January 2017 - Susman
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Love Your Heart

February is quickly approaching and it’s American Heart Month!

While the month is close to being over, thoughts of forgetting about heart health should be far from your mind. After all, there is a direct link between your heart health and your life insurance coverage.

Did you know that heart disease is the leading cause of death for both men and women?
To better understand the status of your current heart condition, first schedule an appointment with a medical professional. It is always best to know the medical facts first. After your doctor visit, consider making the following changes:

1. Increase or add exercise to your daily routine
2. Cook heart-healthy meals and avoid BAD FOODS
3. Stop smoking
4. Understand the medication that you take and learn how it affects your heart
5. Avoid high-stress situations

That list can go on and on, but the one item that the majority of the people seem to have questions about concerns a heart-healthy diet.

Take the following advice under consideration:
1. Plan a healthy menu ahead of time and only buy food for those meals
2. Always control portion size. Use smaller sizes of plates and bowls, eat slowly, and never stuff yourself. Eat larger portions of smaller calories/healthy foods and smaller portions of high calorie foods.
3. Limit how much bad fat you consume
4. Load up on vegetables and be careful about eating too much fruit
5. Choose whole grains
6. Add more fiber
7. Eat proteins that are lower in fat
8. Dramatically reduce your sodium intake
9. Be careful about which condiments you use – READ LABLES
10. There is no such thing as a cheat day!
11. Allow yourself to have a treat (not every day), but don’t go overboard

Don’t forget that while February focuses on heart health, there are still eleven other months in the year where you should be treating your heart with as much love as possible. Changes in lifestyle, diet, and exercise can help make your heart the strongest it has ever been. Commit now to a healthy lifestyle that includes preventative measures to keep your heart healthy, your life long, and your premiums low.

Is Life Insurance an asset?

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928010/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]Is Life Insurance an asset? Is it a plus or minus in your overall financial picture? This week, join Karl Susman and guests as they discuss and explain whether life insurance is an asset or not! Transcript follows.

JIM: When you think of life insurance, what do you think of? For most people, they just look at it as an expense, a bill that you have to pay, a liability. Well, did you ever think of it as an asset, part of a diversified portfolio? Well today, we have John Wheeler, a 40-year veteran of the insurance industry that might put a new perspective on the way you look at life insurance in the future, and the importance that it provides you and your family. Even though we’ve always known that insurance can be an asset, listening to John Wheeler’s insight might have you thinking about life insurance in a whole new way. Welcome, John.

0:47

JOHN WHEELER: Good morning.

0:48

JIM: Good morning. I’m really looking forward to our discussion. I heard you speak a little while back where you put some new perspective in the way that I look at things, especially when it comes to the area of life insurance. Why don’t we just start out with what is the real need for life insurance for someone today?

1:04

JOHN WHEELER: When I’m talking to a client, the way that I explain the need for life insurance is basically dollars walk in, if you walk out, for whatever purpose it’s needed for without delay, so whatever you had planned to do with your income and/or assets is what life insurance can either replace or preserve.

1:21

JADE: Hi John, I got a question for you – can you help clarify the different between term and whole life insurance?

1:44

JOHN WHEELER: Basically term insurance is the lowest initial cost life insurance available, but long term, has the highest cost. In almost every situation, if you live too long, you’re going to pay more in premiums than you would receive in a death benefit, and typically, that’s going to occur well before any normal life expectancy would’ve been reached, so it’s very much like renting. If can be a good, viable, short-term solution, but at some point in time, it’s going to be more expensive than if a purchase had occurred at the same time you started to rent, so statistically, it’s also important to understand that less than 7% of the term policies issued ever pay a death benefit. Now whole life, on the other hand, is an asset that you actually own that builds equity, so it’s like owning versus renting. It normally has a fixed acquisition cost, provides a guaranteed asset growth, which can then be used during the insured’s lifetime, and still provide a guaranteed death benefit, and unless the insured is either very old at the time of purchase or has poor health at the time of purchase, it’s almost impossible to ever pay more than the death benefit would be received, especially if it’s purchased from a strong mutual company that also pays dividends, because then the dividend could actually provide an increasing death benefit as time goes on, even though the premium stays the same.

3:01

JIM: And you know John, a lot of times people look at just the cheapest coverage out there. What’s really important is when they sit down with their insurance professional, is determine for how long they’re going to need coverage. Now while those coverage amounts may decrease over time as they build up their net worth statement and build up their savings and things like that, there should be a permanent amount of coverage, because one thing people don’t even consider is they think, well, once I’m at retirement, I’m okay. Well, I know sitting down with people on a regular basis and looking at where their sources of income are going to be, many Americans today are dependent on their social security checks, and for a married couple, if one of them dies, they’re going to lose one of those checks, so how do they replace that income, and a lot of times, people don’t think that far ahead, and while term insurance is a great way to get started and get the appropriate amount of coverage that you need, and if that’s the only thing you can afford to have the proper coverage, one thing you want to make sure is that you have decent conversion privileges and you’re able to convert to some permanent coverage for some of those permanent needs, would you agree?

4:06

JOHN WHEELER: That’s absolutely correct; because the first thing to be considered is making sure that there is an appropriate amount of coverage, if at all possible. Everything else is secondary beyond that point, but a lot of times people look at that initial cost and there’s such a significant difference, especially when you’re younger, that it just looks like, well, this is just so much cheaper, it makes so much more sense, and then you always hear about the buy term and invest the difference philosophy and we’ve recently been reminded that some of those investments don’t always just go up at the same time, as well as are you really going to continue that savings pattern and leave it alone? America is the worst saving country of the industrialized nations and our famous last words is I’ll put it back, so sometimes that doesn’t occur, and, as we’ll discuss a little bit later, the other issue with the whole life, if you’re in a position that that is a cash flow possibility, can also be leveraged as well.

5:03

JIM: And it’s interesting, too. I just met with a couple this last week and we were talking about amounts of coverage and I showed them permanent coverage and I showed them term and quite honestly, the permanent coverage gave them a little bit of sticker shock. As we discussed it a little further, they opened up and said boy that seems like a lot of insurance and when you think about it, how much coverage should somebody have? Well, if you’ve got someone who is the main breadwinner and maybe all the health insurance is provided through that breadwinner, many people don’t think about how are they going to pay for health insurance if all of a sudden, it’s not provided through that employer? They look at the income. They say money is really tight, yet, they seem to think that money won’t be so tight when someone passes away with a policy that might pay a quarter million, well, if you’ve got someone 30 years old making $50,000 a year, if you’ve got a quarter million, that’s five years worth of income replacement, and that doesn’t even include the cost of the benefits that are being provided, so the amounts of coverage that we’re showing people today, a lot of times that gives them sticker shock, how do you deal with the amount of coverage, or what are you telling people they should be looking at?

6:09

JOHN WHEELER: The easiest way that I get a client to understand really what we’re talking about first of all, is I’ll ask a simple question. Would you be willing to give me all your future paychecks for the amount of life insurance and assets that you currently own, and 99% of the time they’re going to, in seconds, say well, no, and then I’ll just ask the question, are you aware that’s what you’re asking your family to do? Because at the end of the day, we have the concept that as I replace debt with wealth, I no longer need life insurance. Well, if you’re taking a term insurance approach or some type of insurance that is not going to increase in value as time goes on, you’d better hope you’re right for the simple fact that inflation is going to tear away those dollars, and then a lot of people say, well, we really don’t have inflation now. Well, go to the gas pump and explain that to me. Look at your healthcare costs. Explain that to me. Look at the cost of education, so even at a time where today’s economy we say, well, there’s really no inflation, well, there is in a lot of the things that we have to deal with each and every day, so the bottom line of it is, my son taught me a long time ago, it’s always better to use other people’s money. When he was spending my money, he looks at it all together different than when he’s spending his, and likewise, we want dollars that are going to walk in if we walk out that are still going to be able to provide what we would’ve if we were still there, and if the cost of providing some of those things from a security standpoint to our family, is still going to be increasing in cost, we need something that is going to help keep pace with that, like anything else, whether we’re looking at retirement or whatever, it still takes more dollars to do the same thing as time goes on.

7:49

JADE: I really like at how you kind of looked at term insurance as renting and whole life as ownership. Why do you refer to whole life as an asset class?

8:03

JIM WHEELER: Because it is, in fact, an asset that has equity value. That equity value is guaranteed to grow every year you own it. Very few assets you can make that statement about, and the equity also can be used for a multitude of purposes, whether it’s emergencies, education, retirement income, or even to capitalize on other opportunities that may arise. Life insurance cash value is normally the second or third line on a personal financial statement in the asset column. It has asset value that you don’t have to die to receive, and it’s one of the only assets that you can own where they will never see red ink on their annual statement showing a loss in value from previous years.

8:43

JADE: Let’s go back to the comment you made, too, of a little bit earlier in the show as far as the cash value component again. How can you view that as an asset, because you mentioned the term leverage?

8:52

JOHN WHEELER: The issue of the cash value is, like I say, this is a living benefit. People often look at life insurance, well that is only for someone if I’m gone. Well, if you have a permanent type of insurance, like whole life that has asset value as well, most of the time, at least 90% of that value is accessible just upon request, so that could be used for whatever purpose that you chose to, whether that is to take advantage of opportunities from a leveraging standpoint, or whatever, very much like real estate, or something of that nature.

9:24

JADE: John, we’re going to take a quick break and when we come back, let’s talk about the asset class maybe that’s closest to whole life to kind of put things into perspective, so please stay tuned.

9:33

BREAK

11:24

JADE: Welcome back as we continue our conversation today with 40-year-plus experienced insurance planner, John Wheeler. John, prior to the break, we were talking about the importance of life insurance, the differentiation between term and whole life, and you commented how life insurance or whole life insurance can be considered an asset class, so let’s continue on with that and talk a little bit about what’s the closest asset class to whole life insurance today?

11:48

JOHN WHEELER: Well, there could be a lot of differences of opinion on this, but I liken it more to real estate and the reason I do so is because real estate can either be rented or owned, whereas whole life, as we said, is an asset whereas if I’m buying term insurance, that’s like renting, and it’s always more expensive to buy initially, but there’s no asset value unless you buy, so you might think in terms of CDs, things of that nature, as far as safety, but in how it actually works as an asset, I actually feel real estate is closer.

