Is Selling Insurance Hard? Part 1

Sometimes being a life insurance agent is difficult. It's hard to find prospects and talk them into meeting with us, much less presenting them with a plan they need but don't really want. Not many people want to acknowledge that they should buy a plan that, even though is in the best interest of their family, will add another monthly bill to their stretched out budget.

When I speak to people who sell other products or services I have to explain that insurance isn't like selling a car or a home. Those are things that people want and will actually save up for. No one saves up for life insurance or long term care insurance.  Let's face it, insurance is the one thing people buy hoping they never have to use it. 

With that in mind, you can understand why life insurance agents come and go. The person who sold you a policy ten years ago may not be with that company anymore. Heck, they may not be in the industry either. The persistency rate of agents after three years is about 10-12%, depending on whom you ask. That means that if a company hires 100 new agents today, three years from now maybe a dozen of those people will still be around. 

What makes it so difficult? There are several reasons, but it usually boils down to people who have their priorities out of whack. Not always, but often when I sit down and talk to a young couple with kids and a mortgage, it doesn't take long to realize that their "live in the moment" philosophy is great for some things, but not for insurance purposes. They want to have all of the new gadgets and devices, like phones and cars. I had one young man ask me, "What's the point of working to make money if I can't enjoy it?" 

Yes, selling insurance can be like pulling teeth.  So I have to paint a picture for them. First I have to dispel the myth that they will live forever. "Have you ever known anyone your age who has died?" I ask. It can be a dark subject but my goal is to let them know that things happen. A car can cross the center line at any time ending someone's life. A serious disease could suddenly arise. Things happen.

Typical questions I ask run like this:

• What would you do if your significant other should die suddenly?
• How would your family be able to pay the bills?
• Would your family be able to stay in their home?
• Would you be able to care for the kids and work at the same time?
• How much are you willing to pay to make sure your family will be okay?

Let's assume that I got through to this young couple. We all agree that they need some coverage and they have given me a budget to work within. A week later I return with a few options and present them. There is no "high pressure" selling here. Just a recap of what we have previously discussed and what I have to offer. Then it happens.

 

"I think we need time to think about it. Maybe a week or so." Punch in the gut. I'm pretty sure they didn't need a week to consider that nice phone in their pocket. But I have an answer for that one. 

 

Stay tuned and in the next installment I'll explain why it's okay to need a week or so to think about it. 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!

Does Getting the Covid Vaccine Affect Life Insurance?

A wise man once said something to the effect of "I don't care what you believe, just don't tell me I have to believe it too." In today's world we are bombarded by misinformation from all multiple groups with differing agendas. 

It seems that there is a group of anti-vaxxers who are spreading "non-truths" on social media regarding the Covid vaccine. Their whopper of a lie is that if you get the vaccination and die somewhere down the road, the insurance company won't pay the claim because the vaccine is considered "experimental". Nothing could be farther from the truth.

According to the American Council of Life Insurers (ACLI), life insurance policies have not changed and getting the shot will not change whether a policy will pay out in the event of death. 

The stories are being circulated on social media platforms like TikTok, Facebook and Twitter. One such post read like this:

"I just spoke with my insurance company because I was curious that if I got the vaccine for Covid and passed away from complications, would my life insurance be valid? Well, guess what?? They confirmed they would not pay out my policy because the vaccine is experimental. Wake up!!!" posted on Facebook.

A video on TikTok encouraged people to call their life insurance company to verify they would have coverage. The ACLI has tried to be proactive in fighting back this kind of information, while handling a huge increase in phone calls regarding the matter. 

Getting the shot could affect life insurance, but not in the way mentioned in the posts. Actually, if enough people get the vaccine, it could limit any life insurance rate increases that could have resulted from the Covid deaths.

"Only if the vaccine itself increased mortality would you expect it to increase life insurance premiums. and there is no evidence of that so far," said W. Bruce Vogel, an associate professor in the Division of Health Outcomes and Implementation Science at the University of Florida. He continued, "The fact that the vaccine is being given so widely suggest at least an implicit finding by the FDA that the potential rewards outweigh the risk."

Even local officials are having to combat this flow of misinformation. In Oklahoma, Insurance Commissioner Glen Mulready, had to issue a statement confirming that Covid vaccinations would not affect life insurance policies. 

"This simply not true," said Mr. Mulready. "Whether it's Phizer, Moderna or the Johnson and Johnson, these vaccines received Emergency Use Authorizations after the Food and Drug Administration determined their safety and efficacy. I assure you that getting a Covid-19 vaccine will not affect your life insurance benefits."

Of course Mr. Mulready encouraged the residents of Oklahoma to contact their insurance carriers if they have doubts. 

