Menu

Diversified

Shutterstock_2539943641

DI Case Study On An NFL Running Back

As we head into the Divisional Rounds, now is the perfect time to share a case study of an NFL running back we worked on earlier in the off season.
 
In this case, the NFL Running Back being drafted in the second round of the NFL draft and completing three successful seasons, the player was approaching free agency and his biggest paycheck to date. To protect himself and his future income, he needed an insurance policy in place before he hit the field in the fall.
 
Assessment
 
Due to the physical nature of the sport, it was made apparent that if the player suffered an injury or illness resulting in a permanent total disability before he signed a new contract, his future income would be lost. The first policy placed covered $5 million in benefit, but his recent stellar performance moved the advisor on the case to request an increase in disability benefit at the time of renewal.
 
Solution
 
Our Disability Income Support Team worked with the player’s Agent and Insurance Advisor to develop a $10 million permanent total disability policy, which would soften the blow in the event the player became permanently totally disabled before his next big contract was signed.
 
Result
 
This tax-free benefit gave the player peace of mind – if he suffered a serious injury or illness while playing football, his future contract and lifestyle would be protected.
 
The premium for this case was roughly $90,000 plus taxes and fees.
 
Even though NFL super-stars need specialized coverage due to the nature of their sport, it’s important to remember that high-earning individuals have a gap in disability income protection as well.
 
Contact your DI Sales & Marketing Specialists for more information on unique DI solutions.
Shutterstock_1761721280

Irrevocable Trusts: Pay The Trustee

A long time ago, in a galaxy far, far away I remember reading an IRS Private Letter Ruling that had about it the worst method an insured/grantor could use to pay premiums on a policy inside an irrevocable trust.
 
He was the sole owner of a business that each year cut a check directly to the carrier for the total amount due. The taxpayer was asking for a determination as to whether this quick-and-easy A-to-B transaction for maintaining a policy outside of his taxable estate would be deemed an incident-of-ownership resulting in the inclusion of the benefit in his taxable estate at death.

I’ve searched half-heartedly and unsuccessfully for the ruling. But if memory serves me well, which it well may not, the Service did some “deeming”, but not in the unfavorable direction of finding an incident-of-ownership anywhere in the works.

It treated the taxpayer’s monetary circumlocution as: first, deemed income to the taxpayer from the company that must be reported as income; second, a deemed gift from the taxpayer to the trust that must be reported as such; then third, a deemed premium payment by the trustee to the carrier – all without giving rise to any incident-of-ownership in the grantor/insured. Well, how about that?
 
It’s tempting to jump on such reasoning when it becomes bothersome to set up a trust checking account, or go through the multi-step process of actually gifting money to the trust and hoping that the godparent of the beneficiaries (who graciously offered to serve as trustee) doesn’t forget to pay premiums in the years following his or her retirement to the beach. But there are some serious concerns created by the convoluted route taken by the premium in the illusive PLR mentioned.
 
If avoiding gift taxation is dependent on use of available annual exclusions then two things are necessary to qualify for protection.
 
The beneficiaries must receive notice of their right to withdraw contributions made on their behalf, usually accomplished through timely “Crummey letters”. More important, the trustee should be in a position to actually fulfill requests from beneficiaries should they choose to exercise their Crummey withdrawal privilege.
 
If the only asset in the trust is the policy and the cash for premiums that constitute the annual gift merely flies over the trust each year, the Service is in a strong position to argue that the present interest necessary to qualify for the exclusion is only an illusion.
 
In addition, a properly drafted irrevocable trust implemented to keep death benefits free of estate taxation will only allow and not require a trustee to purchase life insurance on the grantor’s life. This avoids any argument of grantor control over the policy. However, if each year, premiums are paid directly to the carrier the grantor has, in effect, forced the trustee to purchase coverage. So, how do you spell a-u-d-i-t?
 
Too often shortcuts are taken in the establishment of irrevocable trusts and too often insufficient attention is given to their ongoing administration. While it is not the legal responsibility of the insurance advisor to see that all is done according to Hoyle, it should be his or her annual practice to make sure that the proper parties are fulfilling theirs.
 
Contact our Advanced Markets Team with questions you have concerning your casework that involves trust planning or estate and gift tax concerns, at 706-614-3796 or tom@cpsadvancedmarkets.com.
Shutterstock_2308549063

Your Clients Aren’t Ready For This—But You Can Help

Cancer and heart disease remain two of the most prevalent health threats in the United States.

Preparing clients for the unexpected—not just with a death benefit, but with living benefits, can make a real difference during life’s toughest moments.

