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Buy-Sell Planning While Generation Straddling

Two of the top ten reasons that younger women say that they marry older men are, first, they have a better read on those with a more promising future, even if it is shorter; and second, if they sprain their ankle they can use their husband’s cane.
 
Pretty funny, but not unlike a couple of the underlying reasons it might make sense for a young entrepreneur to associate with an older colleague in a business venture.
 
The “kid” has the track record of the potential partner to serve as a good indicator how much the codger will bring to the table in the time remaining in his or her active work life. And the older businessperson has picked up things along the way that may come in handy to overcome unexpected hurdles (the cane, just in case you aren’t following the analogy).

But a disparity in age always seems to create a fly in the ointment when it comes time to do some business transition planning.

When insurance ledgers are run in anticipation of insuring for a buy-out in the event of death there is often sticker shock over the difference in cost between coverage for the young ‘un and the old fogie.
 
Clients expect some spread in cost due to age, but not that much – and it doesn’t help that the older proposed insured’s medical history isn’t as positive as it used to be (after all, you generally don’t use a cane because there has been an improvement in health).
 
If properly addressed this bump in the road shouldn’t be a problem. Assume a case where the partners will buy each other out with policies they own on each other on which each will pay the premium.
 
Consider:
 
  • Because the need for coverage is a measurable period of time that is less than life expectancy, term insurance can be used to considerably lower cost up front. And it is usually eligible for conversion if the policy is needed longer for any reason.
  • The higher premium burden of the younger partner can be neutralized by double-bonusing the cost of coverage to both. This equalizes the expense by creating a zero after-tax outlay and the business is now seen bearing the overall cost of the transition plan.
  • After that, focus on the benefits each is to derive from the agreement: either a) the assurance that their heirs will receive a fair price in the form of cash for the business interest, or b) the assurance of funds to buy out a deceased partner and future full ownership of the business. What each partner derives from the buy-sell is exactly the same, exactly what they want, and exactly what they need.
An uninsurable partner creates different problems, but policy cost due to mere differences in age or insurable health should not be an objection.
 
Two other reasons in younger women’s top ten are that an older husband will introduce them to a whole previous generation of chick flicks (Thelma and Louise, Steel Magnolias and Breakfast at Tiffany’s), and he can help with homework.
 
Contact us with any and all questions that come up in buy-sell planning for clients of any age.
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Generate Premium And Solidify Your Client Relationships With This One Step

Even though the Life Insurance marketplace is ever changing, there are time tested ways to help you to generate premium while providing a valuable service to your clients.

It’s no secret that products change and new enhancements are introduced which can provide additional benefits to your clients. It should come as no surprise that as your clients move through different life stages, their needs also change.

As a result, it is imperative that as their Life Insurance agent, you are periodically reviewing your client’s existing policies to ensure that they still meet their primary objective while confirming that there isn’t a more competitive alternative product available.
 
By staying in contact with your clients and performing annual policy reviews, you are also improving your client relationship and decreasing the chances that they will begin speaking with another advisor to confirm that their plan is performing adequately and continuing to meet their specific needs.
 
A recent success story.
 
Recently, we assisted an agent in reviewing three policies that were each designed with cash value accumulation as the primary objective.
 
As the insured’s have grown older, they have become less concerned with accumulating cash value and more concerned with death benefit protection and transferring wealth to their beneficiaries. By using their current cash value and exchanging into a guaranteed policy, we are able to increase their fully guaranteed death benefit by over 35% while maintaining the same premium commitment going forward.
 
This was not a result of their current policy underperforming or being unsatisfactory in any way. It is merely a result of the client’s needs being different today than they were 15 years ago when they originated their plan. More often than not, these sales are not initiated by the client – they begin with a courtesy call from their advisor recommending a review of their current insurance policies.
 
Get started!
 
We have a Policy Review Kit which can be customized to help you begin reviewing your client’s policies.
 
If you would like assistance reviewing one of your client’s existing policies, please contact us today and we can provide you with an itemized list of what is required to get the policy review started.
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Underwriting Strengths Help Shape Great Offers

This A+ carrier will help you shape up for spring and beyond. With underwriting strengths in many aspects, think of this carrier as your personal trainer!
 
  • Occasional cigar users (two per month or less) can qualify for Preferred Plus, Preferred & Standard Plus non-tobacco rates if there is a negative urinalysis test
  • Clients who occasionally use marijuana may qualify for Preferred or Standard Plus non-tobacco rates
Here are some examples for family history underwriting strengths:
  • Family history qualifications do not apply if the proposed insured is 60 or older for Preferred Plus, Preferred & Standard Plus classes
  • Family history qualifications apply only to deaths rather than disease
  • Family history qualifications do not apply to gender-specific cancers for opposite sex persons
  • Family history of deaths due to diabetes can qualify for Preferred Plus, Preferred and Standard Plus classes
Underwriting strengths for common health impairments and non-medical risks:
  • Mild Asthma clients may be eligible for Preferred
  • Mild Sleep Apnea may be eligible for Preferred with verified C-PAP usage
  • Treatment for cholesterol or hypertension does not exclude a proposed insured from any Preferred classes
  • Maximum cholesterol levels for Preferred classes is 300 with favorable ratios; 5.0 or less for Preferred Plus, 6.0 or less for Preferred, 7.0 or less for Standard Plus
  • Commercial pilots for regularly scheduled passenger airlines can qualify for all preferred classes
  • Certain private pilots with IFR/ATP rating, flying between 50-250 hours annually and 1000 or more total hours of piloting experience may qualify for Preferred and Standard Plus classes
  • Preferred classes may be available for occasional scuba diving if proposed insured is certified and dives less than 100 feet
Call our Life Underwriting Department today – we can help you shape great offers and get more business on the books!
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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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New DI Benefits for Physicians and Dentists