The main question in all of this is why people go to the lengths of perpetuate this kind of misinformation. As I stated earlier, people have agendas which may or may not be steeped in fact. Years ago a study was released stating that children's' immunizations were the causes of autism, and many people refused to have their small children vaccinated as a result.  Even when the study, which consisted of a very small number of children, was proven to be false, many parents continue to cite it as their main reason. 

As they say, "you can un-ring that bell." 

So now we are in a situation where many people are suspicious of the Covid vaccine because they feel that it has been "rushed to market". The fact is that most of the labs had broken the virus down gnomically within a few days of getting samples, which means that they were months or years ahead of schedule by using medical advances like RNA testing. And they were able to develop vaccines quickly based on data that came faster than normal.

More importantly, suggesting that the vaccine could affect your life insurance (or any other insurance) is blatantly wrong. My suggestion for those folks that have read this kind of garbage need to find the sources and block them immediately. These "news" sources are more about fear and propaganda than giving accurate information. 

If you have concerns, feel free to reach out to your agent or the carrier directly. In the meantime, please stay healthy.

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

Do I Need To Put My Life Insurance Inside a Trust?

Since we are in the middle of tax season I have tried to keep this week's topics around insurance and taxes. The last one is a bit different but may be of use to some people.  

As the title of this post implies, we are going to take a quick look at trusts and why people use them for life insurance purposes. And like my previous posts, I am obligated to give my disclaimer that I am not a tax expert, so if you have more specific questions about the tax implications I recommend consulting a tax professional.

Why would anyone want to put life insurance inside of a trust, you ask? For several reasons, actually. For instance, there are those people who have special needs children and may be interested in funding their care as they become special needs adults. In that instance, we use a Special Needs Trust and a "second to die" life insurance policy to fund it when both parents pass away. 

However, for the purposes of this blog we will look at Irrevocable Life Insurance Trust (ILIT). When we (or our attorney) create a trust, it's basically like creating a whole new entity, like a new person. The purpose of using the trust for life insurance is for estate tax purposes. The life insurance policy inside the trust is no longer part of the estate, so it can't be taxed. 

The current federal estate tax exemption is $11,700,000, which is very high and adjusted for inflation each year. However, the amount is scheduled to drop to $5,000,000 on December 31, 2025. And now that the Democrats are in control of congress it may drop sooner. 

I realize that for many people these numbers may seem extremely high. At the same time, I know a business owner who purchased a piece of land many years ago and opened a small restaurant. The value of that property increased dramatically over years since he bought it, so his house and business are close to reaching that $5m threshold. When I discussed it with him, he was totally unaware.

Another thing to consider is that you can name a trustee, who may be a family member but can also be a friend or even your attorney. This trustee can use the policy proceeds (death benefit) for your beneficiaries without giving them full control of the monies. This is important if you have small children, a second marriage or if your beneficiaries can't manage the money on their own. 

My advice when it comes to these kinds of situations is to consult a good estate attorney who has experience in these matters. Just because an attorney can make a will does not necessarily mean they understand trusts. When the word "irrevocable" is in the name it means you can't change things later. As a good attorney friend of mine once said to me, "Get a lawyer who has done this before. You don't want one to practice on your client."

There are a few rules you need to be aware of. Some are:

1. You can transfer existing policies into the trust but there is a three year lookback, so if you die in the first three years the death proceeds will be included in your estate and potentially taxed. 
2. The estate is a separate entity and will need it's own tax identification number. Because of this, your premiums will need to be "gifted" to the trust. The trust will, in turn, pay the premiums to the insurance company.

Overall, a trust can be a great way to use life insurance to pay estate taxes. And as I stated earlier, it's best to consult an estate attorney and a tax professional if you have questions. 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! 

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 Employees Get Tax Breaks?

Since it is tax season I thought I would share a few ways that you can use and maximize your insurance to help lessen or avoid a big tax bill over the next few posts. Some of these ideas may be implemented immediately, while others will help you down the road. Like a wise man once said, "If you fail to plan, then plan to fail."

First and foremost, I have to give the obligatory disclaimer that I am not a tax expert and one should consult their own tax advisor before implementing any of these strategies. Remember that tax laws are constantly fluid and can change as political parties rotate in and out of Congress.

Also, I want to let you know in advance that not all of these plans will work for everyone, but hopefully there will be a nugget or two in here for everyone. With that said, let's get started.

For those of us who work for an employer and are fortunate enough to have medical benefits, find out if those benefits are being "pre-taxed". Section 125 of the IRS tax code allows your allows employers to deduct your benefits from your pay before figuring out what your taxable income is. By simply moving your deductions "above the line" it can save you (and your employer) some money, with estimates around 20-25% on the costs of those benefits. The savings, in other words, come in the form of paying less taxes. And since your employer has to match your FICA* (Social Security) portion of the deduction, that can be decreased for them as well. 