Affordable permanent life insurance with living benefits, such as critical illness and long-term care (LTC) riders, offers a comprehensive solution.
  • A critical illness rider provides a separate pool of benefits, distinct from the death benefit – a game changer for clients facing a diagnosis like cancer or heart attack.
  • The John Hancock Protection IUL with a Critical Illness Benefit Rider pays a one-time, lump-sum, income-tax-free benefit (up to 25% of the face amount, not to exceed $250,000) upon diagnosis of covered conditions. This benefit is not deducted from the death benefit, allowing clients to focus on recovery without jeopardizing their family’s long-term protection.  
  • John Hancock’s Long-Term Care rider enhances flexibility, allowing clients to accelerate a portion of their death benefit to cover qualified long-term care expenses – at home or in a facility.
Case Study
  • John Hancock Indexed Universal Life Insurance
  • Male, Age 45, Preferred Non-Tobacco
  • $200K Death Benefit
  • Access to $4,000 per month for LTC
  • $50,000 separate pool for covered critical illnesses
  • Monthly premium ONLY $233.00

John Hancock’s Vitality program goes a step further, rewarding healthy behaviors and even offering access to the Galleri multi-cancer early detection test. Early detection can be critical – clients have a better chance to treat it and beat it.

This is simply too important not to mention—make sure your clients know about these valuable and affordable options.

Call now to discover how critical illness riders, LTC coverage, and the Vitality program can benefit your clients.

Shutterstock_2656158017

Obesity + Lap Band Surgery = Standard

Obesity in the United States has been increasingly cited as a major health issue in recent decades. While many industrialized countries have experienced similar increases, obesity rates in the United States are among the highest in the world.
 
There are several types of surgeries that fall under the group of “bariatric surgery” designed for people that are obese. Lap band surgery (laparoscopic adjustable gastric band), is an inflatable silicone device placed around the top portion of the stomach to treat obesity, intended to slow consumption of food and thus the amount of food consumed.

One of our Strategic Carrier Providers look favorably upon this type of surgery and with applicable credits, will make a favorable offer.

Let’s take a look…
A female client, aged 32 years, is seeking $500,000 of 10-year Term Life Insurance, history includes:
 
  • Build of 5’6 and 212 pounds
  • Blood pressure 120/76Lap band procedure 2 years ago
The initial underwriting work up – Table 2.
 
Then, the following underwriting credits were applied:
  • Optimal blood pressure
  • Lifetime nonsmoker
  • Regular preventative care
  • A1c Test < 5.7
  • Preferred driving record
Final Offer – Standard!
 
Our Underwriting Team is here to help with all of your impaired risk cases. Please contact us today – we will help you make the sales!
Shutterstock_2355974387

3 Simple Steps To Generate More LTCi Leads

While educational seminars or direct mail campaigns are good lead generation tools, these campaigns can be costly and usually take time to yield considerable results.

So how can you build momentum and grow your Long-Term Care Insurance business without breaking the bank?

Follow these 3 simple steps:
  1. Identify price-sensitive consumers in your client/prospect database who are currently on the fence. While these leads may have grown cold, the introduction of an affordable price point could warm ‘em right up.
  2. Schedule a brief meeting with each of the prospects you’ve spoken with in the past, to discuss the type of plan that would meet their needs and budget concerns.
  3. Use tailored needs-based marketing and support. You stand a better chance of shortening your sales cycle and generating new business.
Make certain your clients have the right LTC plan in place to meet their needs.
 
Contact your LTCI Sales Rep for more information.
Shutterstock_1702970452

Disability Income For Medical Professionals With Adverse Medical History

Medical professionals spend a lot of time and money advancing their careers and thus recognize the need for Disability Insurance. In order to address the needs of this target market, we specialize in providing coverage for those clients regardless of adverse medical, financial and personal history.

DI Case Study Example
  • General Surgeon – 4A Occ Class
  • Age 41| $300,000 income

Although the client was diagnosed with type-1 diabetes two years ago, is insulin stable and has no secondary issues, the client was originally declined for DI coverage due to the pre-existing medical condition. The client currently has a 60% income replacement ratio through their employer with a $10,000/mo cap.

The broker contacted our DI Specialist for alternative plan options. After review, and considering the pre-existing type-1 diabetes, we were able to secure an offer for coverage – the client was able to review multiple plan designs and select an elimination period and benefit period that best suited their premium budget.

