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Key Person Coverage Is Not For Investor Reimbursement!

Farmers have always planted hedges of trees or bushes around fields to limit loss due to exposure of crops or livestock to wind and weather. Gamblers hedge their bet with a smaller opposing wager to limit any loss on their original play. The term has common use in business when a “counter transaction” is designed to mitigate the loss should an investment go south.
 
Key person life insurance is a hedge against the loss of a person capital contributors depend on to grow their equity interest. Insurance carriers will assist in so long as the purpose is to limit loss versus simply refunding investments upon the death of a critical employee.

Consequently, it is important to understand a carrier’s financial underwriting guidelines to manage client expectations.

Consider:
  • Carriers start with a multiple of the key person’s compensation. Many start with five times but can be talked into ten. Some will go higher if you know where to look.
  • The multiple is based on total compensation, not just W-2 cash income. This requires providing the right information with the application.
  • Start-up business’s are tough. If initial compensation is low, the insured’s true worth must be established by other means.
Some carriers allow additional coverage for a percentage of a business’s long-term liabilities if a case is made that loss of the client will inhibit servicing the debt.
  • Coverage may be allowed if there is an agreement to redeem any ownership interest from the estate of the insured.
  • The disability of the key person can also severely affect the company. Discuss insuring against the loss of revenue and payment of overhead expenses during an absence.
Approved key person coverage is not tied to the equity stake of an investor. Let us assist you effectively package your next business application with the carrier whose financial guidelines best suits the amount of insurance your client wants and needs. Call Tom Virkler, JD – Director of Advanced Markets, at 706-614-3796 or tom@cpsadvancedmarkets.com.
 
For What It’s Worth: Underwriters will tell you that their goal is to, “Avoid making someone worth more dead than alive.” Some manage to do that without help from a carrier. The estates of both Elvis Presley and Michael Jackson continue to recognize income each year of over $100,000,000.
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Create New Sales Opportunities With Term Insurance

Term Insurance is often used as a cost effective way to replace income, repay debts and/or provide a legacy in the event of a premature death.
 
In addition to these great functions, there are certain term insurance products that can provide your clients with more comprehensive benefits while they are still alive.

Promoting these solutions will not only deliver additional value to your clients, but will also help differentiate you from the competition in what is largely a price driven marketplace.

Consider This
 
For many clients, a major medical event (such as a heart attack, stroke or being diagnosed with cancer) can have devastating financial effects and leave their family unsure of how they will continue to make ends meet while paying for medical care.
 
Did you know that there are term insurance products which could be used as a source of income in the event that the insured were to experience once of these medical events?
 
With built in critical illness and chronic illness benefits, you can help your clients obtain coverage that will offer benefits while the insured is still alive. There is even a product available with these living benefits that can accommodate non-medical underwriting for face amounts up to $249,999!
 
With the introduction of these living benefit features to the term insurance marketplace, you now have a simple sales concept that you can use to create new sales with prospects and existing clients alike. How many of your clients would consider replacing their existing term coverage with a product that could pay benefits if they were to experience a major health event?
 
Contact us today for a copy of our Policy Review Kit and to learn more about the living benefit term solutions available in your state.
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The Skinny On GLP‑1: Underwriting In The Weight-Loss Era

Obesity is a major risk factor for Type 2 diabetes, heart disease, stroke, sleep apnea, liver disease, and certain cancers.

It’s estimated that around 40% of the adult non-diabetic population in the U.S. is obese.

Over the past few years, GLP‑1 medications have become mainstream for the treatment of both obesity and Type 2 diabetes. GLP-1 receptor agonists – such as Ozempic, Wegovy, Mounjaro and Zepbound – mimic the body’s GLP-1 hormone which helps manage blood sugar levels, suppresses appetite and slows the process of food leaving the stomach.

GLP-1 agonists have been shown to reduce effects of metabolic risk factors including obesity, diabetes and in atherosclerotic cardiovascular disease. However, there is also a high incidence of regaining weight loss after stopping the GLP-1, in some cases with weight returning to baseline levels within 1 to 2 years. Ongoing lifestyle change is key for long term success beyond treatment.

When it comes to underwriting, here are a few things carriers look for in assessing the use of GLP-1 medications:
  • Indication – What is the medication treating? Weight loss, diabetes, or both
  • Weight loss history over a period of one year – What is the current height/weight and what is the total amount of weight loss in the prior year? To account for stability risk, carriers will underwrite based on an adjusted weight that includes adding back half of the weight lost within the prior 12 months
  • Comorbidities – Are there any diagnoses for co-morbid conditions such as Type 2 diabetes, cardiovascular disease, sleep apnea and hypertension? Additional ratings may apply if comorbidities are present
  • Healthy lifestyle habits – A healthy lifestyle can help with a more favorable underwriting assessment. These include diet, exercise habits, and a lifelong nonsmoker

Contact our Underwriting Team of experts to help get the best possible offers with your GLP-1 scenarios.

