Category Archives: Life Insurance

Celebrating Our 2016 Content This Holiday Season

cartoon-santa-dog

The holiday season is one filled with laughter, songs, good food and even better company. As you celebrate with family and friends, we wish you happy holidays and hope that you create wonderful memories together.

The forthcoming new year also provides all of us an opportunity to reflect back upon the highlights of the past twelve months. As we do, join us in looking back at some of our favorite blogs and a special video from 2016. Once again, happy holidays from all of us at Petschauer Insurance.

  1. Travel Insurance for your Dream Vacation
  2. What You Need To Know When Choosing A Health Insurance Plan
  3. Certificate Of Insurance 101: What Business Owners Need to Know
  4. Key Man and Buy Sell Insurance Simplified
  5. How is your car insurance rate determined?

Key Man and Buy Sell Insurance Simplified

business-meetingWhile each and every employee has an opportunity to provide your business with value, it’s up to you to protect the business in the event of losing someone who proves so vital to your success.

If the success of your business is primarily dependent on one specific individual, what would happen if they were to die unexpectedly? How can your business maintain continuity, for the benefit of your employees and clients, in the interim?

One way to do this is choosing to take out Key Man Insurance on a specific employee.

Such protection can go a long way towards helping your business stay afloat, specifically in the event of the death of a key employee. This type of life insurance includes a death benefit that would cover certain losses. Additionally, this benefit is often used to recruit a key man’s replacement.

Choosing to protect someone who serves as a primary income producer and/or generator is a smart business decision, because their contributions will be difficult to duplicate. This can apply to non-revenue generating employees like office/operations managers as well, because they, too, can be critical to your business functioning smoothly. Their overall skill and/or knowledge may not be as seamlessly replaceable.

Now that you know the benefits of Key Man Insurance, what’s the difference between that and a Buy Sell agreement?

As mentioned, Key Man Insurance is purchased to help preserve the financial viability of your business, in the event that the key person passes away. Buy Sell Agreements are legal contracts that dictate how the firm’s equity is handled in the event a partner leaves the business, retires, dies or becomes disabled. However, a Buy Sell Agreement is incomplete without the mechanism to fund a transfer of ownership.

This insurance only covers the owners. In the event a business owner passes away, the death proceeds are either paid to the business, or to the surviving partners, who in turn use the proceeds to “buy out” the estate of the deceased owner.

The Buy Sell Agreement insurance benefits the deceased partner’s estate by liquidating the shares of the business and releasing their family from the burden of managing a business they are likely unqualified to run.  This insurance also benefits the surviving business owners by relieving them of the burden of being in business with someone they wish not to be, while also providing the means to buy them out.

What type of insurance is best for Key Man and Buy Sell? 

A permanent policy is an asset that grows in value and is often out of the reach of creditors. This makes sense for a key person with an ownership stake in the business. The cash value is accessible during the insured’s lifetime and can help fund the buy-out of a departing owner. Business owners also enjoy the tax advantages of permanent life insurance.

For non-owner key persons, term policies are generally recommended because they are inexpensive and easily cancelled if the employee leaves the firm.

To speak with a trusted insurance advisor who can design a policy that best fits the needs of your business, contact us today.

How Does a “Buy Sell Agreement” Help Your Business?

signing-contractYour business is likely to be your most important asset. Many business owners are relying on this asset for retirement as well as planning to pass the business onto their children. However, this plan can be quickly derailed in the blink of eye.

What would happen to the business if you or your business partner were to die unexpectedly, contract a chronic illness or have a permanent injury?

This is not something you want to think about with so much riding on your ability to go to work. Without a succession plan, a business partner can find themselves sharing ownership and operations with the deceased partner’s spouse or children. How do they find the liquidity to buy them out?

How does one replace the owner to keep the business viable and ensure future success of the business?

If the spouse relies on the business for their retirement income, where does this leave the spouse financially?

All too often, families discover too late that their businesses were built on a house of cards.

According to the Conway Center for Family Business, 80 to 90 percent of U.S. businesses are family owned, yet less than a third of these companies succeed into the second generation. Less than a tenth make it to the third generation. According to a Price Waterhouse Coopers report, a whopping 47 percent of companies have no succession plan in place.

Given the volatility of the economy and local industry, it comes as no surprise that small business owners focus their energy on the survival and future growth of their enterprises.

Having a succession plan is essential to maximizing the value of your business for your family.

A Buy Sell agreement is a key component in this plan. This is an arrangement that outlines what happens to the business in the event that an owner retires, sells their shares, passes away, or becomes disabled.