Here is the DI solutions they chose:
  • $8,700 monthly benefit amount
  • 75% income​ replacement less underlying GLTD
  • 180-day elimination period
  • 7-year benefit period
  • No exclusion for diabetes!
  • $3,965.87 annual premium*
  • $4,521.92 with own Occupation Extension Rider
  • $360.89 monthly premium*
  • $411.49 with own Occupation Extension Rider

Our DI Specialists will work with you and your client to secure meaningful solutions with affordable premiums for your clients that feel they may not qualify for income protection due to health, occupational, or financial situations.

*IMPORTANT DISCLOSURE: The benefits, limitations and/or exclusions described herein are for general illustration purposes only and may vary by state and client profile.

Shutterstock_429500005

The 10-Minute Insurance Analysis

Back in the old days kids would buy a comic book for 10 cents (5 cents if the cover had been removed for re-sale) and peruse the back pages for ads that peddled everything from x-ray glasses to work-out programs that promised to make you into a he-man in two weeks. Purchases were made by mail and paid for with cash, checks or stamps. Buyers were alerted to allow 4-6 weeks for delivery!
 
Not today. Now “graphic novels” cost around ten bucks and things kids need are purchased online with delivery assured almost the moment of the last key stroke. Comedian Steven Wright described the acceleration of the pace of life well when he said, “Last night I made some instant coffee in my microwave oven and it almost went backward in time.”

The insurance industry has responded to the fast pace to which a new generation of buyers has become accustomed with abbreviated and accelerated policy underwriting and issuing programs.

And now you can do the same in drawing conclusions with regard to determining financial need for coverage in less time and little financial information. Try this:
 
For most people, there is only one need.
 
If a client doesn’t have estate tax concerns, then the only insurance need he or she has is for income replacement protection. If a family is managing its affairs properly then maintaining its anticipated income level for the anticipated number of working years left will allow for maintaining the household and achievement of retirement goals.
 
Coverage for that need is easily calculated.
 
Simply take the client’s current earned income and multiple it by the number of working years that remain. In fact, because a death benefit is received income-tax free, use of after-tax income would still be adequate, but allow for a reduction in the amount of coverage sought.
 
Protection can be purchased economically.
 
Coverage is needed for a known period of time (i.e. estimated number of working years remaining). This is exactly when term insurance is needed. There is no reason to buy higher-priced permanent coverage. Beyond retirement clients may want to maintain some coverage for estate liquidity, but they can either apply for new permanent coverage or exercise the conversion privilege under the term policy.
 
The cost is guaranteed and can reduce over time.
 
Clients can “lock-in” the cost of their income replacement protection with guaranteed level term insurance for a period that covers the number of anticipated working years. As the number of working years reduces with time the death benefit on the policy can be easily reduced. But often the face amount is left level to accommodate for raises, bonuses, or inflation.
 
A two-policy proposal.
 
Don’t forget coverage on a spouse, especially if he or she is also a wage-earner. But even a stay-at-home spouse raising children should be considered for insurance in an amount that would allow for providing the services necessary to keep the household in its accustomed style and schedule of life.
 
This simplified sales process also allows for more profitable execution of a term sale which, given the lower premium size, is less cost effective for you in terms of commission revenue.
 
Groucho Marx once commented on the pace of life when he observed: “Time flies like an arrow. And fruit flies like an over-ripe banana!” I believe he would advise that to save time you call for help with your case-related tax and planning issues at 706-614-3796 or tom@cpsadvancedmarkets.com.
Shutterstock_2065627649

10 Most Common Life Insurance Mistakes (And How To Avoid Them)

Placing the right policy, for the optimal amount, with the correct details, can be more challenging than it seems.

Learning the common pitfalls and how to avoid them will not only help your clients get the coverage they need, but will also help you become a better producer.

10 of the most common mistakes are:
 
  1. Naming your client’s estate as the beneficiary.
  2. Failing to name at least two “backup” beneficiaries.
  3. Failing to check up on your client’s policies at least every three years.
  4. Matching the problem with the wrong solution or type of life insurance.
  5. Your client’s amount of personal coverage is inadequate for their family’s financial security goals.
  6. The policy is payable outright to your client’s minor children or grandchildren.
  7. All the insurance on your client’s life is owned by that same client.
  8. You haven’t checked to see if your client’s business or professional practice can provide insurance on a more efficient basis.
  9. Forgetting that term insurance (including group term coverage) runs out and/or becomes prohibitively expensive to carry.
  10. Purchasing life insurance as though it were a commodity.
It’s important to learn not only why these pitfalls present a problem for you and your clients, but also the solution to avoiding them in the future.
 
