Category: Insurance - PFwise.com

Marijuana or Cannabis Use and Life Insurance - Part B

9/25/2020

In last blogpost, we discussed considerations for marijuana/cannabis use in life insurance. Now we will discuss underwriting for its use.

The primary questions to be asked of a proposed insured that presents with marijuana use history are:

Is the use for recreational or medicinal purpose?
If for medical concerns, what is the underlying health condition?... and what is the severity?
What is the frequency of use?
How is it used?...smoked/inhaled or ingested? (some carriers treat this type of use differently)
Have there been any problems with law enforcement?...or Dr’s concern over use?
Any other drug use or alcohol concerns?

With many carriers, the underwriting of an applicant with marijuana use will often end up with Standard Smoker offers at best...but we do have some who look at this more aggressively. Depending on frequency and/or whether it’s for medicinal use, we still have a few that can rate at Standard Non-smoker or, occasionally, even at Preferred classes. Each individual case will be looked at based on its own characteristics. Please contact us if you need help.

Marijuana or Cannabis Use and Life Insurance - Part A

9/24/2020

An increasingly common impairment we’re getting requests for - and underwriting concerns with - is marijuana or cannabis use. The frequency of use has increased in today’s society, along with legalization in some states for recreational use. Many more have OK’d the use of marijuana for medicinal purposes. As a result, marijuana has become a frequent topic for underwriting discussion.

Regardless of your personal views on the subject, use of the drug is more prevalent than ever and we must address the issue when it arises during the life insurance application and underwriting process.

What Is Cannabis?
Cannabis is a natural psychoactive drug that comes from the flowers and leaves of the hemp/marijuana plant. Tetrahydrocannabinol (THC) is the primary ingredient in cannabis that causes euphoria and intoxication. Cannabis is most commonly smoked as a cigarette or in a pipe. It can also be taken orally, either by eating it directly or mixing it with food products.

Short-term memory, attention, motor skills reaction time, and skilled activities are impaired while the individual is intoxicated. Cannabis contains carcinogens, and evidence suggests that heavy use may be associated with oral cavity, pharynx, esophageal, and lung cancers. Because of those concerns, many carriers will assign smoker/tobacco use rates for any use.

Considerations
For underwriting consideration, the first thing we must determine is whether the use is recreational, or if the proposed insured has been issued a prescription for medical use. If for medicinal purposes, underwriting is going to be looking at the specific issue the marijuana is being used to treat.

Medical legalization is intended to provide beneficial treatment for those suffering debilitating symptoms. However, severity is subjective and open to interpretation. These uses may include severe pain, muscle spasms, severe arthritis, cancer or HIV-related symptoms, weight loss, nausea, glaucoma, and seizures from epilepsy. This highlights the need for full information considering not only potentially serious and uninsurable conditions, but also the high potential risk for misuse.

For recreational use, the underwriter is going to want to know the frequency of use. Classification of marijuana use can be any of the following:

Experimental or intermittent use, for those who have tried but no longer use or are using up to a couple of times a month or less
Moderate use, for those whose use is as frequent as 8-16 times monthly
Heavy use, for those whose use frequency is more than 4 times weekly, or daily use.

There is evidence that many cannabis users do not abuse other drugs. However, multiple drug and alcohol use can be encountered with cannabis use; when combined, it is more toxic than each drug alone.

In next blogpost, we will discuss underwriting for Marijuana/Cannabis Use.

Annuity Wealth Transfer Strategy - Part II

9/23/2020

In last blogpost, we introduced annuity wealth transfer strategy. Now we will discuss the details.

Annuity Wealth Transfer
The Annuity Wealth Transfer Strategy is appropriate for some individuals who are in or near retirement and do not believe they will need any of the money from the annuity for retirement income. For those individuals who wish to pass these assets to loved ones at their death, this concept may dramatically increase the benefits they can provide their loved ones through the purchase of life insurance.

First, determine the after-tax income available either through annual withdrawals from the deferred annuity or from transferring the deferred annuity to a Single Premium Immediate Annuity (SPIA) to ensure the premium dollars will be available for the life insurance premium pay-in period whether it is a lifetime premium or a limited pay premium. Once the after-tax income is determined, illustrations can be run to determine what the maximum death benefit would be and how best to fund, i.e. ten pay, lifetime pay, etc. Keep in mind the exceptions to avoiding the 10% penalty on early distributions prior to age 59½.