If you have an enrollment company or a worksite insurance company providing ancillary products like dental, vision, disability and other insurance products, odds are they can set up and handle the administration of a pre-tax plan. Many of these companies will do it at no charge for your employer if there is a minimum number of participants. 

Be aware of a couple of items though. First, life insurance can not be pre-taxed. Since life insurance proceeds are generally tax-free to begin with, the IRS is not going to allow pre-taxing. Also, certain benefits can be pre-taxed but really should not be. 

I have seen businesses where their disability insurance, for instance, was pre-taxed. When this is the case, there will be a huge problem if an employee needs to file a claim, as it will be taxed as income. As most disability policies pay around 60-65% of a person's gross income, having that partial pay be taxed can be a financial nightmare for a family struggling to pay their bills.

Other deductions that are not necessarily insurance products can be used for pre-tax savings as well. A 401(k) plan can help you out down the road for retirement and should be implemented if offered. These plans were created in the late 1970's as a way for employers to create a tax-advantaged savings account for their employees. Unfortunately many employers replaced pensions with these plans, mostly because it saved the businesses a lot of money. 

If your employer offers a 401(k) plan take advantage of it and the tax savings that come with it. But be aware that it is not a true "retirement plan" and is basically a "savings plan". By allowing the employee to allocate their money as they wish, it also exposes them to a lot of market risk. 

After the debacle at Enron years ago, laws were enacted to heavily regulate the 401(k) plans. And after the financial recession of 2008 many employers changed their plans or did away with them altogether. Do some research or ask your tax advisor what is best for you.

The next few posts will continue on the theme of insurance and taxes so stay tuned. In the meantime, please stay healthy!

*There is a downside to saving all of this money on taxes by using the Section 125 plan. By reducing your taxable income while working, it also reduces your FICA contribution. This, in turn, can reduce your the amount of your Social Security check when you are eligible to receive these benefits. If you are paying less in, plan to get less out.

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!

Can Covid Survivors Get Disability Insurance?

It's starting to look like we are at the beginning of the end of the Covid pandemic, even if just a little bit. People are being vaccinated in record numbers and a handful of state governors are lifting restrictions for businesses and schools. All in all, things are starting to seem more hopeful.

However, there are those who had serious cases of Covid and survived. These people are still feeling the effects of the virus, from symptoms of lung issues,  "brain fog", fatigue and chronic pain. Called "Covid long-haulers", these folks are trying to get back to work and resume productive lives, despite their myriad of ongoing health concerns.

To make matters worse, insurance companies are becoming hesitant to issue policies to these people. This is because unlike other illnesses where the symptoms are gone, these problems may continue to chronically debilitate someone who has been infected. No one knows for sure if they will recover fully or if they will suffer for the rest of their lives.

With that lack of certainty in recovery of the long-haulers, it makes sense that insurance companies may not want to take on the risk of covering them. Part of this is because the disease is new, which makes it difficult for doctors to diagnose since the symptoms can also be associated with other conditions.

Also, insurance companies are wary of fraud and hesitant to file claims, especially with symptoms like fatigue and brain fog. This could lead to claim denials. 

So what should you do? If you feel you are a Covid long-hauler, the best advice is to get diagnosed from several medical practitioners, giving you plenty of documentation in case you need to file a claim. 

If you are healthy and have no symptoms, now is the time to talk to an agent about securing a disability insurance policy. Insurance companies are not going to be looking to cover people who have been infected and I have a feeling that in the short run, at least, they may add Covid to the list of conditions asked about on an application for coverage.

When people think of disability insurance they usually think of accidents, but alarmingly, over 80% of disability claims are for illnesses, like cancer and strokes. More importantly, people fail to recognize that if they are sick or hurt and are unable to work, the bills will continue to come in. Not only are they losing income, but so are those family members who have to stay home and become caretakers.

I always describe disability insurance as being part of the "Holy Trinity" of insurance, along with life and major medical coverage. Having a policy that insures your paycheck is an important safety net in the event one becomes hurt or chronically ill, which may be the effects of the Covid long-haulers.

At Surf Financial, we have come up with our "Covid Package" of plans, which is disability insurance (for the reasons stated above), along with life insurance (people have obviously died as a result of having the virus) and Hospital Indemnity coverage for those who have to be confined to a hospital. The Covid Package is not a formal group of plans fit into one, but mostly a way for us to communicate why they need these plans and what the plans do.

If you have questions about disability insurance or any of our other coverages, drop us a note. 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!