12:18

JIM: Well, let’s talk a little bit more about how they compare, Johnny. I know when I heard you talk a few months ago, you went through a real detailed analysis of really how closely it does compare to real estate, and in many instances, can have more favorably comparisons to real estate.

12:35

JOHN WHEELER: Sure, see real estate value increases or decreases the same amount, whether there’s a mortgage on the property or not. We’ve recently been reminded that real estate can go down as well as go up, and whole life insurance, guaranteed cash value on the other hand, will increase the same amount every year, whether there’s a loan on the policy or not, and some mutual companies then will even credit the same dividend, whether there’s a loan against the policy at the time the dividend is declared or not, so whole life insurance cash value will never decrease, but is guaranteed to increase every year to maturity, which is typically age 100 or 121, in some cases, depending upon the carrier. Now owning real estate can also have tax advantages, such as deductible interest payments, property taxes being deducted, improvement increasing basis, and in some situation, may be even depreciation deductions if it’s for rental property, but most of the deductions are still, however, we have to remember, out-of-pocket costs, so at the time of the sale more than one year later, we might also get capital gains treatment, or if it were a primary residence, possible capital gain exclusion up to a certain amount. Now whole life insurance also has tax-deferred accumulation and can also provide tax-favored income and, in some cases, even tax free if you’re using loans and the contract is not a modified endowment. It also provides a tax-free death benefit income tax wise, in most situations, and the dividends are going to be received income tax free until the dividends received exceed the premiums paid in. Now real estate can, perhaps, also provide leveraging by using the equity in some form of secured loans, providing that the bank is willing to do so. Now the secured credit loan or a credit line, you still have financial standards that have to be met. You basically need to prove you don’t need the loan for the bank to really want to give it to you. Now real estate equity can also, as we’ve recently been reminded, decrease as well, so that makes future accessibility even more difficult, and possibly having the credit line either reduced or closed all together. Now, obviously, if you have a loan, interest is also payable on that loan, but if a loan exists at the time of the purchaser’s death, it’s also important to remember it’s still owed by the estate, so that loan still has to be paid off. It isn’t forgiven, and if the purchaser were to become disabled, any payments are still required by the lender. Now, even after the mortgage is paid off, there are also costs to keep it, which people don’t take into account sometimes. We still have to pay insurance, property taxes, upkeep, etc., so in essence, you never really completely own it. Try not paying your real estate tax for a few years and see if you really own it, even if the mortgage is paid off. Now, in contrast, normally in the range, as I indicated earlier, about 90% of a whole life policy’s equity is available upon request, with no repayment requirements whatsoever, other than typically you’re going to be billed annually for the interest and the payoff amount then would be subtracted from the death benefit in the event of death. No further payments are required after death, and the death benefit is normally going to be received income tax free, and if the policy includes a disability waiver of premium, then any future payments would also be waived, if you’re disabled before a certain age, usually 60 or 65. Now future dividends, if a mutual contract, could also be used to pay off that loan interest, or even the loan itself over a period of time, and remember, whole life is also guaranteed to increase in value every year you own it. Wouldn’t it be nice if you could say the same thing about real estate?

16:10

JIM: The other thing I know that you mentioned that I find of interesting perspective is when you borrow against life insurance; you can choose to come have that deducted off the death benefit, or the proceeds to your family. You can’t just take money out of the equity of your house and choose to tell the bank, hey, look, when I die, just forgive the loan at that point and take if off what my kids get, you’d probably be living somewhere else because they would make procedures to have you find a new place to live.

17:25

JOHN WHEELER: Even paying the interest for that matter, because try not paying the interest if you have a credit line, and they’re not just going to add the interest on to the credit line normally if you’re anywhere close to what that limit is, and, as you just mentioned and I mentioned earlier, a lot of those credit lines today have decreased. You didn’t do anything wrong. You never missed a payment, but just because of overall debt that’s in existence or real estate values declining, and unless you had a major down payment at purchase, you may be upside down on the loan.

17:59

JIM: A couple years ago, took an equity line, because I’ve got three kids college age right now. Two of them are attending college and I had an equity line just kind of as my backup to have some extra funds available, and the bank wrote me a letter and said your equity line is frozen, but thank you for keeping making those payments, so what I thought was going to be a line of cash that I’d have access to, has not been there, but I do have a permanent life policy which I’ve accessed several times over the years as I needed to, and it’s been a great way of having some access to some funds when my IRAs, if I pull that money out, I’m not 59-1/2 yet, so there are penalties and taxes involved, it’s nice to be able to borrow that money and not have another financial impact out there, and then I could pick my own loan repayment schedule. If I had a little extra money, I could throw it in there. If I was a little short or wanted to skip a payment, that wasn’t really a problem. I was able to structure the loan that way, so it is a fantastic tool.

18:55

JOHN WHEELER: It’s also important to realize that that whole life guaranteed cash value increase still occurs, whether there’s a loan or not, so you’re actually building additional equity guaranteed every year, and it provides more flexibility than almost any asset in the marketplace today. A lot of people’s 401(k)s have become 201(k)s. Credit lines have dried up. I’ve had clients that own businesses that have used cash values of their life insurance to help meet payroll, or because they couldn’t get the loan from the bank or their credit line was cut to be able to make up for the fact that their receivables were slow coming in, or we have clients that do have college-age kids and maybe they bought a 529 plan and that tax free income they were looking forward to if it was used for education, is wonderful as long as there’s gain. Many of them don’t even have any gain, so having that cash value of the life insurance that they could utilize allowing that 529 plan possibly to come back and get some gain, provides flexibility, or even at the time of retirement. We’ve had clients that having an asset that they can dip into whenever they wish, as opposed to many other scenarios, that when you turn the spicket on, you can’t turn it off, the only time I’m going to totally lose in the market is if I sell at a loss, whereas the market will go up and the market will go down, but if I have the flexibility to where I’ve got another well that I can draw water from when I’m thirsty, as opposed to continuing to sell at a loss, provides a lot of initial security.

20:30

JIM: Having a diversified portfolio makes sense and permanent life insurance certainly is a good part of that overall diversified portfolio. John, one other thing I’d like to ask you about, and that is, we’ve had accelerated death benefits for awhile, and recently, what’s been added to the different options available with that, has been linked benefits for things like long-term care. You want to just comment on that a little bit?

20:54

JOHN WHEELER: The key advantage to those type of linked benefits is again, the taxation, not paying tax for that and being able to access, in certain situations, even more than what the cash value was, so if it’s just one other way of providing additional flexibility in the event that it’s needed, but the key thing is, is it an absolute replacement for some of those things? You have to still be sure that you understand that life insurance death benefit was decided upon normally for a specific purpose, and if I spend that death benefit early, then it isn’t going to be there for the other purpose as well, so it isn’t an absolute substitute, but it certainly can provide some additional flexibility, if nothing else, for the unexpected in life. That preferential tax treatment is always a good thing.

21:43

JIM: I know we’ve had cases where we’ve worked with clients where that accelerated death benefit, sometimes what’ll happen is the majority of that death benefit can be made available for the family if someone’s terminally ill, for example, and instead of waiting until that person dies, it actually allows the family to take care of some things and have that person be part of the decision making on how that’s done and can really be a powerful tool.

22:08

JOHN WHEELER: Exactly right. The whole issue is being sure that your planning and whatever area that it is, provides enough flexibility for the unexpected, because if a client will commit to me exactly what what’s going to happen, we’ll tell them exactly what’s going to do, but none of us know that. None of us know the type of situation that we’re going to encounter before we leave this world, so providing that additional flexibility to where I have another source that I can provide for my needs, whatever those needs entail, can provide a lot of extra security.

22:39

JADE: Can you share a story or two as far as how that’s made a difference in a family’s life?

22:59

JOHN WHEELER: I’ve seen families that because the home equity went away for whatever reasons or education planning never got quite to the point that it was, any number of scenarios like that where when they didn’t even realize sometimes that this value could be used in advance, that can make a big difference. One of the best stories of all time wasn’t a personal client, unfortunately, was Walt Disney. He had this vision of Disneyland and he couldn’t get enough loans and so on and so forth at that time, for this cockamamie idea that he had, but still yet he had the foresight to purchase quite a lot of permanent life insurance and loans on his life insurance helped start Disneyland, but I’ve had families that because of that planning, the unexpected occurred. I had one client who was a real health nut. When he took off his shirt, even guys looked. He had a twelve-pack, I mean, he looked like someone that was just perfectly in physical health, came down with lymphoma, lived less than three years after that. He could’ve been the type of individual that had said, look, I’m healthy, I’m relatively young, because he died in his early 40s, there’s really no reason for any of this. Well, we got to see how disability waiver of premium worked because there was a period of time that he got, before he passed, that there was no way that he could continue working, so disability waiver continued to have these contract values continue to build, even while he was disabled, and then when he passed, his kids got to stay in the same school, the house was paid for, a large portion of the income that he would’ve been bringing home was still provided for, and his kids still talk today about the real love letter that he left and showing how he did truly care because of the foresight that just in the event something might happen, I want to be sure that my promises were kept. See, in the life insurance industry, we were the original promise keepers. Everybody else comes to the wake with sympathy and good wishes for the family and expressions, feelings of sympathy. We’re the only ones that walk in with a check instead of bills, and it’s very, very important to remember, the bank may tell you no, but a life insurance company won’t if you have value in that contract. It’s like the Good Book says, ask and you shall receive. We’re the only ones that will do that beyond question. Otherwise, if I’m looking to be able to get a loan, my equity value may go away, rules may change and regulations may change and so on, and it’s the unexpected that we also provide for at the same time. Life insurance I’ve often, permanent life insurance, in particular whole life, I’ve often referred to as the Eighth Wonder of the World.

25:32

JADE: Well you’ve made a very compelling argument as far as how to view life insurance as a protection tool. You’ve touched on some amazing stories that really allows you to look at life insurance in many different ways, and you’ve done a great job of helping us understand how life insurance really is a comparable asset class to other assets, and actually in many cases, more favorable, but, at the same time as we kind of walk through today, I feel sometimes that the listener might think there are just so many choices and options, so maybe as we wrap up here, just talk about the importance of not going these decisions alone and working with a qualified insurance professional to really understand the needs and determine the best approach to take.