For individuals with taxable estates, an Irrevocable Life Insurance Trust (ILIT) should be used to hold the policy in order to avoid taxation of the death benefit. The Irrevocable Life Insurance Trust will keep the death benefit out of the insured’s estate thereby allowing all of the death benefit to be available for loved ones. An ILIT allows present interest gifts of $15,000 per beneficiary to the trust as of 2020. If there are insufficient beneficiaries to fund present interest gifts to the trust, the individual can use a portion of their $11,580,000 (2020) lifetime exclusion for gift tax purposes to fund or could also make private loans to the trust if that was more taxadvantaged.

The Annuity Wealth Transfer Strategy can help individuals who do not need income from deferred annuities and would rather use this unneeded asset to maximize what they are able to provide for loved ones. It can take an asset that may be heavily taxed at death and use the advantage of life insurance to dramatically increase what beneficiaries receive. However, if the client needs the money for their own retirement, this is not an appropriate strategy for that client.

The after-tax income from the annuity will fund a larger death benefit than one realized from just leaving the annuity alone and passing it to your loved ones at death.

What happens if the insured winds up needing the money for their own retirement in later years? All of the well-meaning plans can go awry if markets decline dramatically and there is not sufficient retirement income available from the life insurance policy cash value. If that event should occur, the insured can choose a paid-up policy or take loans to pay premiums on the policy. The income stream from the annuity used to purchase the life insurance policy can then be redirected to the insured to fund lifestyle shortfalls.

Annuity Wealth Transfer Strategy - Part I

9/22/2020

Below is an article from American National that discusses annuity wealth transfer strategy. It's a great strategy if you fit the situation it describes.

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There are several ways to help guide clients to a financially secure future through the sale of an annuity or life insurance policy. However, steering individuals to the right plan can be a difficult task without the right preparation. Check out this new series on product sales tactics to brush up on your skills and learn how you can enhance your clients’ portfolios!

Annuity Wealth Transfer Strategy
Deferred annuities are one of the best places to grow assets tax-deferred because the build-up is not taxable until distributed. Assets grow faster if they are not taxed annually and can compound free of taxes. Many of our clients purchased deferred annuities many years ago and the growth of the account has dramatically increased the value of these annuities.

For those individuals who will not need their deferred annuities for retirement income, there is a way to use these funds to provide a larger benefit for their families. Using distributions from the deferred annuity, the Annuity Wealth Transfer Strategy leverages up these distributions into a significantly larger death benefit upon the annuitant’s death.

Double Taxation Trap
While deferred annuities are a good place to grow money, there can be issues. The reason is that if you have a large estate you may pay taxes twice on the money. First, the entire annuity is taxable in the individual’s estate. Secondly, after a partial deduction for any estate taxes paid on the deferred annuity, the remaining gain in the annuity is taxed to the beneficiaries of the annuity, potentially leaving a fraction of the deferred annuity for heirs.

In next blogpost, we will discuss the annuity wealth transfer strategy.

3 Residual Choices for Income Protection Product

9/18/2020

Everyone needs residual income protection. If you can work only part time, you will still need your full-time incomes.

This article below from Standard highlights the differences between the Basic and Enhanced Residual Disability riders to help you find the appropriate rider.

Get More Out of Your Life Insurance Policy

9/17/2020

Many people work a lifetime to accumulate assets to pave the way for a comfortable retirement and to leave an inheritance for their children. The last thing anyone wants is to see their hard-earned savings depleted to pay for long-term care services.

Long-term care services, however, can quickly erode a person's assets. The Help Preserve Your Client’s Estate flyer from Mutual of Omaha below discusses the need for long-term care services. It also includes a case study that examines the impact a life insurance policy with a long-term care rider can have on a consumer's estate using two contrasting scenarios.

Who Are the Right People For Term Life With Living Benefits Riders

9/16/2020

Q. What are the target people for term life with living benefit riders?

A. The ideal people for such term life policies are:

Age 40 and older. People in this age bracket are thinking about retirement and legacy planning and may be ready to obtain permanent life insurance.
Financially savvy. These people are looking to get ahead financially and may find the leverage, flexibility, and tax advantages of life insurance attractive.
Caring for parents AND children. These people understand the challenges of caregiving and don’t want to be a burden on their children.
Known to have a family history of illness. Those in this category know the challenges of chronic illness and how expensive it can be.
Small business owners. These individuals may plan to work well into their 70s. A chronic illness would derail those plans.

If you are interested in term life with free living benefits riders, or you currently have term life but without living benefits riders, please contact us, we will find you the most competitive product out there.

Reframing the Annuity Puzzle

9/9/2020

Below is a flyer from AIG about how fixed annuities could be looked at using the consumption framework. It's a good read for anyone who is seriously thinking about retirement.

Young Consumers Have Noticed Life Insurance: MIB

9/5/2020

U.S. residents under age 45 spent July shopping for life insurance as if it were a hot new phone, or hand sanitizer.