Business Overhead Expense (BOE) Disability Insurance is a cornerstone of a well-managed corporate financial plan. The coverage financially indemnifies the regular monthly overhead of a company in case of the partial or total disablement of the business owner.

BOE coverage allows a business to stay afloat while the owner is on the mend with the goal of getting him/her back to work.

Most plans provide 12 to 24 months of benefit after a short elimination period which can be the saving grace of business owners whose firms employ fewer than 50 employees. BOE plans are important insurances for small to medium business owners along most industry lines. However, there is a concentration of this type of coverage among medical and dental practices in the United States.
 
Physicians and Dentists find BOE coverage imperative due to the operational nature of their firms which have disproportionately-high monthly overhead expenses. Their overhead includes expensive equipment loans and professional staffing costs that most small businesses don’t usually encounter.
 
A common shortcoming of most BOE disability plans is that coverage excludes the salary of any employee with the same profession as the insured person. For physician and dental practices, this means that salaries of any other doctor or dentist on the owner’s payroll will not be covered even if the medical or dental professional is an employee.
 
We can provide a brilliant solution that will change the coverage scope of most physician/dentist BOE policies.
 
Now available is a Salary Replacement Benefit Rider which, in addition to the monthly overhead benefit, pays the monthly salary of the business owner’s replacement while the owner is disabled. The rider is an incredible benefit for your physician and dentist clientele as it allows all expenses to be covered as the business runs normally under the watchful eye of the replacement before the owner is able to return to work.
 
Hopefully you recognize how amazing this scenario is. The BOE policy, with the Salary Replacement Benefit Rider, covers the overhead as well as the salary of a replacement professional, allowing the business to run without the overhead costs. This translates into extra income for your client while he/she is disabled. Technically, if your client has personal DI in place in addition to the BOE plan, he/she could earn more while disabled than while at work!
 
Please contact your Disability Income Specialist to learn more bout the extra benefits of our Business Overhead Expense Insurance.
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Buy-Sell Redemption Agreements – There’ll Be Some Changes Made!

There’ll be a change in the weather
And a change in the sea
And from now on there’ll be a change in me
My walk will be different
My talk and my name –

It was a bit before my time, but you can go on YouTube and call up the sultry singer, Julie London, performing the Overstreet/Higgins song, There’ll Be Some Changes Made.  And if a business redemption agreement could carry a tune, this is what most would be singing in response to the recent United States Supreme Court decision in the case of Connelly v. United States.

The Connelly brothers owned a building supply company and had a business transition agreement where, upon death, the company would redeem and retire the shares of the deceased at an agreed price.  The company owned life insurance on both to fund the redemption. 

Both assumed, along with just about everyone else, that the receipt of the death benefits from the company-owned policy would not inflate the fair-market-value of the business for death tax purposes.  Rather, any increase would be offset by the company’s obligation to purchase the deceased owner’s interest. 

SCOTUS did not agree.  The Court of Last Resort ruled unanimously that a business’s obligation to redeem a deceased owner’s interest is not necessarily a liability that reduces the business’s value for purposes of the federal estate tax.  Consequently, death benefits received on a company-owned policy increased the business’s fair-market-value by the same amount, any agreement to redeem the insured’s interest notwithstanding!

Much commentary is sure to follow, but consider a couple initial thoughts that your business-owning clients should discuss with legal and tax counsel:
  • All existing redemption agreements funded with business-owned life insurance should be reviewed.
  • If a currently funded redemption arrangement will result in unfavorable increases in death tax, perhaps structuring the business transition under a cross-purchase arrangement might prove more beneficial.
  • Opting for a cross-purchase buy-out will require attention to avoid adverse income tax problems if ownership of any existing life contracts is changed.

It is worth reviewing the first three pages of the Connelly decision HERE.  Then call with any questions you have concerning clients and their current business transition plans, and those who are or should be implementing buy-out arrangements.  Contact Tom Virkler at 706-614-3796 or tom@cpsadvancedmarkets.com

For What It’s Worth:  As it will do, YouTube will call up related Julie London videos including the old Marlboro commercial in which she sings and lights her partner’s cigarette in a rather come-hither manner, quickly getting the whole viewing audience smokin’.  Connelly v. U.S. may soon make redemption agreements about as scarce as those cigarette television ads!