Your Life Sales Representative is the ultimate resource to placing the proper policies quickly and with ease. Contact us today.
Shutterstock_144412012

Become A 3-Point Shooter By Understanding The proBNP

Just as basketball fans had to get used to the 3-point shot first debuted by the NBA in the 1979-80 season, we must get used to current trends in underwriting.
 
A blood test was introduced into the game and has been around for several years now. It’s called the proBNP.
 
What is it? The proBNP blood test is a marker for overall cardiovascular risk and a marker of long-term mortality in individuals with heart disease. It is released by the heart as a natural response to when the heart is not strong enough to pump adequate blood and nutrients to meet the body’s needs – when it is deprived of oxygen, or when the main heart muscle is enlarged from working too hard.
 
If the proBNP is abnormal on an exam lab panel, some carriers will automatically decline the applicant or ask for an additional cardiac work-up at the his/her expense in order to reconsider.

However, if the proBNP is favorable on an exam lab panel, carriers may be able to use the result as an underwriting credit for applicants ages 70 and up.

Here’s an example:
  • Male, Age 75, Non Smoker; Seeking $500,000 of UL coverage
  • History of a TIA (mini-stroke) 3 years ago
  • Followed closely by his physician
  • Insurance lab panel showed a proBNP of 55 (normal)
Under normal circumstances, this would be a mild substandard rate – however, with the credit, he can now qualify for Standard. That’s a 3-pointer and a win-win for us all!
 
Contact your Life Underwriting Department for more information.
Shutterstock_2117361212

Buy-Sell Agreements: The Importance Of Transition Planning

The 24-year old actor James Dean was the iconic Rebel Without a Cause, the image of teenage angst, who already had three blockbuster movies under his belt before a misplaced 1950 Ford Tudor blocked the intersection on US Route 466 that would serve as a premature end to the meteoric rise of the young star. It is reported that “Humphrey Bogart, who also knew a thing or two about image making, once said: ‘Dean died at just the right time. He left behind a legend. If he had lived, he’d never have been able to live up to his publicity.’” Sometimes in the entertainment world death is a good career move.
 
And we tend to view buy-sell agreements the same way. The best “move” the participants can make in triggering its fulfillment is for one of the participants to die.
 
Fund the event with life insurance that provides tax-free dollars that are used to purchase the inherited interest from the estate (with a step-up in basis, no less) and everyone goes happily on their way to a new and more cash-flushed existence.

Consequently the death of an owner is the contingency on which we focus too exclusively when planning.

The fact is that a business owner usually doesn’t die. They often leave the business for one reason or another that initiates a buy-out that usually takes the form of a down payment (maybe) and an installment sale for an agreed number of years at an agreed interest rate.
 
Even then life insurance is important.
 
Consider two instances:
  1. The remaining owners buy out a departing partner under an agreement funded with life insurance. The coverage on the departing partner can be kept in force to provide remaining owners funds to pay-off the loan balance should the seller die during its term. It also relieves the departing partner of any concern whether or not the balance will be paid to his family should he die. This arrangement may be cleaner if the policy is transferred back to the insured and a collateral assignment is given in the amount of the loan balance. If so, tax issues and premium-payment arrangements would need to be ironed out.
  2. A younger key person buys out a retiring owner-employer. The retiring seller wants to be sure of payment in the event of the death of the key person-buyer during the term of the loan. Carriers do not recognize a creditor’s insurable interest in a debtor, so they won’t allow the seller to purchase coverage on the borrower. However, the borrower can buy coverage, justifying it as personal insurance, and give a collateral assignment for the balance and term of the loan.
We recently assisted in a case similar to situation #2. We advised with regard to structuring the personally-owned coverage on the purchaser. We advised concerning the drafting of the collateral assignment. We laid a good predicate with the carrier to assure they understood the case – and then the selling owner placed the business through another agent and, consequently, another general agency. As my Mother used to say, “No good deed goes unpunished.” I say simply, “A pox on his house!”
 
Every business you represent should have in place an updated documented transition plan. If one doesn’t, then tell the owners they go to bed every night unsure of who they will be in business with the next morning! Then call us to assist you in all matters of their buy-sell planning and funding. Remember, we will get on the phone with you and talk directly to both your clients and their advisors if you think it beneficial.

Load More

Back To Top

Excellence, Passion, Integrity, Collaboration and Creativity – our core values since 1974

The EPICC Center is the online source for financial professionals, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, carrier / product information, market trends, sales ideas, marketing tools & resources and more.

Subscribe to our newsletter

* indicates required

Copyright © CPS Insurance Services, Inc. All Rights Reserved EPICC | Designed by Apis Productions