26:15

JOHN WHEELER: Well, like anything else. I might start having chest pains and I could always go on the internet and I could see, well, let’s see, it could be gas, it could be a heart attack. Are you felling lucky, as Clint Eastwood would say? As most other situation, the average individual spends more time planning a family vacation that they do their financial future. Doesn’t it make sense with something as uncertain as life is, that it would make sense to sit down and get an opinion of someone who that is their specialty and that can help explain the various different types of coverage according to what you’re feeling is important to you and what you’re concerned about, to help put the right situation on it. If I went to a car dealer and I said, well, I want to buy a car. That doesn’t give a lot of direction. There’s a wide variety of cars to choose from. All of them have advantages and disadvantages. Our field is no different. So, sitting down with a qualified professional that can help explain to you the differences to where you, the consumer, can make an educated decision, and basically at that point, what we do is put price tags on those solutions. Not everybody feels that certain things are the same advantage or disadvantage that other people do. Even though I may see an advantage in some solutions, it may at this time, no necessarily be affordable. I may have champagne need and a beer pocketbook, but at the end of the day, understanding what I’m dealing with and various different ways to approach that, is ultimately the key, so getting that assistance and walking through the maze of decision making process and trying to fit something specifically for me, is, by far, the best approach.

27:55

JADE: Oh yeah, and I appreciate that perspective. It’s an area sometimes that people think it’s just the word life insurance already kind of puts up that wall and gosh, it’s too complex, I don’t understand it, it’s too expensive, there are just a lot of misconceptions out there, and working with that person who has devoted their career to focusing on this area of planning is definitely wise advice. We really appreciate your time today and your perspective, and hopefully this inspires listeners to go back to their insurance professional and really sit down and take a new look at life insurance. Again, term is appropriate in some cases; permanent, of course, in other cases. Viewing it as an asset class and realizing all the powerful benefits that life insurance can provide, working with quality insurance professionals, working with a quality company, obviously evaluating their claims paying ability, all those things are important considerations, so thanks again for joining us and sharing your wisdom today, John.

28:46

JOHN WHEELER: Well, thank you.

29:01

JIM: Thanks for joining us this week, and tune in again next week as we explore another phase of the Real Wealth process, and remember, if anything you heard in today’s show you’d like to get more information about, contact your Real Wealth advisor. Also, if you feel that any of this information will be helpful to a friend or family member, just click the forward to a friend button.

JADE: Please be advised that a taxable event may occur if a permanent life insurance policy is allowed to lapse and a loan on the policy is outstanding. Policy loans reduce the death benefit dollar for dollar. Life insurance guarantees are based on the claims paying ability of the issuing company.

The More You Know

Insurance can be one of the most confusing items in your life – but it shouldn’t be. If you know what questions to ask and can find someone to give you the right answers, you will find all the clarity you need. Here are some things we think you should know or ask in regards to various types of insurance:

What type of insurance do I need?
Once I have guaranteed replacement coverage for my home, do I need anything else?
If I have a home office/business, do I need any special insurance?
Does homeowner’s insurance cover me if, say, someone slips on my front steps, breaks a leg and sues me?
How do I decide the amount of coverage I want or need?
How much or how little is covered?
Should I just let the bank pick my policy?
How do I know if an item needs additional coverage?
Are all accidents in my home covered?
What discounts do I get if I have added safety features?
Is coverage for legal assistance included?
Is car insurance an absolute must?
What about life insurance?
How can I figure out how much life insurance I need?
Can I control the cost of coverage?
Does health insurance help if I’m sick or injured and laid up for a while?

There are so many other questions and items to consider for all of the various insurance you may need. We can answer all of those questions for you and give you the knowledge and control to enable you to make the most informed decisions.

The More You Know
The More You Know

High Deductibles?

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928014/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]Do you have high insurance deductibles? Lisen to the Susman Insurance Agency podcast this week with Karl Susman as he and his guests discuss how to avoid high deductibles. Transcript to follow.

JIM: About 15 years ago, I was at a meeting for insurance agents and financial advisors and had the opportunity to hear Dr. Marius Barnard speak and Dr. Marius Barnard and his brother Christian are known as pioneers in heart surgery. They had the first successful artificial heart transplant, very involved with heart treatment, and I know Dr. Marius Barnard, he would see his patients and how he could basically bring them back from the brink of passing away and solve their medical issues, at least for a pretty good period of time, but created huge financial issues for those families because what a lot of people didn’t realize, until they were in the situation, things like health insurance, pay the bill, things like disability insurance give you a weekly check, but a lot of time, with these serious illnesses, you have the whole family rallying together and you may have a spouse that is losing time at work. You may have family that’s needing to travel a lot for services so what he did is he went to the insurance industry and the companies and said you’ve got to do something about this. Joining me today is Don Hanson, and Don Hanson has been very involved in a new type of insurance that really isn’t so new anymore but it is kind of new in the United States, which is called critical illness insurance, and he’s actually been part of the process in designing some of these products for companies with ObamaCare creating much higher deductibles for families than they’ve ever seen before as we go to a new system. In other parts of the world, this has been a very popular insurance but it’s something that really hasn’t caught on yet in the United States and I wanted to give people a chance to be aware that this type of insurance even exists so welcome, Don, one of the creators of some of these types of policies. Welcome, Don.

1:59

DON HANSON: Thanks, Jim, pleasure to be on the show. Thank you.

2:01

JIM: In my intro, I kind of talk a little bit about critical illness insurance but why don’t you expand on that. What is critical illness insurance?

2:09

DON HANSON: That’s a good question. You had mentioned Dr. Marius Barnard just a couple moments ago and, really, critical illness insurance is the brainchild of Dr. Marius Barnard. He realized, like you mentioned, that, my guess, he would take people and basically bring them back from the brink of passing away to, oh my gosh, look at what their finances are looking like. In fact, he had kind of an offhanded joke he would tell to people. He said, hey, I’ve successfully transplanted your liver but we’re going to have to remove your bank account. Unfortunately, that really reigned true with most of his clients. He would see them a year later or a couple of years later and they would say I don’t have any money left so critical illness insurance was his idea to help provide money to a person who would have a life altering event that, up until that point in time, would literally put them into bankruptcy.

2:56

JIM: Now, I thought, and maybe I’m wrong, that this stuff has been around or created, I believe it was 1993. Do you know exactly when it started?

3:04

DON HANSON: Dr. Marius Barnard actually starting getting the insurance companies interested back in the 70s but it’s my understanding the first critical illness policy in South Africa was established in 1981 or 1982.

3:17

JIM: Okay, so I’m way off on that so it’s been around a long time. When I heard him speak, this was probably in the mid to late 90s and I know he passed away maybe three years after I heard him speak so I feel so fortunate to having met one of the pioneers in transplants and he was passionate about it. I mean he was going around the country speaking about this type of insurance. Obviously, being the one that created the idea of it, it was, back then, the number one fastest growing insurance product all over the United States. I thought this is something I should be aware of for my clients. I went through a whole bunch of education and started talking to my clients and then nothing so why is critical illness so popular in other countries where it wasn’t popular, in my experience, here in the United States?

4:05

DON HANSON: Well, that’s a good question. I think the first answer to that is, in other countries, they’ve got socialized medicine. That can be a real issue for people to get quality care, emergency care, long-term life altering diagnosis. People want to be able to have options and having a tax-free amount of money is one of the best ways of giving people options in their healthcare.

4:26

JIM: There was a Mackinaw Center of Public Policy and back when we were first toying with the idea of socialized medicine with the Clintons, they did a study that compared the United States to Canada and I’ll never forget because it was around this time that my father-in-law had heart surgery and I remember he went into his doctor and the doctor said you need to have bypass surgery. You have blockage. This was on a Thursday so, literally, they were going to put him under the knife on Friday, and they said, otherwise, we’ll wait until after the weekend and do it on Monday. I remember looking at this and it kind of struck me because, in Canada, the average wait was over six months. Now, that average wait is for the people that actually had the surgery. I don’t know if people might have died or people might have been denied the benefits but I know that’s something that you hear as people get older, they just aren’t eligible for that type of care, so something like critical illness creates a pool of cash and, if they want to go off the grid so to speak and still get the surgery, they can move to the front of the line and I think that’s what we saw happening in other parts of the world is why it caught on. Would you agree?

5:30

DON HANSON: Absolutely.

5:32

JIM: So, now, here in the United States, most people don’t know what critical illness is, they’ve never heard of it, and you’ve been involved with some insurance companies in developing some products so what makes you think and what makes the insurance companies think that all of a sudden the United States, they’re going to think differently about it in the years to come?

5:50

DON HANSON: It sure has caught on a little slower than what was anticipated but I do believe that it really has begun to pick up momentum and a lot of the reason is because people, really, up until now, the average American, they don’t even know that this type of insurance even exits so it helps with a little bit more awareness. More agents are understanding that this is even available. For the longest time, even insurance agents didn’t know that critical illness insurance was available or even what it was if they did.

6:18

JIM: I just did a talk with several agents, a couple different groups that I talked to in the last week or two, and there was over 100 agents in each of the talks that I was speaking to and I did ask the audience, how many people are aware of critical illness insurance, and only about 20% of them were aware of it. Then, I asked how many of you could adequately explain what it is and how it works, and there was only one or two hands that went up. One thing is, when it comes to critical illness insurance, if this is something that interests you, go back to your insurance agent and your insurance professional and, maybe, you might have to be a little bit patient because this is something that’s fairly new and they might have to do a little background research for you to adequately counsel you on how this might fit into your overall plan. We’re going to take a short break and when we come back, let’s dig in a little bit deeper. Let’s talk about some of the benefits that might be available and, also, how do people get this insurance, so please stay tuned.

7:16

BREAK

8:11

JIM: Welcome back as we continue to visit with Don Hanson and, Don, as we mentioned, has actually been involved with several different insurance companies and he’s actually worked in the area of critical illness and helping companies develop product so I thought who better to talk about this with than someone who has been on the inside actually creating these types of policies to have a deep understanding of how these policies even work and what it takes to qualify, so let’s talk a little bit deeper about the benefits. We’ve heard of the policies, you know the duck, I won’t mention any names, but they have cancer policies, sometimes you see accident policies, and while those have a place, critical illness is so much more broad-ranged in the benefits that they provide, so talk about some of the illnesses that might trigger a benefit with critical illness.

