Yes! Healthy people living with HIV are now eligible to apply for life insurance. Life insurance companies are coming around to the notion that being HIV Positive does not hold the same mortality that it once did. Previously, buying Life Insurance if you have the HIV virus was next to impossible. Practically all life insurance applications would ask whether the potential client had ever tested positive for the HIV virus. If answered yes, this was an automatic decline for new life insurance policies.
As time goes by, and medical advances continue, the HIV virus is now being treated as a condition in the eyes of some insurance companies. More specifically, as insurers began to underwrite these types of life insurance risks, they were extremely rigid and based their acceptance or declination on test results such as the client’s CD4 viral count. What is being found is that a more holistic approach to underwriting is presenting good risks for life insurance companies and more opportunities for people living with HIV to obtain coverage.
The key component being examined now is whether individuals have their treatment under control. Are they taking care of themselves, eating well, exercising, taking their medications as prescribed by their physicians and keeping an eye on their overall health and well-being. If you or someone you know is living with HIV and wants to get Life Insurance, please have them contact us for a private consultation.
Life insurance products currently available include Term life insurance, Universal Life Insurance, Whole Life Insurance and even Group Term Life insurance. Let’s all be happy with the progress we have seen with treatments and the goal of putting an end to the entire HIV epidemic by 2030.
[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928008/height/360/width/450/theme/st andard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]S*it happens. Let’s face it, that is part of life. If you’re old enough to be reading this, and listening to our Susman Insurance Agency weekly podcast, then you know it. This week, join Karl Susman and friends as they talk about how to best protect your family when the worst happens. Transcript follows.
JIM: Today we have with us the CEO of LifeHappens.org, it’s a nonprofit organization whose mission is really to educate people on the importance of insurance, and Marv, we’ve become good friends and we’ve shared the stage a few times on speaking engagements, and I really appreciate all the work that you’ve done for the industry. You’ve been a life long insurance agent, insurance professional, and now you’re giving back to the industry. I know you served as president of the Top of the Table in MBRT and you’ve been very involved in a lot of different things, but I think the most important thing you’ve been involved in with the industry is this LifeHappens.org, and Marv Feldman, I just want to thank you for being with us and I appreciate all you do for the industry.
MARVIN FELDMAN: Jim, thank you very much. It’s my measure and my honor to be able to share and give back, and hopefully we’ll come up with some good ideas for the people who are listening.
JIM: The scary thing for me when I see some of the stats is the number of people out there, I know Limber has done a bunch of studies about Americans that are uninsured or under insured when it comes to life insurance, and it always affects us. There’s always those people that you see that you think they’re the epitome of good health and somebody happens to them health-wise and they unfortunately pass away or a car accident or something tragic like 9/11, none of us know when that day comes but only some of us know how our family is going to be taken care of, and a lot of us are out there leaving things to chance.
Can you just first of all just share what LifeHappens.org is and how some of our listeners might be able to tap into some of the resources that they have?
MARVIN FELDMAN: Absolutely. The web site as Jim mentioned earlier is LifeHappens.org. We were formed approximately 22 years ago for the express purpose of educating the consumer about what the products in our industry do, not just what they are, about motivating consumers to make informed educated guesses in their overall financial planning while utilizing the agents, and to reinforce the value proposition and the trust level between the consumers and the industry, because that’s something that the media continues to attack because we’re a big target, and they think we have relatively thick skin, but the reality is we have thin skin and it hurts our feelings just like everybody else. Our job is to reinforce that trust and confidence with the consumers.
JIM: The insurance industry, it’s amazing when I hear how much in claims are being paid out, and it’s amazing. It’s a really important part of people’s overall planning, and I know this is September so we’re focused on life insurance this month. It’s live insurance awareness month. You’ve been doing something every September by having a national spokesperson, so talk about a little bit.