However, the Buy Sell agreement is not complete without a means to fund the transfer of ownership. In the case of a death or disability, the most cost efficient way is often to fund the transfer through a Life and Disability insurance policy.  For example, if a partner were to die, the insurance policy would pay the surviving partner(s) the death proceeds to “buy out” the estate of the deceased owner.  In doing so, the decedent’s family is compensated for their stake in the business, while the surviving partners absorb full equity of the business with little to no financial burden, if funded correctly.

Once established, a Buy Sell agreement and the insurance policies to fund the agreement need to be updated to account for the changes in business valuation and ownership. Contact us today to discuss the scenario for your business.

* The examples in this post are intended to educate the reader generally about the benefits of life insurance, through the use of hypothetical “details” including coverages, cash values and premium costs. These are approximations based on the author’s experience, but are not facts that would necessarily apply to the reader’s own situation or to that of any other person. Reliable information regarding such items as coverages, cash values and premium costs may only be obtained through formal communications with your broker.

Sports Stars See Value Of Investing In Life Insurance

football-life-insuranceLast month, the University of Michigan agreed to an amendment with head football coach Jim Harbaugh on his existing contract. After a successful first season, the school rewarded Harbaugh with increased compensation in the form of a life insurance loan, according to ESPN.

In addition to his base salary, Michigan will loan Harbaugh $4 million in 2016 and an additional $2 million in each of the five years that follow to support the premium on a life insurance policy. Harbaugh will not be obligated to repay the loan until his passing. When that occurs, the university will be allowed to recoup its original investment. The rest of the payout will go to Harbaugh’s beneficiaries. According to the terms of the contract, they will receive no less than 150% of the policy that has been paid out at the time. Harbaugh himself is also allowed to borrow from the policy while living, though he must keep 150% of the value untouched, in order to protect the school’s investment.

While such a contract provision is unique in the sports world, there’s no denying that Coach Harbaugh sees the importance of valuing (and subsequently benefitting from) a life insurance policy.

Another notable sports figure, former NFL player and current commentator Boomer Esiason, also understands the value of life insurance. After his mother passed away, Esiason watched at a young age as his family struggled. They had not invested in life insurance.

“We were very lucky we had neighbors who could help out and make sure I was being looked after while my dad was at work,” he shared as part of his partnership with Life Happens. “I learned at 7 that no one is guaranteed a tomorrow, so I’d probably look them in the eye and say, ‘Just imagine if something happened to you and you hadn’t done the planning. The people you leave behind will feel the brunt of your mistakes.'”

This year’s spokesperson, professional race car driver Danica Patrick, concurs. “I’ve been fortunate to have a successful career from the beginning, and I want my family to be looked after if something were to happen to me, especially since my parents sacrificed so much for me to get where I am. But going a bit deeper, both my parents lost their dads when they were teenagers, and neither had any life insurance. My mom was one of five kids, and remembers that her mom had to sell most of the farm off as a result. When my sister and I came along, my parents got life insurance,” she said.

Traditionally, the biggest names in sports serve as role models because of their talent on the field/track. As demonstrated here, the choice to raise awareness for life insurance gives fans another reason to look up to them.

We would be happy to discuss your life insurance needs with you. Contact us today!

Why Young Adults Should Buy Life Insurance

Life Insurance letter for blog

Why should young adults consider buying life insurance now? Thinking realistically about death may be difficult for someone in their twenties to do. But death is unpredictable, non-discriminative, and inevitable. Buying life insurance early on gives someone the opportunity to lock in coverage today that may not necessarily be available later.

Allow us to walk you through more benefits of buying life insurance sooner than later…

Life insurance rates are largely affected by age and health conditions, including height, weight, and smoking status. Purchasing insurance at a younger age will save you money in the long run. The rates are more expensive the older you are, and a health condition is more likely to affect the rate as well. Just one trip to the hospital could drastically impact your eligibility. Past events and previous/existing conditions, such as high blood sugar, bi-polar disorder, early strokes, blood disorders, and even DUI’s can impact eligibility.

Life insurance will provide your beneficiaries with a death benefit that can help you pay medical costs, funeral expenses, loans, mortgages, debts, college tuition, monthly expenses, child care costs, and replace lost income.

There are two ways to purchase life insurance: you can rent or own the coverage. When you purchase “Term” insurance, you are renting the coverage for a for a specific period of time (10,15, 20, 30 years). Premiums are typically inexpensive. *For example, the monthly cost for a $500K life insurance policy for a healthy 25 year old male is as low as $21 and $35/mo for a 20 year and 30 year term, respectively. It’s even less costly for women. You can also convert to a permanent insurance plan without undergoing medical underwriting.

When you purchase Permanent Insurance (often referred to as “Whole Life”), you own the benefit for life. The death benefit is permanent, so it provides protection for your entire life and can actually increase over time. The premiums are considered contributions to an asset. Policies can potentially be “paid up” by the time you reach your retirement years.