9:00

DON HANSON: Absolutely, and I think one of the things that even insurance agents can sometimes get confused with here is that this is not meant to be a policy for hangnails. This is really a policy for critical illness diagnosis, a life-altering diagnosis that’s happened. A good example of some of the covered conditions would be, right off the bat, heart attack, cancer, and stroke. We look at the overwhelming majority of the population, male and female, we look at the top four killers of both genders, and heart attack, cancer, and stroke are in those top four. Those three are part of the top four so those three conditions alone account for nearly 80% of the claims on these policies and that doesn’t mention Lou Gehrig’s or ALS that is also covered on some policies, major organ transplants. I have an aunt that actually went through a double lung transplant and, my gosh, she was on the waiting list for two and a half years and not all the time was she on that list because somebody didn’t have the lungs, it was because she needed to be healthy at the time they did the transplant. There were a couple times she missed out because she just wasn’t healthy enough to do the surgery.

10:07

JIM: My understanding is there’s maybe as many as 21 different diagnoses that result in a claim and the way those claims work, it’s basically a lump sum check and you can have a small policy that might help cover the gaps with deductibles. I don’t think people fully even appreciate, now, those higher deductibles until they get sick and then it causes financial hardship even to cover those deductibles but what I’m hearing, what some of the increases for health insurance might be over the next year or two as more of the Affordable Care Act gets implemented, I think we’re going to see high increases is what I’m hearing and the way to combat high increases is go with higher deductibles and people are going to be exposed to a lot more risk so talk about how those benefits work. What does it take to get a check and is it paid out over a couple of months or how does that work?

10:57

DON HANSON: Sure, that’s a good question. One of the unique things about critical illness insurance is that it’s a lump sum one-time payout. There are certain insurance policies that will have multiple diagnosis payouts available but, really, if somebody is diagnosed with a heart attack, they get a tax-free lump sum check after the diagnosis has been established and, really, that money is completely, it’s up to them what they do with it. There is no control from the insurance company as to how they use that money.

11:24

JIM: That’s interesting because you go back 30, 40, or 50 years, and medical technology has come a long ways so the things that used to kill us, now, we’re able to recover from it but, financially, that’s always the challenge and I know I’ve been involved in some circumstances with some business partnerships where a partner wasn’t supposed to make it and they recovered and here they had a buy/sell relationship with life insurance but they had to still go to the bank and borrow the money to buy the partner out because they had an illness that wouldn’t allow them to return to work so I can imagine that in the buy/sell arena for business owners or key man, the things you would think about for life insurance, you need to think about for this because, if you have someone survive a life-threatening thing where they can’t go back to work, obviously, there’s disability insurance to maybe help with the monthly bills but there’s usually a lot of costs that go well beyond it so something like buying out a partner, can you get enough coverage? My understanding is you can get maybe as much as $1 million of coverage or how does that work for, say, a buy/sell situation?

12:26

DON HANSON: Well, that’s a good question. As far as benefit amounts, benefits can be as low as $5000 in a policy and it can be as high as $1.25 million. Now, one insurance company doesn’t cover the full $1.25 million. In those particular cases, very unique, would require multiple insurance companies to be involved but, yeah, we can get up to $1.25 million, depending on the circumstance. Correct.

12:49

JIM: So, it’s quite a wide range. Now, I know life insurance has gotten a lot easier to get people insured. I’m a pilot and I remember when I first got in the business, if a company would take you, they would charge you a flat extra of $2, $3, or $4 per thousand dollars of death benefit or they wouldn’t even consider taking you and, now, there’s companies that will take you standard. I look at things like cancer. Someone got diagnosed with cancer and you could just forget about getting life insurance and, now, after a couple of years, they’ll go and insure somebody. Is this as easy to get as life insurance or how does that work?

13:26

DON HANSON: You know, that’s a good question. I would say that getting underwritten in critical illness insurance, there’s a combination of some mortality and some morbidity because, really, with critical illness, it doesn’t matter what happens after the diagnosis so whether a person is now deceased or whether they’ve survived and now they’ve got a long road to recovery, the critical illness insurance company, they don’t take any of that into consideration. The only thing they take into consideration is the fact that there was the diagnosis to begin with so it is a unique underwriting experience. With family history, it’s a very important piece of underwriting. As far as previous diagnosis in critical illness, if somebody has already had a heart attack, cancer, or stroke, most of the insurance companies that offer critical illness insurance would not be willing to issue a policy on that individual although there are insurance companies that do have 10 year previous diagnosis so if there has been no cancer diagnosis in the last 10 years, then they would issue a policy. It has gotten a little bit easier with new insurance companies getting into the business but, for the most part, it isn’t as simple as life insurance but it’s not quite as difficult as disability in some circumstances, such as financial underwriting. Critical illness insurance doesn’t have near the financial underwriting that disability does.

14:38

JIM: So, really, what we’re looking at is people that would be motivated to buy it probably don’t qualify because they probably have something but it is something you really want to think about because who among us doesn’t know somebody in our family or friends that haven’t been diagnosed with something like heart attack, cancer, or stroke, and then there’s a whole myriad of other things that are also covered on a lot of these policies. Don’t decide from this program, well, I don’t know if I can get it or I don’t know if I want it. When you’re looking at your health insurance and you’re seeing $5000 and $10,000 deductibles, that can be a lot for a family to handle and, boy, if someone gets sick with something like that, now, you’re making that deductible maybe year after year after year so it is something that can help fill the gap. There’s also something that you can couple with critical illness because it’s only covering the illnesses so, if someone is looking to help maybe mitigate some of the risk of these high deductibles, they might also consider an accident policy, and how do those work, Don?

15:38

DON HANSON: Well, there’s really two different types of accident policies. There’s one that’s considered a schedule of benefits and it’s a very straightforward accident plan where you can go to your policy and it will say exactly what your dollar benefit will be dependent upon the type of accident that happens and then the second kind of accident insurance is what’s called an actual expense reimbursement and what that does is the insurance company asks you to submit what the charges, what’s been billed to you, and they’ll reimburse what’s been billed to you.

16:05

JIM: With those accident policies, do they pay one and done or is that something that you can keep going and, if something else happens, you can collect again?

16:11

DON HANSON: That’s a great question. It’s actually an annual basis so, hypothetically, a person can claim on an accident every year up until the time they get rid of the policy or, normally, accident plans are done at age 65 to 69 range.

16:25

JIM: All right, and then the last question I’d ask you, how expensive are these policies? Do you find people can afford these or are they only for someone who’s got money falling out of their pockets?

16:34

DON HANSON: That’s a good question. Really, I hate to say, it depends upon the face amount or benefit that’s wanted but, really, that’s what it comes down to, a person’s age and the benefit that they’re looking for but, really, critical illness insurance policies can be very affordable. If we’re trying to buy $1 million, of course, that’s going to come with a cost but, when we look at average benefit amounts of $25,000 in face amount being sold, those are really, really affordable. For the most part, the average American, $25,000 of tax-free money is going to help pay their deductible and, if they have some sort of long-term disability, it will at least help pay for maybe the first 90 days of their waiting period before they start getting a disability benefit.

17:14

JIM: Well, I know the one thing I’ve found from personal experience and working with clients is when they get something like that, it usually involves a spouse or other family member carting them to follow-up visits, therapy, rehab., chemotherapy treatments, kidney dialysis. All of those things require a family member typically driving them to and from the office because a lot of times after those treatments people aren’t even supposed to drive. We had a guest on a while back that was in Canada and one of the things he talked about in Canada with his cancer, he was fortunate. He lived about three miles from the cancer facility where people were traveling 300 miles to go to that facility and one of the things we’re seeing in the United States is with the state exchanges, if you’re in a border area and your doctor is across the border in a different state, now, you may have to go for getting treatment, it might have to be in some other city where you were used to being close by so it’s definitely something worth considering. You should talk to your insurance professional about it. Now, I will say, you’ve got to cut them some slack on this one because most of them are just starting to learn about it. I know I’m just starting to learn about it but maybe have them look into it for you and be your advocate to help determine whether or not this would be a good thing to help mitigate some of the risk as we’re going with higher and higher deductibles with our health insurance. Thanks, again, for joining us, Don.

18:37

DON HANSON: Thanks, Jim.

American Dream

How would you describe the American Dream?

By definition, it is the ideal that every citizen of the United States should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative. The terms was originally coined in 1931 by writer and historian James Truslow in Epic of America. He wrote:
“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

There are so many opportunities available to you for your own American Dream. Is what you have now what you dreamed it would be?
Regardless of the path you chose or are currently choosing in pursuit of your personal American Dream, you want to make sure you include insurance coverage and protection. For example, a big part of many people’s dream is to become a homeowner. You pinch pennies, tighten the budget, and save-save-save – finally you buy a home!!

Immediately – Get Homeowners Insurance! Homeowner’s insurance is a specific type of property insurance that protects your home against damages or to your possessions in the home. It also provides liability coverage against accidents in the home or on your property. So, if your buddy drinks a little too much, trips over your dog, and falls down the stairs – you are protected! However, ‘acts of god,’ war, aliens, earthquakes, floods, zombies, and many others are not covered and you may have to seek different policies for some of those items. You can’t just pick any homeowners policy. There are seven forms of homeowners insurance that offer various levels of protection depending on your needs. The best way to choose your level of coverage is to work with you insurance agent. They can evaluate your needs as a homeowner and recommend the best level of coverage.

There is so much more of your dream to protect than just your home. Evaluate where you are – where you are going – where you want to be – and get that insurance so your American Dream stays protected!

American Dream
American Dream

Meet Debbie.

Meet Debbie.
Debbie is going to share the story of Bob.

Bob was a man from a large family, with a lot of drive, and successful in business and at home life.
When Bob’s father died, he left his family penniless and Bob decided that he would never leave his own family in that same state of affairs. He made sure that he had insurance all of his life and was able to make it have a cash value that could be borrowed at a decent rate. This story is a real example of why it is so important to have life insurance.

Battle Cancer and pay the bills

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928016/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]Health insurance can be expensive. Having a diagnosis of cancer can cost you a ton of money even with the best health insurance. In this week’s story, Karl Susman and guests tell a story about Jason, who battled cancer and still was able to pay the bills. Transcript follows.