MARVIN FELDMAN: One of the things that we try to do is to bring somebody to the front who is a nationally recognized individual who is also willing to share their personal story as it pertains to some type of loss, typically involving either life insurance or whether there was no life insurance. This year we’ve done something a little bit different, and that is that we’ve looked for somebody who is in a risky profession and has the chance of incurring some type of accident, injury, or death as a result of what they do, because in reality everybody is involved in some type of risk, even if you’re just getting in your car, driving down the road to go to the grocery store. You’re at risk of somebody running into or having an accident.
This year we reached out and chose Danica Patrick who is a professional race car driver, both Indianapolis type cars and NASCAR, currently running in the NASCAR circuit, and it’s interesting that when we reached out to her we were only thinking in terms of her sharing why she might want life insurance because of her profession, but then we found out that one of her gr andparents had died, they owned a farm, and when the gr andfather died the gr andmother had to sell a good portion of the farm to pay for taxes and expenses. We didn’t know that she had that story, so actually we have a two-fer. We have a story of loss and we have a story of protecting against the future risk that you might be incurring. She’s a tremendous, tremendous spokesperson and is being exceptionally well received by the industry and the consumers.
JIM: Marv, another thing that you do is you have the Life Lessons scholarships, where you award scholarships to kids who suffered a loss, and I’ve got to say I’ve been the judge for that a couple of times over the years, and I think if everybody had the chance to read those stories, first of all you don’t get through them without shedding some tears, but it is amazing, some of those tragedies that these families would have been maybe just a little bit better off had there been some planning in place, but those are all kids who lost parents with little or no life insurance. Share that with us a little bit, how that works.
MARVIN FELDMAN: We open it up February and allow people to submit their requests for scholarships and grants. During a 30-day period we have several thous and kids who will submit applications either written or video application which they can also submit. We then have to boil that down to a very few because last year or this year we only gave out about 34 scholarships total, but we’ve given over $1 million worth of funding in the last few years so it does add up to significant numbers, but it’s surprising when you read these scholarships about how many children were in a situation where there was a loss because of shooting, of drugs, of alcohol, of accidents, of illness, where the people were totally unprepared. They had no planning in place. They had little or no life insurance in place, and the trials and the tribulations that the families have gone through to try to maintain a family life, and for these kids to say, well how do I better myself going forward, so we’re looking for the stories where the children have really struggled to do well and are doing all the things that they need to do to better themselves and allow us to help them along the way, and it’s really significant.
JIM: Yes, you’re dealing with kids that are approaching college, so you’re talking about young adults and the parents of these young adults are fairly young by today’s st andards, and you would think there would be one or two out there but you literally get hundreds if not thous ands of applications, so it’s a reality of life today that life might end at the wrong time for the wrong reasons, but it’s still important to do planning.
MARVIN FELDMAN: It’s very important to do planning. One of the things that we’ve learned through our barometer study which we do in conjunction with Limber the research group for the industry, this are approximately a hundred million people in the United States who have no life insurance of any type. One of the problems today is that you look at the millennials who are deferring the life changing decisions, so they’re deferring getting married, they’re deferring buying a house, they’re deferring having children until they’re five or 10 years older than what it was during our time when we were doing those things.
I was married at 21, today the kids don’t get married in their 30s. I had children in my 20s. They don’t have children now until they’re in their 30s, so those life changing decisions are being delayed and because they’re being delayed they’re not learning early on what needs to be done, and for some of these millennials they’re far enough along in their life that now they’ve developed a few medical impairments and sometimes they can’t get insurance or can’t get it at a reasonable rate, so by delaying they cause other problems that they’re not thinking about, but it’s the old saying of it’s not going to happen to me so I don’t need to deal with it today, and what we do at Life Happens is to try to make sure that they underst and what are the possibilities that something could happen. They really need to take care of it today, and it’s not near as expensive to do what they need to do as they think it is.
JIM: Let’s take a quick break. When we come back let’s just talk about that a little bit, about what it really costs, because I think that’s one of the biggest myths. People think this insurance is really, really expensive but it is something that you can do by maybe giving up maybe a cup of coffee a couple times a week might be the difference between protecting your family and not, so please stay tuned.