Consumers in that age group filed close to 20% more life applications last month than they did in July 2019, according to MIB Group.

The under-45 group has been the strongest-performing age group since February, after years of being the weakest-performing age group.

MIB’s overall life application activity index was 14.1% higher in July than in July 2019.

Here are actual the MIB activity numbers for each age group for July:

Ages 0-44: Up 18.9%
Ages 45-59: Up 12.9%
Ages 60 and older: Up 4%

MIB is a Braintree, Massachusetts-based life and health underwriting data consortium. MIB analysts base MIB’s life insurance application activity index on MIB database search statistics

What kind of customer is Whole Life good for?

9/4/2020

Q. What kind of customer is Whole Life good for?

A. Whole life is usually not just a need, it is also a want from you.

You want to maximize your retirement account payouts
You want to supplement retirement earning with some tax advantaged payouts
You want to spend down your assets and leave a legacy to family members and charities.

You need permanent insurance to do this.

One Powerful Policy That Meets Retirees' Many Needs

9/3/2020

Do you want retirement security? How about a solutions that addresses your concerns with guarantees, flexibility and protection from health-related expenses not covered by Medicare? Below is a product from Sagicor and its descriptions.

One Powerful Policy That Meets Retirees' Many Needs - A Case Study

9/2/2020

Meet Jenny

Age 65
Risk-averse, with cash on sidelines
She and her husband run a small business.

Jenny’s objectives:
She’s ready to take the next step for the future, ensuring that her husband can be financially secure if something would happen to her, and establishing a plan for care.

Her financial needs:

Having a solution that offers protection and flexibility
Making sure she has coverage if she would need care
Maintaining control of her assets if she needed access to cash

After meeting with her financial professional, Jenny chooses:

A $100,000 single premium WealthCare policy
The Global Multi-Index Bonus HIGH PAR Strategy

One Powerful Policy That Can Meet Many Need - A Case Study

8/31/2020

People in or near retirement need solutions that can evolve with their changing needs — for 20 or more years. While people in retirement ages may have CDs, annuities, and bonds in their retirement portfolios, it may be time to consider an insurance asset that can help address a lot of different needs.

Below is a case study from Sagicor that shows how its single premium universal life product helps one retiree.

A Life Insurance Product Better Than the Traditional GUL Right Now

8/30/2020

With the sustained low interest rate environment that makes traditional GUL insurance less attractive and more expensive, it may be time to look at other alternative solutions like a guaranteed-focused IUL.

Imagine: you can pay the same premium as a traditional GUL policy, but get the added benefits of strong cash value and chronic illness protection! Yes, you heard it right.

Strong guaranteed death benefit, upside market potential and chronic illness protection. Now THAT'S the power of QoL Value+ Protector!

COVID-19 and Life Insurance

8/29/2020

Life Happens conducted a survey that found that the COVID-19 pandemic has led to an enormous increase in consumers’ interest in life insurance.

Life Happens collaborated with LIMRA on the 2020 Insurance Barometer report.

In one section, the survey team made survey participants rank their level of concern about living expenses, health insurance, life insurance and saving goals, rather than letting them simply express concern or lack of concern about each of those components of spending.

From 2011 through the beginning of 2020, life insurance flopped around at the bottom of the hierarchy chart.

Earlier this year, life insurance suddenly climbed above living expenses as a concern — even though the survey was conducted before the government had acknowledged that much COVID-19 had spread to the United States.

Lincoln Financial Survey

Lincoln surveyed 1,004 U.S. adults ages 18 and older, in July.

About 7% of the participants said owning life insurance is now less important than it was before COVID-19 came along.

But:

36% said the pandemic makes owning life insurance more important.
9% said they had changed the type of coverage they own in response to COVID-19.
12% said they had increased their life insurance coverage in response to COVID-19.

Permanent Life Products: 2 Conflicting Objectives

8/20/2020

Q. What are the two conflicting objectives of an index universal life product?

A. An indexed universal life product provides premium flexibility as well as death benefit flexibility, it has two broad categories of objectives, which as illustrated below, have natural conflicts.

Death benefit objective: minimum premium payment, maximum death benefit
Cash value objective: maximum premium payment, minimum death benefit

The first objective is to pay as little in premium as possible in order to get desired death benefit. Some IUL policies have a death benefit that is guaranteed for a certain number of years as long as the consumer pays the "minimum no-lapse" premiums. There could be lower cost insurance options than IUL, for example, term life or guaranteed universal life (Perm Term" as I call it. However, with IUL, consumers may choose to pay higher premiums because it provides the death benefit protection AND the ability to accumulate cash value that can be accessed for various reasons such as emergencies, education expenses, retirement funds, etc.