JIM: Today I am really happy to have our current guest with us. Someone that I have gotten to know personally and consider a friend through different industry meetings that I have attended. He’s got a unique story because he understands insurance the value of insurance from a business perspective but never expected to find out what it means from a personal standpoint. To share his personal story we have Jason Mendelsohn. Jason is the co-founder and president of the Ashar Group that’s a nationally licensed firm specializing in secondary market sector for estate and business planning professionals.

00:43

JASON: Hi how are you.

00:44

JIM: Fantastic. I hear your own personal story because we’ve gotten to know each other personally through the years because we’re in the same kind of industry and business and we’ve met at a lot of company meetings through the years. After hearing your personal story I was inspired. Shortly after hearing your personal story to hear you present in front of an audience of your peers, I got to tell you I was touched in your willingness to share so that others can learn from your experience is just awesome, and I really appreciate you joining us today.

1:15

JASON: Thank you very much, thanks for having me.

1:17

JIM: Let’s start out, I just want to share with the audience, we talked about it a little bit in the intro, but your company that you’ve been in, it’s kind of a family business. I know you’ve got a brother involved, a sister involved, and you’re one of the pioneers in this life settlement business, which is a business that helps people that want to or need to get rid of some life insurance that doesn’t fit their circumstances anymore and finding someone else willing to pay for that that might give them an option of getting more than maybe just a cash surrender value. It’s interesting you being in that position of being in the business there’s probably not too many people that understand the value of life insurance much more than you do, would you agree with that?

1:58

JASON: I certainly understand why it’s important, yes.

2:01

JIM: Let’s talk a little bit about your personal story you shared with me off the air. You’re similar in age to me, you’re a couple years younger, you’re 46, right?

2:09

JASON: Correct.

2:10

JIM: You went through a health experience. Why don’t you share with the audience your story.

2:14

JASON: Sure. Back in April 2014, while taking a financial exam, I put my hand on my face and the neck to ponder a question, felt a bump, finished the test, called my doctor and ENT and said what is this what’s happening. He said not to worry about it. I’m a guy that goes to the doctor so I went immediately a few days later. They got me in, went on 10 days of antibiotics and steroids, nothing changed. Had a CAT scan and needle biopsy and then two days later found out I was diagnosis with Stage IV HPV related tonsil cancer, which had spread to two lymph nodes in my neck. Obviously went from someone who was working 7:30 or 8 in the morning until 6 in the evening to someone who all of a sudden was going to be dealing with surgery. Ended up having a radical tonsillectomy neck dissection, so 42 lymph nodes removed in my neck followed by seven weeks of chemo, radiation, and _____. Honestly, for someone who is busy with family, I’m married 19 years, three kids, to all of a sudden have to be going to radiation five days a week, 32 rounds of radiation for 15 minutes at a time, and then chemo one day a week, around eight hours each Thursday certainly took over my life.

3:26

JIM: Now again, how old were you when all of this happened?

3:28

JASON: I was 44.

3:30

JIM: So you’re at really arguably your prime of life, you’ve got a young family at home. At that age I think back I still feel the same way now even though I’m 51, you don’t really think about things like this happening to you, it’s usually other people that that happens to. Did you go through that same thing?

3:46

JASON: I was feeling the healthiest that I had felt in my entire life. Back when my third child was born I was, just to give you a little idea as to health and weight, I was 228, a few years later I went down to 208, through Weight Watcher’s went down to 188, and then all of a sudden had cancer and was down to 172. I will tell you at 188 I was exercising, feeling great, really feeling awesome, and all of a sudden out of now where a diagnosis of cancer really took over.

4:15

JIM: At to go through all this radical treatment, obviously I mean you’re in business, describe what your role was in the business. You’re not just somebody who shows up for work every day, you’re the leader in the business, so talk about that a little bit.

4:28

JASON: Obviously, you know the name of our company is Ashar Group, we appraise life insurance. We are nationally licensed, so as president of Ashar my role is to build relationships with insurance carriers, broker/dealers, BGAs, attorneys, BPAs nationally, so I’m working and building relationship from morning until night. We appraise life insurance as you know, so when someone has a policy they no longer want or need, we appraise it and then we sell it to institutional buyers, but I am working on cases with clients, I am working with carriers, broker/dealers, again, we travel probably two to four times a month visiting national accounts, so I am actively involved in our business. I truly get to the office around 7:30 and leave everyday somewhere around 6 o’clock. As you know I’m president, and my brother is CEO, sister is vice-president of sales, and then we have staff of 20 people, father is on the board, so we are a tightly knit family business and work all the time, pretty much seven days a week to make things happen and provide a high-level of service. So all of a sudden being hit with a cancer diagnosis was devastating to me and put a lot of pressure on my siblings and the company overall.

5:34

JIM: I always kid people that are fellow business owners, I say yeah I just work half days, any 12 hours will do, and you were actually putting a little more than a half a day.

5:43

JASON: Yeah, I mean we worked all the time. I’m not saying this to make our business sound awesome, but I enjoy coming to work every day. I think you know this already but I get along very well with my family. My brother is my next door neighbor. I mean so we work across the hall, we’re always together, and we do work a lot. Again, for us it’s work, it’s taking care of people, it’s serving, and it’s something we enjoy.

6:05

JIM: Obviously now there’s been a big disruption, so talk about what the disruption was both for your family life and then how did the business adjust or what tools did you have in place to deal with this?

6:17

JASON: I’ll try to touch on all points. Through treatment, surgery, that whole timeframe, which was really end of April to my last chemo and radiation was August 11, 2014, but really due to the side effects of radiation I was really having issues probably to the end of October or November, and so during that time period it put a lot of strain on my brother and sister, as well as the entire company. At one point I was in bed 18 hours a day for a week, got up to do some email but I was not able to even swallow my own saliva after radiation for a month, and for weeks I even ate just through a feeding tube, so six Ensures a day, two Gatorades a day through a feeding tube because I couldn’t swallow, so it was crazy. I’ll tell you back to my home life, my wife, like I said married 19 years, three kids, love my family more than anything, my wife’s biggest job during that time period was to shield my kids from me, which again I have to tell you I choke up every time I say that because I speak to my parents every day, and so parents, family, the whole thing means everything to me, so the fact that my wife’s biggest job, and by the way she was a superhero, to shield my kids from me so they weren’t worried their father was going to pass away, meant everything that she could keep them safe. At the beginning, again, I know ultimately here I want to speak to you about what life insurance and disability insurance did for me as far as giving me security, but at the beginning I even made videos to my kids that certainly no one on this program ever wants to make, but it was one such as this to my daughter, hey Lauren one day you’re going to get married, I’m not going to be there, and this is what’s important, and so I will tell you a lot of strain on the family just watching me go through all the treatments. A lot of strain on the business due to the fact that I was taken out of the business due to just fighting to survive, and so I didn’t mention it yet but the fact that I had life insurance and disability insurance gave me peace of mind.

8:16

JIM: I’ve talked to a lot of people through the years in the medical profession, and they say that’s probably one of the biggest things for recovery is having someone who has their supposed house in order or they have peace of mind about that where they’re not, I mean obviously you worry, but to not have that financial worry on behalf of your family if you’re not here anymore, to not have that financial worry about how the bills are getting paid and all those things, that that’s about as strong as just about any medicine, just having that peace of mind so you can focus on getting well, probably the most important thing you came through it pretty well as a matter of fact.

8:50

JASON: Thank you. The day I got the diagnosis my wife was there with me and my father at the ENT, and I got in the car, and after speaking to my family and my first two calls were to my insurance agent saying could you please make sure that my policies are on automatic draft, because I was truly concerned as the one that handles the finances for our home that what if a premium didn’t get paid, what if I passed away and all of a sudden my family wasn’t left with the coverage that I had in place. It gave me tremendous peace of mind.

9:18

JIM: Let’s talk about where you are at in the recovery process as of today.

9:23

JASON: Today I actually went to the radiation oncologist for my checkup. I am obviously a few years out, almost a few years out, and I am cancer free. I had clean margins after the surgery. I still go for checkups every other month to either the ENT, the oncologist, or the radiation oncologist. I have some side effects from the treatments, so I have neuropathy in my knees to my toes in both legs, in my hands, dryness of mouth. I use special fluoride gel trays every night but I’m not worried about dying anymore so that honestly is a tremendous comfort and thrilled to be alive. Little things don’t bother me, and cancer free again like I said, and working every day to serve as a positive role model to either cancer patients currently going through treatment or survivors and their families trying to be a good role model.

10:10

JIM: That’s awesome. We’re going to take a short break, and Jason when we come back let’s talk about that importance of insurance, because it’s something that none of us really like to talk about. I hear it said all the time I don’t believe in life insurance, I don’t believe in disability income insurance, and I had a good friend of mine once share with me well that’s good because it’s not a religion let’s talk about what it does. When we come back let’s talk about what our insurance program did for you and your family so please stay tuned.

10:36

[BREAK]

11:01

JIM: Welcome back as we continue to visit with Jason Mendelsohn. Jason had quite a scare for him and his family, his business partners, which were also family members, where he was diagnosed with cancer at a very early age, with an outlook not looking so good were really preparing for the end result, which fortunately ended up being a clean bill of health and not the opposite. Jason, please share with us, you talked about disability income insurance giving you peace of mind and knowing that you had life insurance. As a matter of fact you shared your first call was to your agent to make sure that the premiums were being paid and not the policy would lapse out right at the time when you might need them. Talk a little bit about your insurance program and what role that played.