JIM: Welcome back as we continue to visit with Marv Feldman who is the CEO of LifeHappens.org, a nonprofit organization that helps educate Americans on the importance of preparing and planning for their families, and also puts the money where the mouth is by offering scholarships for kids who have come from families who didn’t do proper planning with their Life Lessons scholarships.
Marv, before the break we were talking about how many people are ill prepared. You talked about the barometer, the insurance barometer where people are putting off starting families, buying homes, and things like that, and unfortunately they’re also putting off the important planning process and as people get older, having access to life insurance due to ailments, illnesses, maybe some bad hobbies that they might get into like race car driving like Danica Patrick which might make it unaffordable or unattainable to do the proper planning.
Before the break, one of the things we were talking about is the price of insurance, and I know this is probably one of the biggest myths out there. People think it’s ungodly expensive and they can’t afford it without actually checking in to what the price might be for them. Comment on what the cost of insurance is today.
MARVIN FELDMAN: One of the things that we’ve done in our research is to ask people of various ages what they think it would cost for them to buy just a quarter of a million dollars of term insurance at their age assuming they’re healthy. We get estimates of anywhere from two times to seven times what the actual cost is, so for a 30-year-old who is healthy, $250,000 policy is only approximately $200 per year, and a 40-year-old it’s only about $300 per year, and that’s for a 20-year level term policy.
Now, term is not necessarily always the right answer but it’s the least expensive solution, and people have to underst and that for less than a dollar a day they can protect their family, and people waste more than a dollar a day in all of things that they do. A cup of coffee, even if you use a Keurig machine a cup of coffee costs 50 cents to a buck a day, and if you go to Starbucks you’re talking about $2, $3, $4 a day, so when you put it into perspective the cost of buying life insurance is very, very inexpensive and what you do is create money where none existed before at a time when your family is going to need it the most, and that provides you a great sense of confidence and security, and provides dignity for your family.
JIM: Now, I know LifeHappens.org, your main mission is education and you’ve been trying different ways to reach the public to help them become aware that this is important for them and it’s not as bad as you might think it is. Talk about some of the new alternative distribution systems that are being developed to help the consumer.
MARVIN FELDMAN: There are a number of companies out there that are developing programs to make it much easier for the consumer to buy, and even the old multi-line companies and the old mutual companies, they’re all looking at things that can make it easier for the insurance to buy, so the research can now be done on line. They can look to see what they want. They can choose whether or not they would like to work with an advisor or an agent, whether they want to talk with somebody, whether they want to meet with somebody, and in many cases the actual application process can be done on line electronically, so there’s no need to sit there and fill out a bunch of paperwork.
It’s much easier than it used to be to buy. It’s not near as onerous as it once was. The system still does require some medical information but for many people it’s just a questionnaire. There’s really not much more that needs to be completed, so people are afraid to do anything because they think it’s very difficult and very hard to arrange it and to buy and very expensive, but those are myths that are no longer accurate, and it just takes a little bit of effort on their part to take care of it. If they are looking for a company that they can go to, go to LifeHappens.org, look at the list of our supporting companies. We have 150 or 160 companies that are listed on the site.
Jim, one of the things that people don’t underst and is sometimes you can go on to a site and you’ll get quoted a preferred best rate and they think that’s what they’re going to get, but they forget that they’ve got a little bit of blood pressure, they’ve got a little bit of diabetes, they’ve got a little bit of too much weight. They have all these little things that will impact their underwriting and that’s where an agent can really help guide them through the proper company.
JIM: I always tell people the internet has all the information in the world you need, but it lacks the wisdom, and what I find when it comes to insurance, I know you guys have great tools and if people want to get access to your tools, what’s that web site again?
MARVIN FELDMAN: LifeHappens.org.
JIM: As a consumer they can navigate through all those tools, and there are a lot of helpful things there, articles that have been written. There are real life stories. There are different things that they can access that can help them make an informed decision or at least get on the right track and formulate what questions they should be asking their insurance professional. It’s a great resource. People should be looking into it, and the last thing I would say it you touched on this, how important it is to work with an insurance professional, but I also look at that as when you make the decision to buy the insurance, they can help guide you to have the right coverage but even more importantly if there’s a claim they can help your family guide through it because let’s face it, if you lose a loved one you might not be thinking clearly, you don’t know which way to turn. There’s a lot of stress involved. An agent can really help you at that time.