The second objective is what most people purchase IUL for. Consumers with this objective have a strong focus on cash value growth and want to minimize the cost of insurance charges which will eat out cash values. This objective is to generate enough cash value in the policy so that the policy holders can take out policy loans against the policy later - usually tax free.

Which Takes Precedence: Will or Beneficiary Designation?

8/19/2020

Q. Which takes precedence: will or life insurance beneficiary designation?

A. Most people think an updated Will is all they need. However, your will or trust will NOT override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account (IRA or 401k).

Beneficiary designations takes precedence.

Regardless of your current relationship status with the beneficiary on record, and regardless of how your current will reads, the proceeds from life insurance policy will be paid to the latest person named in the beneficiary designation!

A Common Mistake When Looking At Whole Life Illustrations

8/18/2020

Life insurance illustrations can be a useful tool to show how a product works. However, when it is used as a comparison tool to show which product from different insurance carriers is the best, there is a common mistake consumers usually make.

People usually look at the current assumptions in the illustration and pick the product with the highest rate. Here is why this could be a mistake.

Whole life is a permanent life product that is meant to be owned for decades. Current assumption of dividend interest rate just shows you the current rate, and the illustration assumes the current rate would last in the next several decades.

Unfortunately, dividend interest rates do change over time. A company with the best current rate might have a low rate in the past and/or future. What a better way to compare is to look back a few decades, and apply the average dividend interest rate and determine which company has the best rate on average over a long period of time.

Can I Have the Best Class With Elevated Liver Function Tests - Part B

8/17/2020

In last blogpost, we discussed Elevated Liver Function Tests. Now we will turn to questions will be asked during underwriting.

The primary questions to be asked of a proposed insured that presents with this history are:

How long has the proposed insured had elevated liver functions?...or is it a new finding?
Was the elevated testing done by their doctor or insurance exam labs?
How elevated are the tests? 1X normal?...2X normal?... more than 3X?
Has there been a positive alcohol marker test?...if so, what is the drinking history?
Has there been testing done for hepatitis?... ultrasound?.... biopsy?
Is there a known cause of the elevations?...has a doctor reviewed the elevated labs?

The goal in underwriting abnormal liver tests is to determine the underlying cause and rate the case for that issue. Many of the conditions listed above can be quite serious. The level of the amount above normal will have a definite role in the final offer or quote. The underwriter will consider the degree of elevation, the clinical history, and the current physical findings.

We do have several carriers that are more aggressive than others and will allow slight increases, even in the Preferred Best type categories. If you are interested in an application, please contact us.

Can I Have the Best Class With Elevated Liver Function Tests - Part A

8/16/2020

What is Elevated Liver Function Tests?

One of the most common abnormalities in an insurance exam lab is an elevated liver function test. Although they may be generated by other tissues in the body, an unexplained elevation of one or more liver function tests is a concern for impaired liver function.

Elevations in SGOT (or AST) and SGPT (or ALT) are usually caused by liver damage, which allows these enzymes to be released out of the cells. The GGT (or GGTP) test is a very sensitive enzyme for the detection of early liver disease or damage. It also is an inducible enzyme, meaning that it will rise when the liver is busy metabolizing some types of drugs or toxins (like alcohol).

Many impairments may cause elevations in one or more of the liver enzymes, including hepatitis, cirrhosis, fatty liver, excess alcohol use, liver cancer or metastases, as well as certain medications such as Dilantin, phenobarbital, allopurinol, and many others.

In next blogpost, we will discuss what questions the insurance applicant needs be prepared to answer during underwriting.

Key Person Solution For Small Business Owners - Part F

8/14/2020

In our last blogpost, we discussed how to determine the right coverage for the key person solutions for small business owners. Below we will show you a case study from John Hancock.

Key Person Solution For Small Business Owners - Part E

8/13/2020

In last blogpost, we showed you how the key person solution works for small business owners. Now we will help you determine how much coverage you will need.

How much coverage do I need?
The amount of death benefit to purchase will depend on your unique needs and goals for your family. As a starting place, consider:

The amount of income your heirs stand to lose in the event of your premature death
The estimated full market value of your business, and if a family member will take over, how much is needed to equalize your estate
Particularly for service-oriented businesses, the value of your business may be significantly linked to your personal experience, specific skill set and goodwill. The shortfall between how much your heirs could potentially sell the business for after you are gone should be considered.
Your desire to save for retirement in tax-advantaged ways. If this is the case, the policy can be designed with a focus on cash value accumulation. This type of design may be attractive to small business owners who either do not have access to traditional qualified plans or when the strict qualified plan contribution limitations prohibit the owner from adequately saving for retirement.