11:43

JASON: Sure, and thanks for asking. Like I said I called both my insurance agents and made sure my policies were on automatic draft because who knew what was going to happen health wise. I have $6 million of coverage, one of the lessons, and by the way I know that amount of coverage I always had because I understood being raised by parents who valued life insurance, that God forbid anything happened to me I wanted my wife and kids to be well taken care of, meaning I wanted my wife not to have to marry for money, I wanted my house to be paid for, I wanted my kids to go to the schools they wanted to go to, I wanted to just give them comfort. They would have lost their father had it obviously paid out, and they didn’t need to have financial stress. I actually appreciate and value paying for my life insurance because I know it will be there to give my family the support they needed when God-forbid when I pass away one day. One of the things I wanted to mention is that of my coverage I was diagnosed back in 2014, in 2012 a million of my coverage expired as far as the conversion option, so it was 20 year level term, I have a certain amount of time to convert it and I chose not to convert it in 2012 because of the expense of business and family, and I thought you know what in a few years I’ll just get more coverage. Who would have ever thought I would have ended up with stage IV cancer and all of a sudden become uninsurable. It’s just one thing I wanted to mention. The life insurance certainly gave me peace of mind, the disability coverage my insurance agent included a future increase benefit, and while I had peace of mind going through all the treatments, the diagnosis, that if I needed it it would be there. Around 10 months ago, after finishing treatment, I got a letter from the carrier stating that I had the ability to double my coverage without proof of insurability due to the future increase rider, and I certainly did that immediately. It actually brought tears to my eyes, never would have thought I would have needed that either. Again, the insurance peace of mind for me, for my wife and kids, the disability coverage the same thing, and just really appreciated that the agents I had expressed the importance of life and disability and what it could do for my family if I ever needed it.

13:48

JIM: Jason, I just got to share with you, because you talk about the amount of coverage, and I think a lot of our listeners would think of that and say oh my god that’s way too much coverage. I meet with so many couples, they have a quarter million dollars of coverage, or even $100,000 of coverage, and they think that’s plenty. They don’t believe in the life insurance, and I look at that. What’s interesting about that is the value that people put on their lives. I had one person say if you were to pass away how much would you recommend or how much would a plaintiff attorney recommend we sue for as far as loss of value. You see these multi-million dollar lawsuits all day long, and people say it’s such a tragedy, yet when it comes to people taking care of their own family we don’t have some lawyer ready to sue somebody for us passing away and now we’ve only left our family $100,000 or a quarter million, you think it’s a lot of money but at today’s interest rates environment, you have mortgage payments, with the cost of health insurances many people don’t even look at the health benefits that are being provided through an employer or matching benefits to a 401(k) and all the different things that are going to help make that family financially sound if everything goes okay, but you lose that bread winner and all those benefits go away and then there is no money left as well, it’s really a double edge sword. We really appreciate you sharing that with us.

15:07

JASON: Jim, when talking about life insurance and why I have the amount I have, I chose that amount when looking at how much I earn one year and for how long I would be earning it, and so I was trying to figure out what’s the most coverage I could qualify for where I would support my wife and kids, and so I started with my first policy back in by 20s and I figures 50 years later how much life insurance would I need. I also look at there are some people that have family money, which I had none of, and as well from an investment standpoint, no investments when starting out, and so while some people have a little bit about of life insurance and they’re comfortable with that because they have a large investment portfolio, I didn’t have that. As far as I’m concerned and the way I planned for my family was get the most life insurance I can get today and then save money over 10 to 20, 30, 40 years, and maybe later cut back on some of the insurance once I’ve actually saved the money that I can invest, but to me having a lot of life insurance makes sense from the beginning especially if you haven’t yet built your nest egg.

16:11

JIM: If you look at the Wall Street Journal today, it says 3% is the last thing I saw, isn’t even a safe withdrawal rate anymore, and you mentioned you had $6 million and then $1 million lapsed out, while if you take 3% of $5 million, that’s $150,000 of income. Now that may seem like a lot but today that’s not a huge amount for someone, and you’re president of a company and you got a lot of people dependent on you. Talk a little bit about the disability insurance. Did you end up collecting on it?

16:42

JASON: I did not collect on it because I’m partner in a firm and I’m paid differently; however, if I ever got to a point, again back to the whole comfort. I think people to buy life insurance and disability insurance buy it because they understand taking care of people is important, people that depend on you. I at the end of the day have both of those coverages because I knew that if I couldn’t have an income that I needed something to pay my monthly bills and to take care of the normal expenses for my wife and kids in our household, so again, it’s been kind of the underlying theme of everything we’ve talked about today, I think if you love someone and whether it’s your family or from an insurance standpoint for a business you’re taking care of employees and their families, it’s important to have life insurance that supports your family personally or your business, and then also from a disability perspective, if you’re dependent on your income I don’t know how you can with good conscience go through life without disability insurance, because people always say that you’re much more likely to become disabled.

17:44

JIM: Now one of the things you mentioned with your DI insurance, you were made the offer to double your insurance. I got ask you a question, this might be hard to really conjecture, but do you think you would have went ahead with that had you not had this health scare?

17:57

JASON: You know it’s an interesting question, I don’t think so. Should I have, yes. Again, as long as you qualify and you can afford it I think yes. I don’t know that I would have. It’s easy for me to say now absolutely I would have. I might have delayed it, but I’m so happy that I had the option. Again, not happy about having cancer or having had cancer, but happy with the decisions I’ve made before and after that to make sure that my family and business are provided for.

18:25

JIM: That’s funny, because I just talked to an executive that came into my office not so long ago and I asked him about do you have disability income insurance. He said oh yeah it’s all taken care of, it’s one of my benefits at work. I have long-term disability and it takes care of me. I said well how does it take care of you. They said well I think it’s 60% of my income, and I said you think or you know. He said I think. Alright, well this guy was making pretty good money and he was living off the money that he was making as most people tend to do. They spend up to their income level, and he was saving for retirement the way he should be and all that, but the income that he was making his family was really dependent on to reach their current goals as well as future goals. I said okay well maybe you should verify how much coverage you have and if there is a cap. He said what do you mean? I said well most plans are capped out at $5000 or $6000 a month, and if that’s the only policy you have I’d be surprised if you have much more than $5000 a month. Well he looked it up, he did have 60% of income to $5000 cap, which ended up being more like 30% of his income, plus he didn’t realize that that disability income on the group was taxable, so I said okay so if all of a sudden tomorrow, let’s say you don’t even have any extra medical bills that aren’t covered by your health insurance with deductibles and co-insurance and things like that, would you be able to live on $2000 a month. He just kind of looked at me with a blank stare, and his wife was looking at him with a different type of stare knowing that their family was in a pretty vulnerable position. He was in a very stressful job, let’s face it if you have a lot of stress that can cause health issues, so disability income insurance with this being disability income insurance awareness month is one of the things that gets most overlooked, and while you are very blessed to have recovered the way you have, you certainly have learned some lessons and have shared some lessons with us today that at 46, the president of a company, and on top of the work and working out and getting healthy and all of a sudden something still hits you, you need to make sure that you’ve got your loved ones protected and your family is protected and your business partner is protected if you’re in business for yourself. Jason, any final words or any words of advice that you’d like to close with?

20:45

JASON: Yes, thank you. I was trying to put my last few years in a brief summary for you to hopefully encourage others to learn more and find out more about what their needs really are for life and disability. I will tell you a brief story and then I’ll close with this also. Since recovering I now am being a good role model or working to be a good role model for other people going through my same cancer and the process. Right now I’m dealing with a gentleman 44, another one 49, and two men in their 50s, all of which had my exact same diagnosis, all of which healthy, working out, business people, all different income levels, and I will tell you that you never know when some of these things, one of them being life insurance, one of them being disability insurance that you never think you’re going to need and that you can always qualify for, are going to become unattainable. I would say that if you’re listening to this program, learn from my story because and I tear up or get choked up when I say this, but as a guy who for all intents and purposes sitting on top of the world was 19 years being married, three kids, a business and loving life, and all of a sudden out of now where got hit by cancer, I couldn’t stress enough to all your listeners to say go speak with your insurance agent, financial advisor, and find out what you have, understand what you qualify for, because I never thought I was going to be the one feeling comfort from it, and that’s exactly what was perfect for my situation, so I would just tell you that anyone listening to the program, speak to your financial advisor and insurance agent, because you never know when you’re going to be or if god forbid you end up in my position, and this will protect your family and that’s all.

22:38

JIM: Jason, I really appreciate it. If you just inspired one person it was definitely worth the time, and hopefully we’ve inspired a lot more than that. I know from dealing with people on a daily basis, so many people we get, it seems like the world is so fast tracked today, we’re so busy day to day to day to day that we don’t always take the time to look at those important details and make sure we’re protecting our family, so thank you very much.

23:04

JASON: Your welcome, thanks for having me.

Travel Time

Any time is a good time to travel. Sure, it depends on where you want to go and the weather season, but for most of us, everything from a quick getaway to an extended exotic vacation is something we love to do and can’t ever come soon enough.
You find the perfect location, plan your adventure, book the tickets, and upon check-out you are ask if you would like to purchase insurance to protect your trip.

Would you? Should you?

Often times not only do you wave goodbye to your family when departing for your vacation, but also to your insurance coverage – especially as soon as you leave the United States.
The most common items (deemed reasonable) covered by travel insurance include medical emergencies, visitor health insurance, delayed, lost, or stolen baggage, and trip cancellation/interruption (death, bodily injury, illness, disease, pregnancy complications, termination of employment, deployment, prohibition of travel to the destination, evacuation from the destination). Sometimes additional policies can be purchased for more specific needs such as pre-existing conditions, elective treatments or surgery, war, and terrorism. An added bonus of travel insurance is it is often there to help 24 hours a day/7 days a week.

So do you need it?

If you are a worrier, this might be a good way to give you peace of mind. If your trip is just a couple days domestically, you probably don’t need it. We gave you some of the pros and the type of coverage you can get, but there are also reason why you might decide not to get travel insurance. For example, you might already be covered on your current insurance, your credit card might already offer additional travel protection, or maybe you just aren’t worried about any type of loss. It all depends on the individual.

It is definitely worth the time to do some research about the coverage available and the health care services available at your destination. As always, it is better to be over-prepared.

Travel Without Worry
Travel Without Worry

Think Before You Act

I watched a report on television tonight about drugs and alcohol abuse. It wasn’t just one of those statistical reports that spouted off mindless numbers and socioeconomic causes. The show interviewed numerous different people:

Current addicts
Former addicts
People currently in rehab centers
People in hospitals due to permanent damage from substance abuse
People in jail due to killing someone because of substance abuse
Friends, family, and loved ones affected by users/abusers

I have experienced people I love go down the road of addiction. Sometimes an intervention worked and other times it didn’t. This show reminded me of that. It was painful and sad to watch, but also a major eye opener. Addiction or abuse of drugs and alcohol aren’t the only issues that plague the health and wellbeing of those closest to us. A loved one that you knew at one time could have been perfectly healthy and on the right track and the next thing you know, they have made a sudden decision that altered their life forever. While abusing drugs and alcohol is no joke, this sudden shift from the right track to the wrong one can be the unfortunate case in some many other aspects in life. It only takes one small movement or ripple to cause a massive wave in our own lives and in the lives of those around us. Sometimes we fail to look at the big picture and don’t truly understand cause and effect.

