the road will probably be for a "guaranteed issue" policy which will cost her a lot of money for just enough to bury her.

Leveraging your good health can be a great way to keep your insurance costs down. It also helps when overfunding a life insurance policy for accelerated growth inside a cash value policy. Permanent policies, like Indexed Universal Life (IUL) can be used for things other than the death benefit, like long term care expenses, chronic illness and a retirement supplement.

Another reason to buy early is to protect your loved ones. Just because you are young doesn't mean you don't have responsibilities. The sudden and unexpected death of a young parent can be even more catastrophic to a family's financial future because young children are involved, as well as the fact that the mortgage payment is mostly interest, leaving little to know equity in the home. That means the burden of making a mortgage as well as funding the educations of the kids could end up on the shoulders of a single parent.

Consider this for a moment. A permanent life insurance policy can be paid up early, so if a young person buys a policy that is paid up in 10 years (or at age 65), that piece of the financial puzzle is taken care of before old age and bad health sets in. And you won't have to deal with it later.

The same is true with most other kinds of insurance. Many cancer plans, for example are based on the age of the insured when the application is taken, thus locking in that rate for as long as one keeps the policy. Take advantage of your good health and young age. You'll be glad you did in the long run and so will your family. 

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!

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!

How Can I Help My Kids Avoid College Debt?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 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!