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Life Insurance For The Small Business Market Restrictive 162 Executive Bonus Plans

The traditional 162 Executive Bonus Plan is one of the simplest and most popular executive benefits offered in the small business market. The bonus is tax deductible and has few regulations and reporting requirements. This makes the Executive Bonus Plan extremely attractive to many business owners.

The bonus needs to be considered reasonable compensation in order for it to be deductible, but other than that, the business owner has complete flexibility.

Who is covered and the level of participation is completely discretionary, plus the commitment to the contribution can also be flexible.
 
Even with all of the positive attributes of Executive Bonus Plans, some employers continue to have concerns. Many employers are concerned about not having control of the asset (the policy), which is owned by the employee. The employer may feel that unlike other executive benefit plans, there is nothing to tie the employee to the company, no “golden handcuffs.”
 
Though employees have an incentive to stay with the company in order to continue receiving premium bonuses, some employers may feel that the bonuses paid are “money out the door.” Further, they may fear that the employee may handle ownership of the policy irresponsibly.
 
A potential solution for the employer who has these concerns is the restricted executive bonus plan.
 
The Restricted Executive Bonus arrangement is designed to give the employer some degree of control over the employee’s access to the policy during employment.
 
The restrictive bonus may be approached in many ways; however the most popular method is through a restrictive endorsement to the policy. Using the restrictive endorsement, the employee agrees to sign an endorsement form, which becomes part of the policy. The endorsement states that the employee will not exercise certain ownership rights in the policy; usually for a period of years or until the employee reaches a certain age.
 
It is extremely important that the endorsement signed by the employee not grant any ownership rights to the employer. The only way the premium/bonus can be deductible to the employer is if there are no ownership rights with the employer. If the business had any ownership rights, the business’ deduction of the premiums would be jeopardized.
 
The restrictive bonus should be used sparingly.
 
And only in cases where the employer has expressed significant concern over the lack of control perceived under a standard executive bonus arrangement. In addition, the employee participant may feel as though the benefit is less compelling since the bonus is already taxable (causing an out of pocket expense in a single bonus situation) and the benefits are not immediately accessible.
 
In some cases, a restricted plan may even have the opposite effect from the intended goal of tying the employee closer to the company. It is more practical to use the double bonus, or gross up bonus, when the restrictive endorsement is used. In this situation, the cost is zero and the plan should continue to be compelling to the employee.
 
The bottom line is that executive bonus is a great way for employers to reward and retain key employees. The restrictive bonus can be used sparingly when the objection of “money going out the door” arises. Either way, executive bonus is a great sales concept for the small business market and can generate significant commissionable sales to the producer.
 
Contact your Life Sales Rep for more information.
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Great Underwriting News On A Weighty Issue!

Our Underwriting Department can help you make the sale for your clients whose weight is an issue.

One of our A+ carriers takes an aggressive approach to underwriting build cases.

Some case examples that may surprise you:
  • A man who is 6’ 0” and 300 pounds could possibly qualify for Standard rates with credits for favorable blood pressure and cholesterol levels.
  • A woman can be 5’ 4” and 235 pounds and possible Standard if there are no co-morbidities present.
Next time you have an applicant whose weight is an issue, think of us and you’ll find we don’t think it’s that big of an issue.
 
Contact our Underwriting Team to help uncover more ways to get better offers for your clients and increase your sales !
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Approaching LTCI For Couples With No Children

The need for long-term care does not discriminate. No matter what your income is, your marital status, or any other demographics that come into play – when you need long-term care, you need long-term care.
 
Clients with families and children typically consider themselves to have a “default” caregiver, someone who will always be on call if they were to encounter a long-term care situation. But what about your clients who do not have any children? How do they approach their need for long-term care?
 
Although couples may face the same long-term care risk as families with children, their situation may create a different set of challenges.

Not having a “default” caregiver in the form of a child can force your clients to think creatively about their long term care strategy.

Ask your clients, how do they want to live their life?
 
Living life without children opens up new possibilities and introduces some unique challenges. They may have more freedom to delve into their career and explore their interests. Yet, they may need to put more thought into long-term care than people with kids.
 
They could have a heightened need for professional assistance, since an adult child won’t be “on call” when and if they need help. And, if they’re part of a couple, they might bear a greater part of the work of providing care than they would if they had children.
 
Accidents, chronic illness, or simply the effects of aging could all result in a need for long-term care in the future. That’s why it’s important for everyone to take steps to preserve their quality of life and financial assets as they age.
 
We’re here to help you design a plan that is both affordable and provides the best solution for your clients’ needs. Contact your LTCI Sales Rep for guidance.
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7 Things You Need to Know About Underwriting DI Cases

Everyone knows how hard insurance professionals work to prospect, set appointments, complete the fact-finding process, run quotes, close the deal, fill out and send in forms all just to submit a single Disability Case.

