Do I Need Term Or Permanent Life Insurance?

Life insurance gives you a way to protect your loved ones avoid financial stress surrounding your funeral and help ease the transition to life without you.

When you’re shopping for life insurance, you have options. You can choose between multiple insurance providers. You can pick the amount you want your policy to pay out when you pass away. You’ll also need to make a decision about how long your policy will last, and that usually means choosing either term or permanent life insurance.

When it comes to term vs. permanent life insurance, what’s the difference? Which policy type is best for your situation? Hopefully this will help you understand the basics to both permanent and term life insurance policies.

What Is Term Life Insurance?

Term life insurance gives you life insurance for a set term. That means you choose a policy and a death benefit (the amount your beneficiaries will get when you pass). But you also choose a term associated with your policy.

At the end of that term (e.g., 10, 20, 30+ years), your policy is set to expire. At that time, you have options. You can let the policy expire, renew it for a new term or — assuming your insurer allows — convert it to a permanent life insurance policy. Many carriers will give you an option to convert your policy to a permanent policy during the term.

Why would you choose life insurance that will expire after a certain time? Simple: term life insurance policies are significantly cheaper than permanent life insurance policies. And, in some cases, you may feel you only need life insurance for a certain time.

For example, some people buy term insurance with a term that lasts the length of their mortgage or until their kids will be done with college. That way, your family can get through major financial milestones with or without you. Once the house is paid off and the kids are educated, you may not be as worried about leaving your partner without your income.

The amount you’ll pay for your term policy depends on a few things: your current age, the term of your policy and the size of your death benefit.

CNN Money has a helpful example to give you a ballpark idea. They say that a healthy 35-year-old male buying a 20-year term policy with a death benefit of $500,000 will pay about $430 a year. At 50, that same male will pay $1,300 annually for the same policy.

Most term life insurance policies (97%,according to the Insurance Information Institute) are level-term policies, meaning you decide a term with your insurer and your death benefit stays the same throughout the term.

But there are other types of term life policies, including yearly renewable policies and return-of-premium policies. 

Of course there are pros and cons to term life insurance. 

Pros: Less expensive, flexibility in choosing a plan that meets your needs and it's easy to understand. 

Cons: Policy expires at the end of the term, which could leave you with nothing. Also, it lacks cash value.

What is Permanent Insurance?

You can probably guess from the name: permanent life insurance is a type of life insurance that stays in effect throughout your entire life. Once you buy your policy (assuming you pay your premiums), your death benefit is guaranteed for your beneficiaries, whether you pass away in 10 years or 80.

But there’s more to the puzzle here. Most permanent life insurance policies come with a cash value component. As you pay your premiums, that money accumulates with your insurance provider. Depending on the type of policy you choose, you might get returns on that cash value in the form of dividends.

There are three different types of permanent life insurance:

• Whole life insurance: You get permanent life insurance plus a cash value component that essentially functions as a savings account. You earn dividends on your policy’s cash value component.
• Universal life insurance: With this policy, you get permanent life insurance plus a cash value component that earns interest based on money markets. You may also be able to adjust your policy’s death benefit (assuming you pass a medical exam). There are a couple of versions of Universal Life and in recent years have proven to be very suitable for many people. 
• Variable life insurance: This gives you the most flexibility — but also the most risk. You get permanent life insurance and you can invest your cash value component how you want (stocks, bonds or money market mutual funds). The issue is that if your investments don’t perform well, the losses can eat into your death benefit.

The cost of your whole life policy depends on a bunch of different things: your age, your current health, the type of permanent life insurance you choose, the amount of your death benefit, the insurer you choose — the list goes on. We’d love to give you a figure for how much you can expect to pay, but there are too many variables here.

Generally, be prepared for permanent life insurance to cost between five and 10 times more than a term life policy. For all that extra money, you get a policy that won’t expire and a potential earnings vehicle while you’re alive.

There are also pros and cons of permanent life insurance.

Pros: Policy will last for life and accrue some cash value. And if you have some medical concerns after the policy is issued, it won't affect your policy. 

Cons: More expensive, can be more complex and difficult to understand, and the cash value may disappear if the policy isn't structure correctly.

Despite what the financial "gurus" in the media profess, there is no "one size fits all" approach to this. Everyone has different issues, like medical conditions, the budgets and other financial considerations which may determine the face amount of the policy. 

A short conversation with us can help determine how much coverage is needed in your budget. Book a phone appointment to have a quick talk to determine your needs and how we can help you secure your family's financial future. 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! 

Are You Protecting Your Lifestyle?

Disability insurance is often misunderstood. While almost everyone gets the need for life insurance, not everyone understands the importance of having disability insurance. Insurance agents have the opportunity to help their clients understand this important coverage. 