This is a great way to build wealth on a tax favorable basis. In addition to the pool of money that will be paid upon your passing, there is also a Cash Value that accumulates inside the policy that you can access anytime without restriction. The cash value often grows to a point where you have more cash than what you contributed.   Access to this cash can also be tax free, including gains.

*For example, for $100/mo, a healthy 25 year old male can purchase a $100K policy that would be “paid up” by age 65, when no additional premiums are required. By 65, based on current dividend rates of the top insurance carriers, the death benefit would double and the cash value would be expected to almost triple the total cumulative contributions.

 *If the same person waits 10 years to start the policy (assuming health status hasn’t changed), the premiums would increase to about $150/mo, and by age 65, both the death benefit and the cash surrender value would be about 25% less than starting the policy 10 years earlier.

It pays to get life insurance while you are young, healthy, and a more desirable applicant. The younger you are, the less expensive the premium will be. Make life insurance a part of your balanced financial plan or budget.

Taking care of yourself and your family’s future today will save additional stress and worries tomorrow. Contact us today and we will be happy to discuss your situation with you in more detail.

* The examples in this post are intended to educate the reader generally about the benefits of life insurance for younger people, through the use of hypothetical “details” including coverages, cash values and premium costs. These are approximations based on the author’s experience, but are not facts that would necessarily apply to the reader’s own situation or to that of any other person. Reliable information regarding such items as coverages, cash values and premium costs may only be obtained through formal communications with your broker.

Simple Life Insurance vs. Traditional Life Insurance

lifeInsurance-300x202Let’s face it. We don’t always have total control over our lives – unexpected things can and do happen. However, we can take steps to reduce the damage those unexpected things cause. Life insurance is one of those steps.

Think of all the people in your life who count on you: your spouse, your kids, and possibly others. How would they cope financially if something happened to you? This is such an important question to ask ourselves.

While it’s never too early to plan for the unexpected….it can be too late.

Let’s be honest: we all know there are some drawbacks to buying life insurance. We have to meet with the agent, then have a medical exam, then the insurance company requests doctor records, etc… It can be a long process from signing the application to having the policy issued – the average time can be 2-3 months.

Good news….This is what the process use to look like.

In 2015, we now have a new and simple way of purchasing life insurance coverage.

Tell me how you like this scenario? …You meet with your agent, sign the application, receive a decision within 72 hours, and have a life contract in your hands within 7-10 days? There is NO blood work, NO labs, and NO parameds… NO Waiting!

The types of products that are available for this type of program are:
1. Term Life
2. Universal Life
3. Whole Life

Since there are no medical exams, Simplified Life Insurance of this type will cost a little bit more than traditional life insurance. The reason for this is that the best rating class will be “Standard.” What this means is, if a person went through the traditional process and had the medical done, they could conceivably be rated “Preferred” and get a better premium rate.

The decision to be eligible to buy a simple life policy versus a traditional life policy will be made with you and your agent.

Some valid facts why Simplified Issue Life Insurance may be for YOU:
1. You don’t like needles
2. You want more privacy
3. You want the insurance sooner than later.

You have one life, and many people rely on you. The choice can be simple or traditional.

You would never think of not buying insurance for your car, house, boat etc. Yet many of us go without insuring our own lives. Contact your agent today to find the best way to insure YOU! Please, we urge you not to let your most important asset go uninsured.

Richard Montenegro, Jr.
Managing Partner
FIS Marketing, LLC
3900 Veterans Memorial Highway
Suite 251 (Field Office)
Bohemia, NY 11716
Cell: 631-312-6344
Fax: 585-625-0318
www.FISMarketing.net
www.facebook.com/FISMarketing
http://www.linkedin.com/in/richmontenegro

 

Confused About Life Insurance? Let Us Explain

When consumers were asked why they never made the decision to purchase life insurance, they used words like unclear, puzzling, mystifying, complicated and frustrating. 

People are confused by the terms and may be too embarrassed to constantly stop their agent and ask for an explanation of their meaning.  For example, terms such as:

  • whole life vs. term life
  • cash value
  • dividends
  • universal life
  • accidental death benefit
  • accelerated death benefit
  • contingent beneficiary
  • waiver of premium
  • preferred risk, sub-standard risk
  • conversion privilege

So if you appreciate the value of life insurance, we urge you to find yourself an agent who is willing to explain, in detail, the types of coverage available given your situation, budget, health, age, family and expenses.  Life insurance helps provide you and your family with peace of mind when it matters the most. 

How Can We Communicate More Effectively With People Who Want To Purchase Life Insurance?

secrets-to-life-insuranceRecently, I read an insurance periodical that stated that over 15 million people in the United States are really interested in purchasing life insurance. They understand the value of having it and what it could mean to their families if they were to become disabled or die.