The last thing you want is for an application to be held up in underwriting because information may be incomplete or worse yet, declined because of medical issues.

It’s important to remember that the information required by underwriters helps the insurance company manage risk, which in turn helps to keep prices and products competitive across the market.
 
Here are 7 ways you can help your cases move through underwriting faster and more efficiently:
  1. Before moving forward with an application, know your client. Take the time to ask about their medical history, health concerns, and current medications. If there are red flags, allow our Underwriting Department go to go to work for you. We can pre-screen the client and direct you to a carrier that might be lenient with that particular medical concern.
  2. Answer all questions on the application and provide full details such as occupation and job duties as well as physician name, address and phone number. Make sure all required fields are completed. Incomplete apps may delay your case.
  3. Send a copy of the most recent illustration reflecting the correct occupation class, benefits, discounts and premiums.
  4. Attach all necessary financial documentation.
  5. When possible, submit the case for simplified underwriting with no blood, urine, EKGs, or APS required. Typically, if the client is between the ages of 18-50 and looking for a monthly benefit amount up to $10,000 this is the way to go. This program averages a 48-hour turnaround time once the application and TeleApp interviews are competed and received.
  6. While not required, it’s always helpful to attach a cover letter that discusses the details of the particular case. This helps to give the Underwriting Department a clear picture of the case, particularly if there are any unusual medical concerns or job occupation descriptions.
  7. You can complete the telephone health interview at any time. The application does not have to be in-house for the phone interview to be conducted and typically takes less than 20 minutes.
The tips on this list will save you valuable time and help you grow your business.
 
Contact your dedicated Disability Specialist today to learn more about how you can streamline the underwriting process!
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Multiplication Tables – Using Basic Financial Underwriting To Increase Your Sale

How much does an insurance company think that your client is worth? Many times it is much more than your client does, and you have their underwriting guidelines to prove it!
 
Insurance companies don’t want to over-insure someone. Too much coverage can often result in someone falling down a flight of stairs before their proper time. Carriers set their financial underwriting criteria to limit the amount of insurance someone can buy, not to try to increase the size of the sale. So financial guidelines are a carrier’s attempt to standardize the process for determination of the reasonable worth of an applicant based on their situation.

The most common insurance need among prospects and clients is to replace the income survivors would have anticipated had premature death not occurred.

The starting point for calculating the amount of coverage a carrier will issue for purposes of income replacement is determined by a multiple of current annual compensation based on the proposed insured’s age.
 
The multiple deceases with age, understandably, because death denies a person fewer potential income-producing years as they get older. Multiples vary from company to company.
 
Consider one of the more conservative examples:
The table can help a client to realistically focus on just how big a pool of money the survivors would need to survive over the remaining years should a wage-earner pass away. And the client can “fatten up” a little in that the compensation figure used is usually the pre-tax earnings which in the calculation process translates into an amount of untaxed death proceeds.
 
Carriers will usually only take earned income into consideration unless it can be shown that the insured’s death might have a direct affect on unearned income. Non-working spouses can usually get a minimum of one-half the coverage on a working spouse.
 
At young ages the calculation can result in a large death benefit. But it is what the client needs and if he or she is healthy the competitiveness of current term insurance rates make sufficient coverage affordable to all.
 
Call with any questions concerning financial underwriting that may arise in case planning or when dealing with carriers.
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Indexed Universal Life: A New Savings Plan!

The yields in today’s marketplace on traditional short-term and long-term savings instruments are at an all time low.

Individuals are looking for efficient strategies to grow their money that they have worked hard to accumulate, but fear high risk in the markets.

There is a way to accomplish long-term growth and minimize the exposure to the increased volatility of the markets – Indexed Universal Life Insurance products.
 
How does this work with a real prospect in mind?
 
Indexed Universal Life has downside protection against poor market performance.
 
For example, if the S&P goes down 20% the policy will protect against loses with a 0.00% floor. The value in the policy will not be reduced by the loss in the index. If the market goes up 20% then the client will realize a gain up to the interest rate cap inside the policy, which can be as high as 13 %.
 
The Indexed Universal Life products also allow the individual to participate in an index of their choice within the carriers offering, which is usually the S&P 500. The client may also have options to participate in the Hang Seng and the EURO STOXX 50.
 
If you have prospects that are creating a college savings account, retaining a key employee or trying to compensate high level executives, Indexed Universal Life is a way to help them secure and plan for their futures.
 
For more information on Indexed Universal Life products please contact your Life Sales Marketing Manager today!
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Underwriting Credits Help Make The Sale

Carriers use crediting criteria to improve your clients’ ratings. The following case study shows how the identification and application of underwriting credits can significantly reduce premiums.
 