Take a minute to reevaluate the decisions you think you are going to make today or don’t be so quick to leap before looking. Your life is so much more important than that – and so much more important to those that love you than you can ever imagine.

7373ea21098b23714c067de5f90e2176

Don’t take your paycheck for granted!

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928017/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]I know it is the second week of the New Year, however I am still going to wish you a Happy New Year! Do you take your paycheck for granted? Just how important is your paycheck and what would you do if you couldn’t earn money? Join Karl Susman and guests this week as they discuss options available. Transcript to follow:

JIM: As you may or may not be aware, May is disability income insurance awareness month and we’re focusing a lot of our programs this month on disability income, and I think it’s one of the most misunderstood insurance products that people have or think they have.

Today joining us is disability income insurance professional Corey Anderson who has focused pretty much his whole career on helping both groups and individuals make sure they’re protected in this very important area. There’s a saying out there, if you had a golden goose that laid the golden eggs, would you insure the eggs or the golden goose, and that’s what we’re talking about when we’re talking about disability income insurance. Welcome, Corey.

00:41

COREY: Thanks for having me, Jim, I appreciate it. They also know me as the DI Geek.

00:45

JIM: The DI Geek, well I’ve known you as a geek but I’m not sure if it’s the DI Geek, but any rate, Corey I really appreciate you joining us. I have known you for quite a few years and you’ve impressed me as one of the most knowledgeable people I’ve come across in the country. I’ve learned a lot from you myself. You’ve helped me with even some of my clients when it comes to making sure they’ve got the proper coverages.

I meet with a lot of clients and one of the first things that I do when I get together with them is making sure I understand what it is they have, whether it’s investments, whether it’s insurance, group insurance, individual insurance, all those different types of things. I consider myself a retirement planner and the problem is if their income stops there’s no way that they’re going to have the retirement they dreamed of. As a matter of fact, they’re probably retiring a lot sooner than they planned with a lot more expense and a lot of limitations.

First of all, let’s just talk about, I hear clients say I’ve got social security, I look at my statement, I’ve got Social Security Disability income right on there. What do I need another policy for?

01:44

COREY: Well, you’ve got a wonderful plan through Social Security Disability. It’s one of those things, everything that the government does is great, right. That was a joke a little bit, but anyway, Social Security Disability, more than 50% of the people that apply for Social Security Disability are declined the first time when they’re trying to apply for it. In fact, I have my cousin who’s basically my brother, he’s 35 years old. He’s been out on a long term disability claim for over two years, about two and a half years, and his Social Security Disability policy through Uncle Sam has not paid him. He can’t lift 10 pounds from the floor to his waist. He cannot sit for prolonged periods. He cannot stand for prolonged periods. He’s had multiple spine surgeries. He’s actually going into surgery May of 2016 again, and Social Security Disability still has not approved him. The definition for the Social Security Disability is the inability to do any gainful occupation for which a job vacancy exists in the immediate area, and it’s expected to last 12 months or longer or result until death.

02:46

JIM: I hear the ads a lot of times where attorneys say they’ll help you through that process, and I know I’ve found with some of my own client experiences, that’s usually what they had to do is hire an attorney just to try to make sure they were getting the benefits that they deserved if of course they deserved it, and I know it’s a difficult process.

Let’s talk about the benefits that you get. I know a lot of people are qualifying for their disability through Social Security. Isn’t that enough?

03:12

COREY: No, it’s not going to be enough. At the end of the day you can pull up your statements on line and look at what your Social Security Disability benefit will be, and you’re going to get nowhere near 100% replacement of your income. You’re probably less than 50% replacement of your income, so it’s not going to be anywhere near what you need, and at the end of the day is when you’re on claim, you’re sick or hurt and you’re not going to work, are you spending more money or less money than when you are working? You’re spending more. We have this beautiful thing called the internet. In my area of the country I can click on Amazon before 10 a.m. and what I ordered is at my doorstep by 5 p.m. Everything is at your fingertips, so you’re on claim, you’re no longer having 40 hours a week going to work, you’re spending more money than when you were working and on top of it social security is going to pay a very small benefit compared to what you were making.

04:00

JIM: People don’t think about things like for example your health insurance. If you have group health insurance you’re no longer working for the company. You’re no longer eligible for group insurance, so if your employer is paying for things like health insurance, that’s not included in your wages and now you’ve got to pay some of those expenses as well. You might have additional medical expenses. You might have a spouse who has to take off of work and they’re missing wages because they’re carting you around to the different doctors or therapists or whatever. You know, when the skies are clear we don’t think about stuff like that, and then when it hits us it’s a little bit too late to react.

Let’s transfer now to group insurance. I know a lot of people will have disability income through work, and I know when I first start talking to people, I said, do you have disability income insurance through work, and their reaction almost always is oh, yeah, I’m pretty sure I do. I’ll ask them, is it long term or short term or both, and they kind of look at I like a deer in the headlights, well what do you mean? Now, some of them will say, well I think I got long term disability and it covers me for 180 days. Well, that’s short term disability, so let’s talk a little bit about what’s the difference between short term and long term, does it all come together, is it separate policies? What do you see in the group marketplace?

05:09

COREY: Typically a short term disability plan is going to be a three-month or six-month benefit period. Sometimes you’ll see longer, but typically it’s a three- or six-month, or they’ll call it 13 weeks or 26 weeks. Personally short disability I think has its place in the market, but personally I’m not a big fan of it, and when I recommend it when I’m working with a client is I’m a big fan of it if you’re of child bearing age and you plan on having children and that is a covered part of the short term disability, then great, I’m a big fan of getting it, but at the end of the day is if you’re out of work for 13 weeks and you have no paycheck, life is not going to be good, it’s going to hurt financially, but typically most clients can get through that.

It’s a matter of if you’re going to be out of work for two years, five years, 10 years, 20 years, something like that, that’s where you can’t get through that financially, so short term typically 13- to 26-week benefit. You see it a lot of times provided by the employer. If the employer pays for it and they don’t add it to your payroll which most employers don’t, at claim time that benefit is taxable and typically what we see of a group short term plan is it’s typically 60% or somewhere around that of your basic wage, which most people have car insurance, most people have homeowner’s insurance, most people have health insurance, and all of those after the deductible is satisfied are typically paying 100% replacement, not when it comes to disability. We’re talking 60%.

06:28

JIM: Then you talked about a taxable, so who knows what’s left after that. It all depends on the rates in the future with our trillion dollar deficits, $20 trillion national debt. We just had some Social Security professionals on not so long ago, and they’re predicting that the pool of money that’s set aside for Social Security Disability income is going to run out of money in 2016, so I’m hearing a lot of things about that. Can we count on all these different things, who knows.

All right, well let’s talk about group long term disability then. Is that something that’s automatically covered then? Can they assume that if they got short term disability? What do you need to do to figure out what you’re benefits are?

07:06

COREY: Well, some employers provide group long term disability, some don’t. It a lot of times depends on the area of the country. There are certain areas of the country where you see a lot of groups have it and some areas of the country where not very many people have the group disability, but group disability typically is going to kick in after a 90-day or 180-day waiting period, typically, sometimes longer than that, sometimes shorter, but typically a three- or a six-month wait, and then your benefit period is going to be two years, five years, but most of the time it’s like age 65 or normal social security retirement age, but back to just like short term, you’re typically talking 60%, sometimes higher, sometimes lower percentage of defined earnings which typically is base wages.

07:45

JIM: I’ve got a comment on that because I just had a client in, he is a manager in his business. He’s got four kids at home, I think he’s 38 or 39 years old, okay. He’s making about $120,000 a year and I was talking to him about this, and his base wage is $85,000. He gets 60% of that to a cap of $5000 a month. What a rude awakening for him, and not only that, that was short term disability. Turns out he didn’t have long term disability. He was under the assumption all this stuff was covered. You know what? It was covered at his last job. When they explained it to him, it all sounded kind of the same and I don’t think he paid close enough attention. He just kind of assumed it was all the same from his last job, and the definitions as you talked about he had some big shortcomings. He didn’t seem as concerned about it. His wife was on the edge of her seat knowing that she’s juggling taking care of four kids, plus she worked and his paycheck was what provided the money for their kids to go to school because they sent them to private school. His money was what paid for their house and their mortgage payments and the grocery bills. It was a rude awakening for them to find that stuff out.

One thing I would recommend everybody, and I’m sure you concur, is they should be pulling out their benefits right now and confirming what they think they have, because I rarely come across anybody who knows exactly what they have. Their assumptions, they normally assume much more coverage than they actually have, and the time to find it out is when you can do something about it, not at claim time. Would you agree?

09:19

COREY: Yes, I couldn’t agree more. Usually we see a lot of the group plans only covering base wage and we see that where you get commissions, you get bonuses. We had a Mercedes dealership in the Twin Cities that we were reviewing their group plan, and their group disability plan didn’t cover commissions. Well, last time I checked at a Mercedes dealership you have all the sales people on commission, and then at this Mercedes dealership all of the mechanics were on commission, so literally you have maybe half of the staff at least not covered by the group disability plan, so you see a lot of that where it’s not covering commission, bonus.

Another thing you see a lot of times is like deferred comp or something where you have maybe stock options, stock grant type stuff. That’s not going to be covered by your group plan, and like you had said earlier health insurance, where most people don’t pay the real cost of health insurance at their employer. Their employer typically, we see a lot of times where the employer subsidizes at least half of the premium, if not more, if you have a family we see many families that $1000 of the monthly premium is paid for by the employer but they never even notice that, and when do they realize it, when they’re sick or hurt, not going to work and all the sudden they get the Cobra bill and their premium just went up $1000 a month for health insurance.

