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!

What About Medicare Supplements?

Are you one of the millions of Americans in need of information about Medicare supplements? Each day, thousands of people who are on the cusp of turning 65 years old are getting bombarded by phone calls and brochures about the varying array of products. It can be confusing but luckily it's not as bad as one would think. However there are some basics that can help you understand the ins and outs of Medicare.

First off, the Medicare program was never designed to cover all the costs associated with health care, and it doesn't. This in turn has created a multi-billion dollar commoditized supplemental market. Today, 90% of Medicare beneficiaries have some form of supplemental coverage. 

Medicare supplement plans were standardized so that plans can be easily compared between carriers. For example, all plan A's are the same, and all of the plan B's are the same. The insurance companies are not allowed to add or subtract to them as this would make it even more confusing to those purchasing these plans.  This has made the market more about premium rates than anything else. 

So what does Medicare cover? There are two parts:

Medicare Part A - Hospital Insurance, covers hospital inpatient care and recovery care in a skilled nursing facility, hospice and home health services.

Medicare Part B - Medical Insurance, helps cover some medically necessary services from doctors and other health care providers plus preventative services. 

What does Medicare not cover? Again, it wasn't designed to cover all of your doctor and hospital bills. You are required to pay for a portion of those bills in which Medicare does not pay, including:

• Medicare Part A hospital benefit-period deductible and coinsurance
• Medicare Part B medical annual deductible, generally 20% coinsurance and those charges exceeding the Medicare eligible expense
• Skilled nursing facility coinsurance

These bills can be paid for by yourself or through the Medicare supplement policy that you purchase.

Medicare supplements do offer a great value. They include:

• No provider restrictions. You are not restricted to use a network of healthcare providers. Any healthcare provider who accepts Medicare patients accepts Medicare supplement insurance. If you move, your coverage goes with you.
• Instant coverage. There is no waiting period for preexisting conditions and benefits are paid from the time your policy is in force.
• Low out of pocket costs. Your Medicare supplement and Medicare Parts A and B work together to minimize your share of healthcare costs. With this additional insurance coverage, even unexpected medical events aren't likely to impact your financial health.
• Guaranteed renewable. Your Medicare supplement insurance policy renews as long as you pay the premiums on time and make no material misrepresentations (that means you are honest on your application).

There is some interesting information about Medicare that most people aren't aware of. Did you know that Medicare was started in the 1960's? Back then people paid about 19% of their income for their care. Since then, healthcare costs have skyrocketed but the income levels of older Americans haven't kept pace. And now Medicare constitutes about 14% of the federal budget.

Also, because of the aging Baby Boomer generation, the number of people on Medicare is expected to rise from 47 million to 78 million between 2010 and 2030. 

Obviously there is a lot of information here which makes it more important that you let an insurance professional help you choose which Medicare supplement is right for you.

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!

Buying Life Insurance During a Pandemic

With the pandemic all around us, people are starting to look seriously at life insurance to protect themselves and their families. As a matter of fact, a survey conducted in May and June 2020 by Life Happens, an industry funded education group, found that 67% of Americans say that the virus has been a wake-up call for them and 30% say that life insurance has been one of the topics for dinner table discussion. 

Luckily, there’s never a bad time to make a financial plan and lock in coverage. Life insurance companies and agencies, like Surf Financial, quickly implemented plans to work around the hurdles of the pandemic. For instance, many of our carriers already had systems in place for agents to use web based application systems, but with some extra enhancements we can now have policies delivered to the clients directly instead of coming to our offices. 

Now is a great time to buy life insurance because some companies have started raising prices.  Before those increases kick in across the board, you may want to lock in on a great rate. It’s also a prime time to make an application that won’t require a medical exam. In the past, buying a no-exam policy usually meant paying more because the insurer had less information on you to assess their “risk” in selling you a policy. But the pandemic has made in-person meetings impractical, as well as unwelcome, so having a nurse do a paramed exam may no longer be necessary.

Even before the pandemic, many insurers had been working on ways to use data (such as electronic health records and prescription databases) as a substitute for medical exams and to digitalize the life insurance buying experience. Many life insurers quickly adapted by offering no-exam policies at prices comparable to policies that required an exam. This is giving life insurance buyers more choices for coverage—without worrying about how to get an in-person exam done. 