Disability insurance protects your earning power should you become disabled and unable to work. It can help protect your lifestyle from a full or partial loss of income. As you well know, the probability of you becoming injured or disabled during your working career is much higher than your probability of dying.

The odds are about three to five times greater that you will become disabled for at least 90 days or longer than the odds are of of you dying. Disability insurance can help bridge this gap in income during a period of disability.

Disability insurance typically comes in two varieties, short-term and long-term.

Short-term disability coverage typically provides income replacement for an injury or disability that lasts anywhere from 30 days to one year. The time frame will vary based on the policy. Short-term disability coverage is a common employee benefit, some employers offer it at no charge. 

Long-term disability policies typically cover a disability that lasts three months or longer. This also includes a permanent disability that limits the covered individual’s ability to work on a permanent basis either in part or totally.

For those who are employed, many employers offer both short-term and long-term disability coverage as part of their employee benefits menu. It’s common for these policies to replace 50% to 60% of the employee’s compensation once the coverage kicks in.

This group coverage generally comes at a reasonable cost and will be sufficient for many of your client’s needs. However, some clients may have situations for which this type of coverage might not suffice. And of course, others who are small business owners, contract employees or otherwise self-employed might not have access to group coverage.

Group disability policies typically have a very broad definition of disability that often refers to the ability to do any sort of work. The policy might require you to work at any sort of job you might be able to do, and then pay you for the difference in your salary from your old job and the new one. In an extreme case this might require someone who is used to white collar employment to work in a fast food restaurant to receive policy benefits.

Disability coverage purchased privately will often have a narrower definition of disability. For example, an oncologist will be considered to be disabled if they can’t work in their field or something extremely close to it. Same with an attorney and many other professions.

Group coverage may not cover some forms of variable income such as commissions or incentives that many salespeople or high level executives might count on as a key portion of their overall compensation. The group policy might limit the covered compensation to the policyholder’s regular compensation.

We recommend that if you have a group plan to avoid having your premium payments deducted "pre-tax", as this can make your benefits taxable if you should become disabled and need to file a claim. Saving a few dollars in payroll tax could decrease your benefits considerably.

Along with that, note that your benefits can be taxable if your employer is paying for your coverage. 

You will need to shop around for a policy and insurance company offering the coverage that best fits your situation. In general, the narrower the definition of disability, the higher the premium. Privately issued policies will as a rule be more expensive than group coverage.

There are a number of factors that will impact the cost and even the availability of a disability policy for you. These include:

• The elimination period. This is the waiting period until coverage kicks in. The shorter the elimination period, the higher the premium. Think of it as a deductible in time.
• Definition of disability. As discussed above, a policy with a narrow definition of disability will cost more.
• Your occupation may factor into the equation, especially if you work in a field that is more likely than some others to result in a disabling injury.
• Your income. The higher the income the higher the premium as the insurance company would have to pay a higher benefit level for a disability claim.

Social Security offers disability benefits, but they are very hard to qualify for. This is not something you should depend on to cover you in the event of a disabling condition.

Should you find yourself disabled and unable to work for a prolonged period of time, this could be financially devastating without the proper coverage in place. 

During these times of Covid, it's more important than ever to make sure you can cover bills like housing, utilities and groceries. In the upper right of this blog is a "Get A Quote" button. Run your own quote and see how much it would cost to insure your lifestyle. If you have questions, 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! 

Cash When You Die, Cash When You Live Part 2

In the previous post I explained how Indexed Universal Life (IUL) is a great alternative for those who would like their life insurance policy to be useful while they are still living. The growth in the policies, which builds cash value, is based on an index of the stock market rather than interest rates. That means the growth inside the policy can increase faster in this low interest rate environment.

How is the IUL a way to help you in your retirement years? First, let's acknowledge that this is first and foremost life insurance. There is underwriting involved and for those who are young, healthy and do not smoke, the rates will be much less expensive. With that in mind, the growth of the cash value of the policy will greater as well for those in good physical shape.

One of the concepts of permanent life insurance is "over funding", which means that one can contribute additional premiums to the policy. This has to be done within certain limits, per the IRS (life insurance has a special tax status that can be discussed at another time), but it helps accelerate the cash value. Accessing that cash can be beneficial if one has emergency expenses, as it can be surrendered or taken out of the policy as a loan. 

Taking the money out as a loan has advantages and disadvantages. The money taken from the policy is tax-free, as it isn't income. On the other hand, if you die, your beneficiaries will get the death amount of the policy, minus the loan amount. Also, the interest can be a bit high, usually around 8%.

But there are other ways to use an IUL to your advantage when it comes to retirement. Let's compare it to a Roth IRA, which is one of the better vehicles out there. The Roth IRA has the following features:

• Post tax dollars are contributed.
• Tax-deferred growth.
• There is a limit as to how much can be contributed ($6000 for 2021).
• You have to be at least 59 1/2 years old to access the money without tax penalties.