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Home Care – A Compelling Story

There is a growing movement among health care providers that underscores something we in the Long-Term Care industry have known for years: helping chronically ill people receive the care they need while remaining in their homes is not only what people prefer, but can also be more cost effective than facility care.
 
Compassionate Care
 
According to an article in The Atlantic magazine, home based care is gaining traction as “a more humane, effective, and affordable health care system” than traditional nursing home care.
 
We understand that your clients want to maintain their independence. They want the freedom to make decisions about how and where they receive care.

While health and long-term care insurance differ in services that they provide, we believe that home care benefits are very important.

Today’s LTCi policies contain many benefits that will help your clients remain at home: access to a care coordinator, respite care to give volunteer caregivers a break, homemaker services, caregiver training, as well as extra funds to help pay for home modifications, medical alert systems or durable medical equipment.
 
These built in benefits are a compelling reason to purchase an LTCi policy, especially for high net worth clients, as they provide added peace of mind for family members.
 
Start focusing on the benefits instead of the premiums – call your LTC Sales Reps today for further discussion.
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Opportunities In The Critical Illness Market Today

Many middle-class Americans who face cancer, heart disease or other serious illnesses also face thousands of dollars of debt. Even with Health Insurance, the additional cost for specialist care, unique treatments, and high deductibles add up quickly upon a critical illness diagnosis.

Fundraisers on crowdfunding websites like GoFundMe have become a popular way to find financial help in times of a healthcare crisis – yet only 1 in 10 campaigns meets the financial goal.

The Need Is Real
 
Think of the difference $50,000 could make for a person who has just been diagnosed with a serious illness such as cancer or heart attack. There’s never been a better time to reach out to your clients who have a family history of cancer or heart disease and offer Critical Illness (CI) Insurance.
 
We’ve taken steps to streamline the process with our Critical Illness Insurance carriers. A client can get up to $75,000 benefit with no exam or interview. Simply submit a complete online application through www.cpsinsurance.com and you will have an answer within 48 hours.
 
Higher deductibles and healthcare costs are adding stress to people’s lives and budgets. Your clients will understand the importance of Critical Illness Coverage when you mention it to them. Help them fill the financial gap at a time when they need it most.
 
Contact your dedicated CI Specialist. We will guide you through the simplified process and provide you with everything you need to add this to your product offering. Spend 30 minutes with us to become proficient at offering Critical Illness Coverage.
 
Source: Chicago Tribune, “Medical GoFundMe campaigns are a symptom of a sick health insurance system,” August 23, 2018.Source: Chicago Tribune, “Medical GoFundMe campaigns are a symptom of a sick health insurance system,” August 23, 2018.
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1035 Exchanges – Keep Your Hand Out Of The Cookie Jar!

In his work, A Collection of Polite Conversation, Jonathan Swift used an idiom that spoke to the difficulty of transforming a man of coarse origins and crude behavior into a proper gentleman, having one character simply state, “You can’t make a silk purse out of a sow’s ear!”
 
But to sully or spoil something good is another and an easier matter. No better example illustrates than misconduct during the non-taxable exchange of a life policy.
 
A universal life policy is a beautiful thing. Among the usual tax advantages is the feature (for non-MECs) that allows for the tax-free withdrawal of premiums; i.e.,  first-in/first-out (FIFO) distributions.
 
A silk purse indeed, but more a sow’s ear when FIFOs are attempted incidental to a 1035 exchange. Consider:
  • A life-for-life 1035 exchange must be a strict policy-for-policy transaction.
  • Anything received other than the new policy is considered “boot.”
  • Boot is taxable to the extent there is any gain in the old policy.
  • A withdrawal from the old policy taken incidental to the exchange is considered boot!
  • The IRS has never been clear how long prior to an exchange a withdrawal must be made to avoid treatment as boot.
  • Even recycled withdrawals used to pay off policy loans before the exchange are considered boot!
There are many reasons that a client may want to access a policy’s value at the time of an exchange. Alert them that there may be issues. Then come to us with your case to see if there are strategies that could avoid taxation or, at least, avoid the consequences of withdrawals. Contact Tom Virkler, JD – Director of Advanced Markets, at tom@cpsadvancedmarkets.com or (706) 614-3796
 
For What It’s Worth: Jonathan Swift might advise that creating boot is killing the goose that lays the golden eggs, or snatching defeat from the jaws of victory, or creating a fly in the ointment, or throwing the baby out with…
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Wealth Transfer Strategy Using Deferred Annuities To Fund Life Insurance

Do you have clients that originally purchased a Deferred Annuity to find that they no longer need it for retirement income purposes? Often, these clients intend to “leave it for the kids.”

Although a Deferred Annuity is a great vehicle to accumulate funds for retirement, it is not an efficient vehicle to transfer wealth since it may be taxed twice at death.