Note: You may still run into a medical exam requirement if you’re looking for a large amount of coverage (in the millions) or you’re older or have health issues.

Some life insurance buyers will purchase the maximum coverage they can get without an exam, even if they need more. For whatever reasons, whether for convenience or because they have a fear of needles. 

Whether life insurers will continue to offer no-exam policies after the pandemic remains to be seen. Exams could make a comeback if insurers see higher claims than they expected on policies that didn’t require a medical exams. If that happens, you could either see rate increases or the companies will start requiring exams again. 

Another school of thought is that carriers won't go back to the old ways. Part of this is because of innovations that were already starting before Covid. 

The unexpected closing of one of the three primary providers of life insurance medical exams also caused disruption. In early July, EMSI suddenly shut down and insurers had to scramble to get their applicants rescheduled with other exam providers. (The other two large providers are ExamOne and APPS-Portamedic.)

A typical life insurance application includes dozens of questions about your health, prescriptions, family health history, driving record and dangerous activities such as sky-diving. Since the application process is all about the insurer “assessing risk,” questions concerning the virus have quickly became a standard part of applications.

If you answer "yes" to questions like "Have you been diagnosed with Covid?" or "Has someone in your household been diagnosed with Covid-19?" you may not have your policy issued or it may be postponed.  And if you have had the virus and have recovered, you may still have some difficulty getting a policy, mainly because not enough is known yet about the virus. 

Insurance companies have always been concerned when it came to international travel. When the pandemic started, traveling internationally was seen as especially risky from a life insurance buying perspective. Most life insurance companies instituted postponements for applications until after the travel. Once you were back and healthy, and after a certain period of time such as 30 days, the insurer would consider your application. If you have plans for international travel this year, expect a delay on a new life insurance policy for at least 30 days. And that’s assuming you don’t have additional international travel plans.

If you’re ready to buy coverage, life insurance companies are fully open for business, but be prepared for potential delays due to the pandemic: You may experience a delay in the application process if your insurer wants to request medical records, as many doctors’ offices have reduced staff for doing such tasks. If your application will require a medical exam, you might also experience a delay, especially if you’re avoiding in-person contact with strangers.

Take time to look at how much life insurance you need. Applying now is easier than ever. For instance, we have added our calendar to our website, so you can schedule a time for one of our agents to call you to find out which plan you need and how to fit it into your budget.

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!

Non Medical Life Insurance

For many people, finding a no exam life insurance policy can be a great way to purchase a policy conveniently and quickly. But convenience is just one reason why people like life insurance with no medical exams. In today's world of Covid-19, as we try to do social distancing, many just don't want a nurse, no matter how sterile, to come into their homes. And I'm sure there are some nurses who are concerned about their safety as well.

I had a client from Florence, SC who was terrified of needles. It stressed her out to no end, but she needed some life insurance protection and reluctantly agreed to the paramed exam. The nurse told me later that the client nearly passed out and her blood pressure was very high, all as a result of her fear of needles. Again, convenience is not the only reason to purchase no exam life insurance.

These policies allow you to get term life coverage to financially protect your family in the event of your early death, without having to undergo a medical test. 

Whether you are looking at term life insurance or whole life insurance, it usually means passing medical underwriting — and that involves a medical exam in which a nurse meets you at your home or work. This exam can include the nurses getting your information, such as medications, but also having to measure your blood pressure, height and weight, and procure blood and urine samples.

Unfortunately, having to pass a medical test can be a roadblock for some people to getting this important coverage. Maybe they feel they can’t pass medical underwriting. Or, maybe, like the client I mentioned earlier, they just don’t like to be poked and prodded with needles. Either way, they put off buying the coverage they need to protect their family's financial needs.

Before we get started, let’s make sure you understand some basics about no exam life insurance. There are two types of these policies - simplified issue and guaranteed issue. 

When it comes to simplified issue no exam life insurance, you simply answer a series of questions about yourself and your general state of health to qualify. If your responses fall in the parameters of the insurance carriers underwriting limits, you are halfway there.  That’s different than the normal underwriting process where you have to undergo a medical exam. Be aware that the life insurance company can still request your medical records. Depending on the face amount, your age and whether or not you smoke, the carrier may forego asking for those records as well. However, there is a trade-off for these so-called “simplified issue policies.” They will usually be a little bit more expensive than their medically underwritten counterparts. 