On the other hand, here are some the features of an IUL.

• Post tax dollars are contributed.
• Tax deferred growth.
• There is NO limit on contributions.
• You can access your cash value at any age.
• There are living benefits for chronic illness and critical illness.
• If you die, the policy will pay your beneficiaries the face amount, minus any deductions or loans.

As you can see, an IUL can be a great alternative to a Roth IRA. People who are younger, healthier and don't smoke can make the most of this type of life insurance policy, so it obviously doesn't work for everyone. It also helps if the insured has the means to over fund the policy.

Years ago I had a client who used an IUL in an interesting way. Since he had been over funding it early on, it had plenty of cash value within a few years. This gentleman, who loved to look for a good investment, would see a parcel of land and decide to purchase it. He didn't want to go to the bank and fill out a loan application, as that was too long of a process, so he would call the insurance company and borrow against his policy to make the down payment on the property. Usually he would get his check within a few days.

He would repay the loan amount within a few months and do it again if he saw another good investment property. In essence, he was "warehousing" his money in the IUL for future investments. In the meantime, he still had plenty of coverage in case he died.

If you would like more information on IUL's or a quote, stop by our website and fill out a contact form so we can get back to you. In the meantime, stay healthy!

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

Cash When You Die, Cash When You Live Part 1

In a former life I had a securities license and sold products like mutual funds and variable annuities. Retirement planning was also part of the work as I would talk to people, mostly business owners or self-employed individuals, who had no funds put away or had gone through the little they had when the economy took a downturn around 2008. 

It was difficult trying to convince someone who was already wary of being in the market that they should return. At the time the market dropped, people who were not my clients called me wanting explanations. "Why are you calling me? I'm not your guy," I would ask. 

"My broker won't return my calls," was the usual answer. These people just wanted to vent and their usual investment reps were either dodging them or dealing with "bigger fish". 

In that experience I learned a couple of things. First off, as I mentioned earlier, a lot of people were just not willing to jump back into investing. Secondly, these people "lived in the moment", as most of them were younger and really didn't seem to care about their retirement years. Finally I realized that they could leverage their youth and relatively good health and purchase the life insurance they also didn't have.

I had worked with a company that focused on whole life insurance for a few years and liked the concept, but to be honest, I felt it was a bit too conservative. The company wanted us to sell it as a "retirement supplement", which was a hard sell. Even the mutual companies had tepid growth at the time.

I had also sold traditional universal life insurance, but there were other issues there. For starters, the growth inside the policies were based on interest rates, which had sunk to new lows. Back in the 1970's and early 1980's, universal life policies were sold as investment vehicles when the interest rates were in the double digits. Now they were losing money as the "cost of insurance" tends to increase in these policies as the years go by. In other words, the cash value inside the policies were getting eaten up by internal costs.

After doing some research I found a better alternative. The Indexed Universal Life (IUL) policy offers more potential for growth than a whole life policy or a low-interest universal life policy. But there is more to the story than just another life insurance option.

First off, let me acknowledge that there are detractors. The IUL is, like it's traditional counterpart, built with increasing internal costs, which can also "eat up" the cash value. However, it's internal growth is dependent on an index of the market (the clients has options to choose from) instead of interest rates. 

A properly structured IUL can offer upside growth with downside protection. There is a cap and a floor. The cap is the most the policy can earn and the floor is the least, typically zero. In other words, if the market takes off and does well, the policy's cash value will increase. On the other hand, if the market drops, as it did earlier this year when the pandemic struck, the policy loses nothing. 

Some carriers have begun offering IUL's with other benefits, either built in or as optional riders. Of course there are the usual riders like the accelerated death benefit and disability waivers of premium. But some include living benefits for chronic illness and critical illness benefits. 

In the next post I'll show you why an IUL is a great choice for supplementing your retirement plan (if you have one). 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!

Getting Our Priorities Straight During the Holidays

With the holidays right around the corner I thought it would be appropriate to share a story from years ago when I was working for a very large insurance carrier. The agents were required to meet once a month and discuss our sales production numbers, and part of the process was that the veteran agents would give advice to the newer sales reps. 

As was usually the case in December, sales were down across the board. People generally don't buy much life or disability insurance before the holidays, with the exception of signing up for their benefits through work, so the agents were not too happy. I was one of them.

I shared how I would sit down with a couple to discuss life insurance, for instance, and would hear interesting excuses for not buying. "The holidays are coming and I need the money to buy a television," or "The new Iphone is coming out this week." 

That made no sense to me. "You have a wife and kids and a mortgage. If you were to die unexpectedly in the next few days, that cell phone isn't going to help your family stay in their home," I exclaimed to no avail.

Herein lies the problem for us insurance agents sometimes. We deal with people who mean well, and want to do right by their families, but their priorities are out of whack. The short term goals have overtaken the long term goals. Living in the moment is their mantra because "who knows what the future holds?" If they really want to know what is in store for them they should ask their elders. 