Then in between, making sure you don’t make the mistake of letting that insurance lapse just before you need it, I think an agent plays a very important role in making sure that insurance does what it’s intended to do, and that is provide security for that family when it’s needed the most.
Any other points that you’d like to make, Marv?
MARVIN FELDMAN: No. Your point about the agent is good. When you’re going through a lot of stress and strain in what’s happening in your life, you don’t want to be calling 800-agent to find somebody to help you. You want to be able to go to somebody you trust that you know can walk them through the process.
JIM: My underst anding too is I have not seen any policies that are priced less just because you avoid the agent. The policies are fixed, it’s just a matter of whether or not you want the agent or not. Is that true?
MARVIN FELDMAN: That is true. A lot of people think that if they’re buying over the internet and they’re buying direct that they’re saving a lot of money. There are no fees, there are no commissions involved. Those are all regulated by the state. It doesn’t matter whether you’re buying through the internet or you’re buying through an agent. The cost for the policy, the premiums are exactly the same, so if you want to look at it that way, when you work with the professional agents and advisors you’re getting their advice and their wisdom for free.
JIM: Marv, always a pleasure to have you. Again, I really appreciate what you do for the industry, especially helping to educate the consumer, and hopefully we’ve reached a couple of people where it’s going to end up making a big difference that they make the decision to take care of their families and it’s there when they need it, so thank you, Marv.
MARVIN FELDMAN: Jim, thank you very much.
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 underst and 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. Underst and 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.
[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928010/height/360/width/450/theme/st andard/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.
JOHN WHEELER: Good morning.
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?
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.
JADE: Hi John, I got a question for you – can you help clarify the different between term and whole life insurance?
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 underst and that less than 7% of the term policies issued ever pay a death benefit. Now whole life, on the other h and, 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.
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?
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.
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?
JOHN WHEELER: The easiest way that I get a client to underst and 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 st andpoint 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.
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?
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.
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?
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 st andpoint, or whatever, very much like real estate, or something of that nature.
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.
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?
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.
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.
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 h and, 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 st andards 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?
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.
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.
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.
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.
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?
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 underst and 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.
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.
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.
JADE: Can you share a story or two as far as how that’s made a difference in a family’s life?
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 Disneyl and 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 Disneyl and, 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.
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 underst and 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 underst and the needs and determine the best approach to take.
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, underst anding 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.
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 underst and 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.
JOHN WHEELER: Well, thank you.
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 outst anding. Policy loans reduce the death benefit dollar for dollar. Life insurance guarantees are based on the claims paying ability of the issuing company.
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.
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.
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.
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:
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 underst and 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.
Things in our lives are constantly evolving, changing. It’s inevitable. There are many people who crack under the pressure and stress of change, making complicated situations even worse and slowing the growth process.
We currently have numerous opportunities afforded to us that our ancestors quite possibly couldn’t even comprehend. I think those “perks” make the wheels of change turn even faster than they once did. Life is fast-paced and hectic. We often convince ourselves that we have the strength and endurance of superhero. Certainly we can argue that we’re all superhero material in our own way, but we still have to remind ourselves that failure can and will happen. We are only human after all. Sometimes change comes in the form of a sudden event – illness, car accident or any event that can turn life upside-down in the blink of an eye. When those moments strike, we don’t want you worrying about ANYTHING other than getting back on your feet.
Take a moment and look at life insurance through a different lens. Buying life insurance doesn’t have to be stressful. We underst and the struggles of comparing life insurance companies and policies, because we’ve been there. It can be confusing and frustrating, which is why we are here for you now. We wanted to make it easy for you to feel financially protected and we have done just that. We can offer protection whether you’re old or young, sick or healthy, male or female, gay or straight, married or single.
No matter what, we’ve got you covered.