Putting it all together
The personal key-person solution can help address some of the financial-planning challenges you and your business may face. Focusing on what makes your business unique, the plan can be designed with your specific needs in mind and can offer protection in many ways. Please contact us if you are interested in creating such a plan.

In next blogpost, we will show you a case study how this solution worked for someone.

Key Person Solution For Small Business Owners - Part D

8/12/2020

In last blogpost, we introduced the key person solution for small business owners. Now we will show you how it works, in 3 phases.

Phase 1: Working years
During the years when you are actively working in your business, the personal key-person life insurance policy provides income tax-free death benefit protection to your family from day one to:

Replace your income if something were to happen to you;
Help cover over a shortfall in the business’ value should your family not be able to sell it for as much as they expected;
Serve as an inheritance for your family or equalize an inheritance between family members who work in the business and those that do not; and/or
Cover long-term care expenses for you should you become chronically ill (if the optional long-term care rider is added to the policy), providing additional protection if your ability to work and produce income is halted.

Additionally, depending on state law, life insurance proceeds receive favorable protection from creditors, including bankruptcy protection. Particularly if your business is in a higher-liability field, this solution can help provide a level of asset protection during working years.

Phase 2: Retirement years
Once you decide it is time to step away from the business, the potential cash value build-up within your personal key-person policy can be used to help supplement your income via tax-free withdrawals or loans. This access to cash value provides additional flexibility and protection to help address common issues, such as:

Extended period of time before appropriate buyer can be found;
Reduced business value due to down market, slow economy, or having to sell quickly; or
Periods where your income from the sale is lower than anticipated (possibly due to cash flow challenges related to the new owner).

Unlike qualified plans which require distributions starting at age 72 and are subject to income tax, withdrawals from the life insurance policy are purely discretionary and received income tax-free. You have ultimate control to take withdrawals or loans if you need them or retain the cash value in the policy — and increase the death benefit to heirs — if you do not.

Phase 3: Later retirement years, beyond life expectancy
Lastly, your life insurance policy’s potential cash value also can be used to provide additional supplemental income in the event you outlive or have insufficient other primary assets to draw from. If the cash value is not needed, the death benefit is preserved and can provide a source of funds for a surviving spouse and/or enhance the legacy you leave to your loved ones.

In our next blogpost, we will show you the way to estimate how much coverage you need.

Key Person Solution For Small Business Owners - Part C

8/11/2020

In last blogpost, we discussed retirement challenges faced by small business owners. Now we will show you the key person solution for small business owners.

The “personal key-person” solution
A personal key-person solution insures against the loss of your business’s most essential person — you. Through the purchase of an individually owned permanent life insurance policy, you can secure:

Income tax-free death benefit to financially protect your loved ones
Access to tax-free income from potential cash value that accumulates inside the policy
Potential long-term care protection when an optional long-term care rider is added to the policy
Waiver of premiums in the event of a total disability when optional rider is added

How it works
Permanent life insurance, at its core, is a protection vehicle. No matter what stage you are at in life, your policy provides an income-tax free death benefit, making it an excellent way to ensure your family’s financial security. And, when that life insurance policy is designed as part of a personal key-person solution, you also have the ability to access the policy’s cash value to help offset a number of the risks often faced by small business owners.

In next blogpost, we will discuss how the protection works.

Key Person Solution For Small Business Owners - Part B

8/10/2020

In last blogpost, we discussed some major risks faced by small business owners. Now we will focus on retirement challenges faced by small business owners.

Retirement planning challenges
While many business owners expect the business to provide some, or all, of their retirement income via a sale of the business, there are a multitude of factors that influence whether or not the business will sell for what you feel is its full fair market value.

As you plan for your retirement, consider the following:

Will there be a willing buyer when you are ready to retire?
Will the sales proceeds provide you with adequate income for your lifetime?
If the new owners are not as successful in running the business as you were, how will that impact your retirement income, especially if you sold the business on an installment basis?

Timing is important when it comes to selling a business, and it is often difficult to predict what type of market you will face when (or if) you decide to sell your business. Ideally, you will be able to time your sale with a booming economy so that you receive top dollar. Unfortunately, there is no way to predict what the market for your business will look like when you retire or whether you will receive enough to secure your retirement future.

With all of this uncertainty, it is important that you put a plan in place today that lets you decide how long you want to stay active in the business, while at the same time protecting you, your business and your family from life’s many unknowns.

We will discuss the key person solution for small business owners in next blogpost.

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