Case Study:
  • Male, age 35, NS
  • Seeking $2 mil of term
Scenario:
  • No tobacco use
  • Build is 5’8”, 204 lbs
  • Blood pressure 130/85
  • Cholesterol 273 with cholesterol/HDL ratio of 5.5
  • Father diagnosed with prostate cancer at age 56, but still living at age 67
Underwriting Rating: Using traditional criteria, this proposed insured would qualify for Standard Plus with a $3300 annual premium.
 
Crediting Criteria: Crediting Criteria added 1 inch to the proposed insured’s height, making him 5’9”, 204 lbs. He was then considered Preferred for build.
 
Final Decision: Case was moved to one class higher and issued Preferred – Annual premium = $2271 and saving nearly 30%.
 
On each case we see, we work hard to identify any underwriting credits your client may qualify for. Contact our Underwriting Department today.
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Profitable Prospects Lie In Multi-Life LTCi Sales

Multi-life LTCI continues to be one of the leading sales opportunities in the long-term care insurance marketplace today. Usually the hardest part of making a sale is finding the prospect, however, a multi-life prospect might be as simple as opening your client files.

Chances are, you already have clients who could be excellent contacts to expand your LTCI worksite business.

Look for existing clients who meet one or more of the following hidden multi-life triggers:
  • Owns a business or holds a professional occupation such as an attorney, physician, CPA or consultant
  • Holds a high level position or has influence in the executive decision making process
  • Runs a successful business that’s looking to offer more benefits to its employees
  • Could benefit from the tax incentives of purchasing LTCI with company dollars
  • Owns a business with employees who could benefit from discounts and possible underwriting concessions
Keep in mind that your best prospects may be organizations that are willing to pay some or all of the premiums for five or more policies.
 
Gaining multiple LTCI sales from a single contact benefits you, but what about your clients?
Not only are there a variety of carve-out benefits to choose from; there are additional benefits they should be made aware of:
 
  • Generally not subject to ERISA
  • Employer paid premiums are often deductible as an ordinary business expense
  • May qualify for reduced underwriting and discounts
  • Unisex pricing
To learn more about the multi-life sales opportunity, please contact your LTCI Sales Rep today.
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Not All Disabilities Are Treated Equally

If a severe disability struck, the kind where it’s impossible to perform life’s most basic activities without assistance, would your clients have enough income to get by?
 
Traditional income protection would provide approximately 60% of your client’s pre-disability earnings. However, your client’s expenses are likely to dramatically increase should a catastrophic disability occur.

By adding the Catastrophic Disability Benefit (CDB) rider to their individual Disability Income (DI) Insurance policy, clients could receive up to 100% of their pre-disability income to help cover expenses in those types of situations.

The rider offers a minimum monthly benefit of $500, up to a maximum benefit of $10,000 (depending on the client’s income). AND it is in addition to the base monthly benefit.
 
Together, the rider and base policy benefit replace a higher percentage of a client’s income to help them account for the extra expenses that often accompany a catastrophic event.
 
What’s Covered?
 
CDB benefits could be paid if your client is ADL disabled, cognitively impaired or presumptively disabled.
 
 
Contact your DI Sales Rep to learn more about income protection, and the advantages of the Catastrophic Disability Benefit rider.
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Super-Roth-Likeness: Does it Walk Like a Duck?

Comedian Steven Wright tells of the time a burglar broke into his apartment while he was asleep, stole everything, and replaced it all with exact replicas. Later his best friend walked in, looked at Steve and said, “Do I know you?”

Americans have never been averse to imitations when the original was unavailable, especially when the substitute still did the job and was more economical as well.

This passion for the more commonplace might help you make sales to clients who have maxed out their qualified retirement options and are looking for an effective way to accumulate more for supplemental income when they no longer work. In this case there is an “imitation” that may be better than the original.
 
Consider a Roth IRA, best described as “a reverse traditional IRA.” Contributions are after-tax and distributions are tax-free. But consider, too, an over-funded universal life policy that builds significant cash value in later years.
 
Compare the features and uses of the two vehicles:
 
The perceived value of an executive bonus plan is greatly enhanced when the policy is designed as an over-funded contract and the possibility of withdrawals to supplement retirement income is highlighted at the time of implementation. But any client is more inclined to consider use of an insurance contract for retirement purposes when the similarities to a Roth IRA, or any qualified plan, are explained.
 
Speaking of similarities, there is the story of a citrus farmer in the Central Valley who has developed a grapefruit that looks exactly like an orange, except that it is bigger and it is yellow.
 
Get in touch to discuss how a client’s retirement can be better, or with any other planning questions that arise in your casework, at either 706.614.3796 or tom@cpsadvancedmarkets.com.

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