For instance, I had a 30 year old woman, non-smoker and in overall good health, in Myrtle Beach, SC apply for $250,000 20-year term policy which required no medical exam. A comparable policy requiring the exam came in about $9/month cheaper. As you can see, the risk to the carrier was built into the premiums.

Guaranteed issue policies tend to come in the form of whole life policies and are usually taken by those who have health issues which would normally keep them from getting coverage. There is no medical exam, no health questions and the price can be higher. Typically these are bought for final expenses associated with funerals and some may have limited benefits for the first two years of the policy.

I advise my clients to be truthful in answering the survey questions. If the carrier finds that you may have "fudged" your information they can void your policy.

At Surf Financial Brokers we have several companies who offer non medical life insurance policies. Book an appointment to speak with us and go over your options. And 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!

Advancements In Cancer Treatments and Cancer Policies

As new advancements in cancer treatments develop, many of these innovations are not covered by traditional health insurance or even Medicare, or they can require strict adherence to Medicare guidelines. Additionally, increasing out-of-pocket medical expenses such as health insurance co-payments and deductibles can leave many unprepared for the high costs associated with a cancer diagnosis.

One of our carriers, GTL, has formed a partnership with TGen, one of the leading nonprofit medical research institutes in the world. The result is a policy* that gives you and your family access to revolutionary genome sequencing technology and consultative services from TGen's expert cancer ace of mind in knowing you have access to one of the most advanced medical technologies which may give you your best shot to beat cancer.

• Confidence that his insurance coverage can help give access to a highly precise and individualized plan of care based upon ground-breaking research.
• Consultations for you and your doctor with a TGen oncology expert to explain your sequencing results and treatment recommendation. 
• Cash to cover the high out-of -pocket costs associated with cancer and comfort knowing your bills can be paid. 

Your uniqueness plays an integral role in how you develop and react to cancer and even how you react to treatments. So if cancer is as unique to a person as their DNA, why would cancer treatments be the same for everyone?

Your genome is the complete set of your DNA. It is your blueprint. It's your personal set of instructions for what makes you unique. Genomic sequencing provides TGen's experts your complete genetic code which is sorted and studied. Sequencing can be used as a medical tool that unlocks the power of your genome to help create treatment plans that are more precise and individualized.

Genomic sequencing:

• Analyzes a patient's tumor "fingerprint" to see if there are therapies that have worked well before.
• Allows the oncologist to match each patient with the best treatment based upon the underlying biology of your specific cancer. 
• Makes medicine more rational, personal and precise by identifying molecular targets before treating the cancer
• Identifies whether targeted drugs that support your own immune system's ability to fight cancer could be beneficial to you. 

So how does all this work? When a patient is diagnosed with cancer and files a claim with GTL, the patient informs the doctor that they have access to genome sequencing through TGen. The biopsy is taken and sent to TGen. GTL then pays the benefits for the testing and any consultative services. The patient and doctor get one-on-one consultations with a TGen oncology expert to explain sequencing results and treatment options. 

All of this sounds very technical, but the bottom line is that cancer research has advanced tremendously over the last few years and cancer policies have had to keep up. This policy will not only pay benefits for those very high out-of-pocket expenses that can be incurred when one has cancer, but can also give you a better shot at recovery. 

And we make it easy to apply for coverage, as it can be done completely over the phone. During these days of Covid-19 most people don't want an agent visiting them in person. You can even set your own appointment with us and let us know when to call. Our goal is to make the whole process of getting a cancer plan as easy and convenient as possible. 

For a short video on this awesome plan, click here. And please stay safe and healthy!

*This policy is not available in all states. 

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 Reasons To Buy Life Insurance?

When I give sales seminars I discuss how some things are easier to sell than others. For example, people want phones or cars or homes, but no one wants life insurance. One of the ways to test this out is by filling in the blank in the following sentence. "I am saving up for ______." A product that people will put in that blank are going to be markedly easier to sell because it is implied that someone is willing to put money aside for that item. 

Needless to say, I don't think I have ever met anyone who said they were saving up for a life, disability or long term care policy. The reasons for this could be that insurance is an intangible product. You can't touch it (you can touch a policy, but does it give you any satisfactions?), drive it or eat it. And most importantly, insurance is the one thing we purchase hoping to never use. 

Why do we buy insurance? Here are a few reasons.