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3 Concepts That Will Place More Life Cases

Life insurance is more than just a death benefit – there are numerous living benefits attached to life insurance which are available before the funeral procession ensues.

During retirement, consumer attention often shifts from income replacement and mortgage protection to concerns about outliving retirement income and health care costs.

Three common pre-retirement uses of life insurance are:
 
  1. College Expenses
  2. Supplemental Retirement Income
  3. Long-Term Care Expenses
A properly designed Indexed Universal Life (IUL) can help you win more cases by providing customers with options they can use while living.
 
Simply put – IUL’s can provide clients with access, growth and protection at any age.
  • ACCESS: Liquidity window for access to tax free cash withdrawals.
  • GROWTH: Non reportable tax-free retirement savings linked to well known indices like the S&P 500. Clients can’t lose money when the market goes down.
  • PROTECTION: Flexible death benefit provisions that policy owners can utilize for income, health care costs and ongoing care through the chronic illness rider.
Contact your Life Sales Rep today to learn how to position these game changing features of life insurance in your customer presentations.
 
We welcome the opportunity to guide you through the options of new life insurance policies and help you place more of your cases.
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Some Breathing Room For Your Clients With Asthma

Asthma is a disease that affects the lungs and results in temporary narrowing of the airways.  Symptoms include difficulty breathing, wheezing, coughing and tightness in the chest.  It affects over 8% of adults in the United States.
 
Diagnosis and severity of asthma is determined by lung function testing known as Spirometry.  Results are measured in percentages and values of 80% or greater are generally considered normal.

Individuals with this impairment may represent a significant underwriting challenge. However, PREFERRED may be possible for your asthmatic clients!

Criteria that could help applicants qualify for Preferred include:
 
  • No tobacco use
  • No hospitalization for asthma in the last 5 years; no other ailments
  • Spirometry showing normal results of FVC (Forced Vital Capacity) and FEV1 (Forced Expiratory Volume in one second)
  • Treatment may include intermittent (as needed) use of inhaled bronchodilators, brief courses of corticosteroids or low dose medication
  • No time off of work or school due to asthma symptoms
  • No underwater or high altitude avocations, whether ratable or non-ratable
  • Must meet all other regular, published Preferred criteria
So, breathe easier for your clients with an asthma history.
 
Call the Underwriting Team today for more information on this carrier and to see how we can help get the underwriting offers you need to make the sale!
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Your Clients Aren’t Average – Why Is Their Long-Term Care?

Some carriers like to claim that your clients don’t need Long-Term Care (LTC) protection beyond the average length of a care need. But preparing for only the average length of a care need can leave a large gap.
 
The Story of Averages
 
The average length of an LTC need is typically longer for women than men (3.7 years vs 2.2 years). However, in a survey of leading long-term care insurers, that story of averages doesn’t hold up.
 
With five of the seven carriers, men met or exceeded the length of claim for women, with each exceeding a million dollars! Planning for the average would’ve only covered a fraction of the cost.

The belief that average lengths of care are sufficient could create one of the most devastating financial decisions in life.

Addressing only the average care need excludes the possibility of a life-long diagnosis like Alzheimer’s or Parkinson’s. Lifetime protection is the only way to ensure that every client has exactly the amount of protection that they need, whether it’s for two months, two years, 20 years or more.
 
Your clients aren’t average, and their LTC protection shouldn’t be either. Contact us to learn more about Continuation of Benefits options, including Lifetime, to help your clients be protected against costly LTC needs.
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Target The Easy DI Sale

We often hear advisors mention they don’t offer Individual Disability Insurance policies because their client base already has protection through an employer plan. While many advisors may choose to move on to another aspect of the client’s financial picture, it’s the experienced advisor that sees the true opportunity.

We’ve always found it easiest to present to clients who already own a DI policy. If the client is covered by a plan at work, they already know the importance of having a plan designed to protect their paycheck.

They recognize the value of the added benefit provided by their employer, but typically aren’t aware of the short comings of a group plan such as direct-integration, taxable benefits, and lack of portability. However, the existing employer plan serves as an excellent starting point to introduce the subject of proper income protection.
 
For those clients with existing coverage, commend them for having an existing plan in place. Then offer to review the plan to determine if it’s providing the necessary coverage it’s designed to provide by asking for a declaration page of their existing policy. With the policy declaration page and some basic client information, we can conduct a complete policy review showing the client’s current protection along with any recommended changes.
 
EXAMPLE:
 
Client: Male, 40
Occupation: Executive
Income: 100k with 25k in bonus
Current Coverage: 60% of Salary with a 10k Cap
 
Current Coverage: $5,000 per month (taxable)
Additional Coverage Available: $3,300 per month (non-taxable)
Underwriting: Just completed Application Part A and B. No Exam, Labs, or Tax Returns needed
 
If you want to target an easy Disability Insurance (DI) sale – the DI review is the easiest way to immediately increase your disability sales – work with your existing book of business to provide proper income protection. To learn how to best incorporate this strategy into your sales activity, contact your DI Sales Rep today.

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