10:26

JIM: I know personally, I had my adult daughter on the plan and my wife’s on the plan. January 1 my health insurance provider went out of business. I was paying $880 a month, it went up to $1460 and my out of pocket increased. I’m paying the full boat, so for those of you that don’t know what your health insurance benefits are worth, especially when you’re looking at something like disability income insurance, if you become disabled and now you lose your health benefits and you’ve got to pay all your bills on 60% of your pre-disability income and then no bonus included, no commissions included if you’re in that boat, and then on top of that now you’ve got your health insurance to pay for. You’ve got all this happening, it can really devastate a family financially.

I know you know some statistics about when a typical person is disabled. I have read some statistics about mortgages and how many people lose their homes versus dying versus disability. What have you found?

11:21

COREY: Well, you have more than half of all mortgage foreclosures are caused by something medical, so right there it shows that people are sick or hurt and they’re not going to work, and it typically causes the foreclosure of the home.

One other thing I want to comment on the health insurance, I’m 37 years old, my wife is 37, we have four beautiful children. I’m self employed and I get the privilege to pay a little over $1000 a month on my premium, and my deductible is over $12,000 a year, so I share that example always so that clients can see kind of what is the real cost of health insurance and get an idea and a perspective on that so they really think about how much is my employer subsidizing because sometimes people get frustrated with their wage at work and it’s like, have you actually seen all the benefits sometimes that your employer is providing?

12:06

JIM: Yes, my deductibles are only $7000 apiece for a total of $21,000 and then it doesn’t cover 100% after that either, so I’m really excited, looking forward to that medical bill that might come up.

At any rate, we’re going to take a short break and when we come back let’s talk about what we do to fill in the gaps that might be left by group insurance. Please stay tuned.

[BREAK]

12:27

JIM: Welcome back as we continue to visit with disability income insurance professional Corey Anderson, pretty much spent his whole career helping people understand their disability insurance and understanding where the gaps are, and helping them find solutions.

First of all, let’s just talk about the many people that are out there. They don’t even have group coverage, okay, they’re completely on their own. What do you tell something like that?

12:52

COREY: I say at the end of the day is if you’re sick or hurt, how are you going to pay your bills? You cover your home, your auto, your health insurance, what pays for all of those premiums and pays for the actual vehicle and pays for the actual home? Your ability to get up, show up, and make an income, and so if something were, let’s look at getting you individual disability insurance, you set the premium. A lot of people say, how much is this going to cost? It’s just like buying a car. You can buy a Cadillac Escalade or a Geo Metro or somewhere in between.

When I was in college I had a car that was literally $100 car, same thing with the disability insurance. We can get you a plan for a couple hundred dollars a year. I’ve got many clients only paying a little over $200 a year, and I’ve got one client paying $1500 a month, but that’s because he makes a significant income and has a significant amount of health issues, so you customize it. A lot of times people will say 1% to 2% or 1% to 3% of your income. I don’t know if I like throwing out those numbers from the standpoint of you customize it.

Literally the other day I was looking at a policy for a client and the premium that he went with, there were a bunch of different options and he went with a premium that is one-third of the highest priced premium and he still got a phenomenal contract, long benefit period, et cetera, so you can really hone it in to what you want.

14:09

JIM: The key is you should sit down with your insurance professional, figure out how much risk do you want to assume and how much risk do you want to transfer to the insurance company. I always say handle the risk that you can afford to weather the storm, but whatever you can’t weather on your own, transfer that to the people that have much deeper pockets than you do, and that’s the insurance industry, and they’re built to handle this kind of stuff.

Let’s talk about more unique situations. Let’s say we’ve got somebody like I was talking about earlier, base pay of $85,000, making almost $120,000, and literally his group coverage covered him $5000 a month because it capped out at that, and that’s all taxable. We don’t know if we can even count on Social Security Disability, and his family is literally living on $10,000 a month of income. His wife’s wages mostly go to pay the income tax, so he’s pretty much paying most of the bills, so we’ve got $30,000 to $40,000 shortfall of what he needs to get by each month. What can we do for something like that?

15:07

COREY: Well, first off the calculation is technically wrong. I don’t mean to point this out, but I said 60% to $5000 of $80,000 which is really $4000 a month of benefit, not $5000 a month.

15:19

JIM: Okay.

15:20

COREY: We think it’s $5000 in our head, but it’s not $5000, it’s $4000, and that $4000 is then taxable. You can probably get, and I’m guestimating here, probably another $4000 a month of individual on top of that group plan, and then that individual plan would be tied to the employee not to the employer.

Back in the day when we came out with the new Papaca (SP?) health insurance that that came out, one of the big things with it was portability and from the standpoint of you would always have health insurance and there would be no gaps and no pre-existing conditions. Well, if you start at employer A, you quit at midnight tonight and you start right away in the morning at the new employer, you have a new waiting period. You have a new pre-existing condition exclusion, so if you move with health problems you might not be covered right away for certain things that could come up.

16:07

JIM: That was a good point, because he just switched employers so he’s trying to find out this information, and he found out, oh, yes, it’s in 90 days that I’m covered. Anyway, with all that said, he wasn’t covered at all.

16:19

COREY: Let’s focus on him. Let’s stay on his topic, so 90 days before he is eligible, but let’s say that he even had coverage day one, so he would have had coverage day one but they would still have a new pre-existing condition exclusion, so let’s say he’s on heart medicine and he switches employers, goes to a new employer, has coverage right away and three months in he has a heart attack. He’s not going to be covered because that’s a pre-existing condition, and usually you’re not covered for the first 12 months for pre-existing conditions. You’re covered for everything else, but not pre-existing conditions, so even if there wasn’t the three-month waiting period you would have that issue, but with him he had three months before he’s eligible, then once he’s eligible he still has typically probably 12 months of a pre-existing condition collusion, whereas if he had an individual policy the individual policy is tied to him, not to the employer, and that plan follows him with employer to employer, if goes self employed, also if he switches occupations, all those types of things, that plan follows him versus staying with the employer.

17:21

JIM: Now, the thing really to consider too is when we’re young we’re invincible. We’re never going to get sick, we’re never going to get disabled, we’re never going to die, we’re going to live forever, and we do a lot of our planning that way, but another important consideration is getting that portability policy as young as you possibly can because most DI policies on an individual basis, and correct me if I’m wrong, they’re based on their issue age when you first buy it.

I look at some of these folks that were smart when they were young and bought these policies and they’re paying literally peanuts for an awesome coverage plan, and a lot of them have these guaranteed purchases options and ability to keep the policies, keep pace with inflation. When I talk to someone who’s starting to think, you know what, maybe I might get disabled someday, maybe I should look into that, and now they’ve got some health ailments and they’re paying the premiums of a 50-year-old, it’s almost enough to have them have a heart attack when they see the premiums, you know.

18:17

COREY: I think of it as the insurance company says, how much money do we want to collect between now and age 65, and how many years do you have to pay premium. It doesn’t work out exactly to that, but basically a 45-year-old is typically double the price of a 25-year-old. A 55-year-old, double the price of a 45-year-old. It doesn’t work out scientifically exactly like that, but it’s pretty darn close, so the younger you buy it, you end up saving that much in premium and it’s something where you have coverage the whole time and you didn’t go naked without the coverage.

18:45

JIM: You know, I have a friend of mine, he would probably appreciate the fact that I’m saying this. I was just with him, he’s close to my age, he’s past the half century mark and he was out skiing. We were at a business meeting together and I was leading the meeting, and he asked if he could spend a few minutes talking about the virtues of wearing a helmet when you go skiing even though it doesn’t look cool. Here he got in an accident, cracked the helmet in half, broke all these bones in his body, he’s going through rehab right now, and then he talked about a neighbor kid of his is in a coma from a skiing accident that wiped out and hit their head, and he told me this when my daughter was going out to Colorado skiing so I made sure but she said oh, yes, we all wear helmets, so I felt much better about that.

Disability can happen at any age. It can be an accident, could be a sickness. Look at Christopher Reeves. There are so many things that can happen in the blink of an eye, you don’t want to go this alone. What final tips would you have for people if they’re looking at this right now?

19:43

COREY: When we make a decision on disability insurance, there are three basic decisions. Definition, how do you actually qualify. Benefit amount, how much do you get per month of benefit, and your cost, how much do you pay in premium, and I think you can apply that to any of the plans you look at. What you’re going to see is if you have group insurance, high benefit amount, very, very low premium, so what suffers is the definition. There are so many contractual problems to a group plan.

When you’re looking at an individual plan, how do we try to get all three, how do we get a high benefit amount, great definition, plus try to keep the premium reasonable, and the beauty is these days there are a lot of options within a plan, that you can design it and pick and choose and do a little nip and tuck here to save some premiums, so really shop when you’re looking at it, have your advisor look at a few options, and when you’re looking at it remember words matter. Group insurance, everybody says it’s cheap. Well, there’s a reason it’s cheap. Words matter.

20:39

JIM: Give me an example of a word that matters.

20:42

COREY: The words in there are own occupation versus any occupation, quick example, my cousin Travis that I was talking about earlier, his group plan paid him for two years because he couldn’t do his own occupation at time of claim. After two years they stopped paying him saying he can go do any occupation, which I don’t agree with. I’m actually dealing with it, but they’re saying he can do something, which maybe he could go do something, but he can’t perform any of the duties he did before and so the group plan stopped paying at two years because of that.

21:13

JIM: Well, there are a lot of moving parts. We say it on this program all the time, don’t go it alone. There are a lot of options. There are a lot of myths out there, and I think the first thing you owe it to yourself, make sure you completely understand how you’re covered for a disability if it happens to you, and make sure you’re comfortable with that risk. If you’re not comfortable with that risk, you need to do something about it while you can, while you’re healthy. Once you’re sick, it’s way too late and we’ve had guests on this program and throughout the month we’re going to have some real life stories to share with you of people who went it alone and didn’t have the coverage or people that had the coverage and what a difference that made.

We were focusing today on individuals, how they’re covered, but as business owners there are issues like disability buy/sell. If you get disabled the life insurance doesn’t pay on a buy/sell. There are policies that will pay a lump sum so you can buy partners out. There are a lot of different ways to structure it. Business overhead coverage so the business can keep running so you have a chance to sell it as more than a fire sale price. There are a lot of considerations, too many for us to go into in this short period of time, but talk to your advisor.

Any other comments you should share with that, Corey?

22:24

COREY: No, I agree with all of what you said and I appreciate you having me on the show.

22:28

JIM: All right. Thanks, Corey.

22:29

COREY: You’re welcome.