As I expressed these concerns to my colleagues at our sales meeting, a veteran agent laughed. "I know what you mean. Everyone is living in the moment, especially younger people. They think they are going to live forever and nothing will happen to them," he said. "But you have to help them understand that is wrong."

He continued to talk about the whole situation. "The holidays should be a time to emphasize the family. That should be their focus and if it isn't, then you need to make it their focus." It made sense. 

Of course we all want to have some nice gifts under the tree for the kids to open on Christmas morning. But trying to outdo ourselves (or anyone else for that matter) isn't what the holidays are all about. Wiping out our bank accounts at the end of the year over a phone or a television actually can make our festivities (and the new year) miserable. 

More importantly, all the gifts in the world can't make up for the loss of a loved one. So my message for you this year is this: It's fine to splurge a bit. This year has been tough on everyone, but remember that the holidays are about family, whether they are immediate, extended or otherwise. Make sure your priorities are in the right order. 

My job, as an insurance agent, is to make sure that your family will be able to continue to live comfortably if something should happen to you. Your priority should be making sure that your family is able to stay in their home and continue without you were to die unexpectedly. 

As I talk to my friends and clients I am learning that many have decided to cut back a bit on expenses this year. One less stocking stuffer or electronic gadget won't be missed. My wish for you and yours is to enjoy your family as much as you can. And 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!

4 Cancer Insurance Options That Can Work For You

I often discuss cancer and it's impact on a family. Yes, there is the toll it takes physically as someone undergoes treatments, and despite all the advances in research on the disease, many continue to die from various types of cancer. 

There is also a huge financial impact on survivors and their families. Cancer treatments are expensive and even though health insurance picks up a large portion of the tab, there are still some huge gaps not covered by major medical policies. Deductibles, co-pays, travel, and other out-of-pocket costs can wipe out a family's finances. Not to mention the lack of income if the cancer patient is the breadwinner of the family.

As previously discussed on this blog, there are several cancer insurance plans available on the market. There are also non-traditional plans that can also help cover the expenses related to having cancer. These plans pay directly to the insured, not the hospital or the doctor. Here are a few. 

1. Cancer treatment plans. These are the insurance plans that most people think of when considering cancer insurance. They generally pay a structured set of benefits for various treatments. For example, if someone is hospitalized for cancer, the policy may pay a set amount of money, say $100 per night. There may be another benefit if surgery is necessary. Wigs (for hair loss as a result of chemotherapy) may even have a benefit. 

Many of these types of plans are offered through "worksite" companies, which means you can get them through your work if your employer agrees to deduct the premiums from your paycheck. If you are self-employed or a business owner, you can get an individual plan and the costs is just about the same. 

A cancer treatment plan pays the way it sounds. As you are receiving treatments, you can remit the receipts to the insurance company to continue receiving benefits. As cancer treatments are not a "one and done" scenario, you could continue receiving benefits for months. With that in mind, a cancer treatment plan has the potential to pay out a lot of money, but it can also be difficult for someone who is seriously ill to keep up with the paperwork. If you would like to run your own quote on one of these plans click here. 

2. Lump sum plans. Unlike the cancer treatment plan, these plans pay a lump sum of money when someone is diagnosed with an invasive cancer. There's no need to save receipts and you can choose the amount you want, along with your premium amounts. Many people prefer these plans for their simplicity. 

One of our lump sum insurance carriers has included genomic testing with their plan. Your doctors can send a biopsy sample to a laboratory where the sample is examined. The lab will in turn contact the doctors and give them suggestions as to how to treat the cancer. All of that is included at no extra charge and can help dramatically. If you would like to see a short video on how it works, click here. 

3. Critical illness insurance. Critical illness plans generally cover several specifically named illnesses or health events, such as heart attacks, strokes, kidney failure and major organ transplants. Sometimes cancer will be included on the list. These plans are paid in the same way as the lump sum plans in that you choose a face amount when you apply. 

4. Life insurance will critical illness riders. Life insurance carriers are starting to offer riders that cover critical illness (and chronic illness) into their policies, and many are included at no extra charge. For younger people this can be great as the premiums are low. I always emphasize to my clients that they are buying life insurance, first and foremost, so the underwriting process can be an issue. 

This isn't the cheapest option as most carriers only include the riders on their permanent plans. However, we have found one carrier that offers them on their term policies. 

On all of these plans be aware that there may be some underwriting involved. If you have had an internal cancer in the last few years you could be denied coverage. Also, skin cancer isn't always covered. 

If you have questions about any of these options let us know. Our website has contact forms and a page where you can book a phone appointment that works on your schedule. 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! Thanks!

4 Things You Should Take Care Of Before You Die

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

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

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

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

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

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

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

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

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

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

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

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

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