However, believe it or not, they can’t make it all the way through the purchasing process.

Why?

People are confused by the terms and may be too embarrassed to constantly stop their agent and ask for an explanation of what a specific term means. Apparently, this is not only in the case of life insurance, but other financial products as well as, for example, long term disability. I, personally, can certainly understand not buying something I don’t understand!

When consumers were polled as to why they never made the decision to buy the product(s) under discussion , they used words like unclear, puzzling, mystifying, complicated and frustrating—-in other words, not a positive experience! Furthermore, the subject matter itself deals with subjects most people shy away from discussing to begin with. Death and illness, under the best of circumstances, can be tough subjects to explore. However, using conversation that is easy to understand, explaining the who, what, where, when and the how of the coverage, might help to put a more positive spin on it.

Using terms like “whole life vs. term life, cash value, dividends, universal life, accidental death benefit, accelerated death benefit, contingent beneficiary, waiver of premium, preferred risk, sub-standard risk, and conversion privilege” only serve to complicate matters. Many people would rather just forget about the whole thing and move on to a more pleasant subject. That won’t help them when the time comes to face the eventualities of life.

My husband sold life insurance for some fifty years before he became too old and too sick to continue his career. I distinctly remember accompanying him to the homes of potential clients who had invited us over for a social evening during which the conversation segued into a discussion of the need for life insurance. One of the great gifts my husband possessed was the ability to tell stories. He didn’t hesitate to use this when illustrating what could happen to a family with no life insurance. By the time he was finished even I wanted to purchase the product!

So if you appreciate the value of life insurance, find yourself an agent who is willing to explain, in detail, the types of coverage available given your budget, health, age, family expenses and make sure that you find out everything you need to know on the subject. Heaven forbid that the worst case scenario occurs and you need the coverage, you will have prepared yourself with something to help you over the rough time that is bound to ensue.

By Karen Skoler, CPCU

The Difference Between Life Insurance And Long Term Care

inflation_chart_500x357In order to understand the need for Long Term Care (LTC)Insurance, it is helpful to understand what Long term care involves and how differently men and women might think about this subject.

Long Term Care is necessary when an individual needs assistance with two or more Activities of Daily Living (ADL). These activities include, but are not limited to, bathing, dressing, eating, and toileting. Nursing/Rehabilitation Centers do offer this type of care, but some individuals would prefer to remain at home. Some LTC policies allows a person the benefit of being helped with such activities in the comfort of their own home or in a skilled nursing setting . There is, however, some debate on the necessity for Long Term Care insurance as we have learned that men and women view the need for this coverage very differently. Below is a typical excerpt from a conversation between an aging couple.

EMILY: We need to think about the purchase of LTC Insurance; I’m almost 65 years old and will most likely need daily assistance in the future. I see that some of my friends already need such assistance.

JOHN: Long Term Care Insurance!!! What is this insurance ? I’ve never heard of that one! I have Life Insurance. Why do we need yet another type of insurance?

EMILY: It’s been around for a lot of years. It’s just like you to tune out to facts you don’t want to know about! Your Life insurance will help me with expenses after you die! LTC insurance will help pay for our continuing care while you and I are alive.

JOHN: Do you mean I will have to pay you to care for me? I Thought it was a given that you would care for me if and when I’m unable to do things for myself.

EMILY: No Silly, but what if I die before you… what if I’m not physically able to care for you…what about my care after you die…?

JOHN: What about our kids…? They will care for us.

EMILY: I would never dream of that! That would only make them despise us. Time spent caring for us means time away from their jobs, their homes and their own families. Also, it would mean a loss of income if they had to take off time from their jobs. Before you know it we’ll have real family problems!

JOHN: Okay, we know that you will outlive me, so my life insurance will take care of you after I’m gone.

EMILY: So $50,000.00 will be enough to cover all my expenses for the rest of my life? What will I use to pay for the expenses if I need long term care?

JOHN: And why not? That’s more -than- enough for you.

EMILY: In my family the women live well into their eighties. For how long can $50,000.00keep me going? Don’t forget that we still have a bit remaining on the mortgage, monthly utility bills will still be due, and by that time, who knows what they would cost? What do you imagine Long Term Care will cost at that time, whether it is in our house or in a facility?

VOICE OF REASON IN JOHN’S HEAD: Aren’t women supposed to make decisions based on emotions rather that reasoning? She sure put a lot of reasoning into this!

EMILY: You know this is something we need to look into. How can we get more information on LTC? Maybe our Life Insurance Agent has more information. Who knows, perhaps there’s some sort of rider that can be added to our existing policies.

JOHN: EM, I have to give you credit, you do put forth a strong argument, and you seem to have given this quite a lot of thought. Maybe Long Term Care Insurance is worth taking a look at.

– Narima Prashad