1. It gives us peace of mind. As we tell our clients, you can lay your head on your pillow and sleep knowing that if something bad happens, you have mitigated the damage as much as you can. 
2. It provides security for you and your family. Life insurance means that you have loved ones that will still need financial help if you were to die suddenly. This is also true of a disability policy,which is just insurance on your paycheck to keep the family afloat if you are sick or hurt and unable to provide the income needed to pay the bills. Again, when I talk to groups I mention that those bills are going to keep coming.
3. Cash accumulations can provide down the road. Yes, life insurance can be a great way to take care of multiple concerns in the future. A permanent life insurance policy, if purchased early enough and structured properly by good agent, can also be used as a "retirement supplement" by providing a secondary income stream. 
4. You can fund a cause with someone else's money. One of the most interesting ways to give to a charity, non-profit or religious organization is to make them the beneficiary of a life insurance policy. Most people do not have $100,000 to give to their church or favorite charity, but they can afford the premiums for such a policy. And when they pass away and the organization receives the funds, it can be used for a variety of needs, from scholarship funds to building a much needed community center. (I know of one client who wanted a small plaque mentioning the donation was in the memory of his departed wife.)
   
   

There will always be those people who say things like, "I don't need insurance because I won't be able to use it." I don't want to call these people selfish, but if they were to die too soon, someone else is going to be stuck with paying those bills. Do you really want your loved ones to have to pay for your funeral costs? From personal experience, it is bad enough when you're grieving for a loved one and then have to give a credit card to the funeral home. 

In these days of Covid-19 one should seriously consider purchasing a policy. If you would like, go to our website and book an appointment for a "no pressure" conversation. And 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!

6 Questions You Should Ask About Life Insurance Through Work

Quite often I will be discussing life insurance with someone and they will tell me that they don't need any because they have coverage through work. Given that everyone has a different situation, I ask some questions to find out how much they have and if it's enough to cover their needs.

The discussion usually turns to "Do I need to get life insurance through work?" or "Is it any good?" My general answer is that I don't know unless I take a look at it. DISCLOSURE: The information below is not specific to any industry or employer. There are too many plans out there to discuss each one in detail.

Here are some questions to ask your Human Resources person about your life insurance through work.

1. What's the face amount? It can vary,with the lower end being as small as $1000 to upwards of $20,000. Or the employer may just offer the equivalent of one year's salary.
2. Is it "basic" or "supplemental"? Most of the time, a "basic" policy is no charge or just very inexpensive. 
3. How much am I paying for it? If your policy is "supplemental", you may be paying more. One thing to be aware of is when the sales rep quotes you a price based on the frequency of your paycheck. $8 a week sounds good until you do the math and realize you are paying around $35 each month.  
4. Is my policy "guaranteed issue"? This means that there are no health questions. Most basic policies fall into this category.
5. Is my policy "simplified issue"? This means that your policy will ask a few health questions. These may be regarded as "knockout questions", which means if you answer "yes" to one, you will be disqualified from getting the coverage. 
6. Is it portable? What you are trying to find out is if you can take this with you if you leave your employer. And if you can, ask if the rate will go up.

Years ago I was selling "supplemental" life insurance on the coast of South Carolina. Our polices were simplified issue and I felt that they were a bit pricey. That higher price is reflected in the minimal amount of underwriting done, giving the company a higher risk. 

A young couple in Florence, SC asked me about life insurance on the husband. He was an exterminator for a local "bug company" and was being offered supplemental life insurance through his employer. The amount he wanted to purchase was going to cost him $75 each month, where I had a comparable plan for around $40. The difference in his head was that the premiums from my policy were going to be drafted from his bank account each month while the other was going to be deducted from his paycheck. He was willing to pay nearly double for the convenience of not having to worry about the money being in his account. His wife and I argued with him that he was wasting money. About a year later they split up, and she said it was because he was a "hard headed man". 

Most of the time I suggest that if you can get some "basic" coverage through work, go for it. It's cheap and your family can more than likely use it if you die. With that being said, I would treat it as a secondary policy and have a primary policy outside of work. As mentioned earlier, your policy through work may or may not be portable and if you're in poor health when you leave your job, you may not qualify for another plan.

If you have questions, feel free to leave a comment or drop by our website and book an appointment for a free consultation over the phone. 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. And please subscribe to this blog!