How can your clients avoid this? By reducing or replacing the Annuity with more tax-efficient assets.
 
How It Works
 
Annuity Maximization is simply an asset repositioning strategy in which the Annuity is exchanged or converted to a Single Premium Immediate Annuity (SPIA). A SPIA provides an income stream for a chosen number of years based on a single deposit made to purchase the Annuity in addition to your client’s age and health status.
 
Your client may then make gifts of the after-tax income generated from the SPIA to an Irrevocable Life Insurance Trust (ILIT). The ILIT then has the funds to purchase a Life Insurance policy on your client’s life for an amount that replaces or exceeds the value of the Deferred Annuity, to benefit the heirs. The Life Insurance policy pays out the tax-free death benefit at the end of the client’s life.
 
You want to be sure to avoid taxation on your client’s Deferred Annuity as it can be taxed up to 70%. By converting the Deferred Annuity to a SPIA and then leveraging the SPIA income withdrawals to purchase Life Insurance, you’ve created a simple solution to increase the amount transferred to the heirs of your client.
 
For more information on this plan or any other Life Insurance sales ideas please contact your Life Sales Marketing Manager.
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A Healthy Lifestyle Will Give You Wellness Credits!

Wellness crediting programs can help give clients who maintain a healthy lifestyle the potential to be upgraded to a better underwriting offer and price.

For example, one program is open to:
  • All Ages
  • All Face Amounts
  • Most of their product line (some product exceptions apply)

An insured may be credited up to two classifications, including from Preferred to Preferred Plus. This crediting program can improve substandard ratings, too.

Some of the criteria includes:
  • BMI range of 22-29 (ages 18 and older)
  • Untreated blood pressure < 120/80
  • No incidents of CAD, diabetes or cancer in parents or siblings prior to age 60 years, or both parents live to age 75 or older
  • Normal routine colonoscopies, mammograms, pap smears, CBCs, skin checks in the last 3 years
  • Hemoglobin AIC readings 5.0 – 5.5 range in the last 12 months

Call the Underwriting Department to discuss your client’s health history and this program for the best possible outcome!

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Why You Need To Talk About LTCI

Most people envision themselves living a long life, investing and planning throughout their working years to create a financially secure future where they can enjoy spending time doing their favorite things.
 
As part of your client’s financial planning process, it’s important to understand the potential impact that needing long-term care may have on their assets, their family, and their future.

The reality is, as people start to live longer, the greater the likelihood is that your clients will require long-term care.

The costs associated with long-term care are significant.
 
While it can take decades to accumulate the assets they’ll need to retire comfortably, just a few years of paying for long-term care may threaten a lifetime of savings.
 
If you’ve ever been in a care-giving situation, you understand the physical and emotional toll it can take. While providing care to loved ones is an act of compassion, placing these burdens on spouses, children and other family members can create a significant emotional and physical strain, and is something that many people would like to avoid.
 
Don’t wait to address your client’s long-term care needs.
 
Incorporating Long-Term Care Insurance into financial plans today can help protect assets, reduce the burden of care that would otherwise fall on family members, and enable clients to receive care in the setting they most prefer, including their home.
 
Perhaps the greatest benefit: Long-Term Care Insurance allows loved ones to care about, rather than care for, each other.
 
We’re here to help you design a plan that is both affordable and the best solution for your clients’ needs – contact your LTCi Sales Reps for guidance.
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Why Business Owners Should Invest in Disability Buyout Insurance

When a business has multiple owners, Disability Buyout Insurance provides funds to buy out the disabled owner’s share of the business. This ensures that the business can continue operating smoothly without financial strain.

The Importance of Disability Buyout Insurance

Without this insurance, a disabled owner’s share of the business could become a burden, leading to potential disputes and financial instability.

Who Needs Disability Buyout Insurance?

Any business with more than one owner can benefit from Disability Buyout Insurance. Whether it’s a partnership, a corporation, or a limited liability company, having this insurance in place can safeguard the business from potential disruptions caused by a co-owner’s disability.

How Disability Buyout Insurance Works

When a co-owner becomes disabled, the Disability Buyout Insurance policy is triggered. The policy provides the necessary funds for the remaining owners to buy out the disabled owner’s share of the business. This ensures a smooth transition of ownership and allows the business to continue operating without interruption.

Choosing the Right Disability Buyout Insurance

Factors such as the value of the business, the number of owners, and the potential impact of a co-owner’s disability should be taken into account. Working with an experienced insurance advisor can help in choosing the most suitable policy.

Conclusion

Disability Buyout Insurance provides financial protection and ensures a smooth transition in the event of a co-owner’s long-term disability. By understanding the importance of this insurance and choosing the right policy, business owners can mitigate potential risks and secure the future of their business. Contact your Disability Insurance Specialist to learn more.

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