Retirement Cash Flow

An annuity is a financial tool that will provide a succession of payments to a policyowner, or annuitant, in exchange for a single lump sum payment or series of payments to the insurer.  In other words, an annuitant pays an insurance company a certain amount which is then credited with a certain rate of interest, and this is how money grows in an annuity.

Annuities are interest bearing, tax deferred savings vehicles designed to provide future income in exchange for a lump sum or series of payments now.

During this growth period, or accumulation period, the rate of interest is not taxed, which allows for a greater accumulation of funds.  Once an annuitant is ready for the policy to start paying out (payout or annuity period), the annuity concludes its accumulation task and benefits are paid at specified periodic intervals.  These payments can either be paid over a certain amount of time, paid at a specific monetary amount per payment or act as a death benefit to an annuitant’s beneficiary. Read more

Life insurance is similar for a business as it is for an individual in protecting against the financial loss associated with premature death.  Though various kinds of companies exist (sole proprietorships, partnerships and corporations), life insurance is necessary to ensure capital is adequate and available if unexpected loss occurs.

The death of a business owner or partner in a business can also bring the end to the business; life insurance plays a vital part in protecting the integrity of a business if such event were to occur.    Life insurance, in the form of a ‘buy-sell’ agreement, provides the necessary protection to ensure the survival of the business and a disbursement of ownership rights to remaining partners or owners.

As a licensed insurance agent, it is important to understand the basic concept of a buy-sell agreement as well as the types of buy-sell agreements available to properly insure against the loss of a business owner or partner.

The death of a business owner doesn’t necessarily mean the end to the business.  Buy-sell agreements are used to provide structure in the absence of the business owner or partner.

A ‘buy-sell’ agreement, also known as a ‘buyout’ agreement,  is defined as a financial agreement or arrangement that protects business partners against financial loss by securing a predetermined fair market value share of a partner that, upon a predetermined event such as death, is sold to the remaining partners in the business to ensure the continuation of the business.

2 types of Buy-Sell Agreements: Read more

As with any successful business, ongoing commitment to customer satisfaction is the key to business growth.  It is even more important in the insurance industry!  Clients are more likely to renew or continue to use your services, if they are comfortable with you,  the agent.

When an agent earns the trust of a client, a sale is made — and referrals will follow.

Even more important, clients will refer others to the you, helping to build your book of business.  Something as important as protecting one’s family and financial wealth is worth the comfort of knowing they are in good hands.

Health insurance replacement often occurs for may reasons including better benefits, reduced deductible, reduced premium, and better network coverage.  It was common to switch insurance when moving to a different state due to the limited networks maintained by each insurer, though, now more insurers provide for a national network of coverage to eliminate the need to change insurance due to a change in where one moves or travels.

Policy Replacement vs Policy Retention

Due to the many factors involved with issuing a policy based on an insured’s preexisting health concerns or the benefit advantages of one plan over another, as a licensed insurance agent, you should closely exam the advantages and disadvantages of replacing a health insurance policy.

The following factors should be considered: Read more

An important topic taught through our insurance license school is understanding what happens to a life insurance policy once an insured dies and what laws govern who receives the death benefit monies provided by the life policy.

A life insurance beneficiary is an individual who receives the policy’s benefit proceeds upon the death of the insured.  The insured has chosen this individual, or individuals when he or she purchased the life insurance contract.  The amount of benefit proceeds as well as distribution percentages are also chosen by the insured and can or cannot be altered during the insured’s lifetime, depending on the designation type that the insured has chosen at the time of policy issuance.

The life insurance beneficiary, designated by the insured, gains control of the death benefit after the insured dies.  This beneficiary can be a person, institution, or charity and though insurable interest is not required to be a beneficiary, family members of the insured are usually named.

Distribution by Descent

(Per Stirpes vs Per Capita)

Per stirpes rule – Death proceeds from an insurance policy are divided equally among the named beneficiaries.  If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual.

Per capita rule – Death proceeds from an insurance policy are divided equally among only the living primary beneficiaries. Read more

A question that our online insurance school often receives is how to figure out a health insurance policy’s ‘out-of-pocket limit’, or maximum financial limit that an insured must meet in a calendar year based on incurred medical expenses. Before we can understand how to calculate a policy’s out-of-pocket limit, we must first review some key terms used in the insurance industry, namely: deductible, coinsurance, and stop-loss.

How do you calculate a health insurance policy’s out-of-pocket limit?

Deductible - The amount of expense that the insured must pay before benefits are covered by the insurance company.  This amount is covered 100% by the insured and is usually based on a calendar year medical expense basis, meaning that each new calendar year (January 1st – December 31st) the insured is responsible for satisfying a new deductible if medical expenses occur within the year.  This amount varies based on the policy chosen by the insured with common deductible amounts of $500, $1000, $2500, $5000, up to a less common $10,000 deductible.  The higher the deductible of a policy, the lower the monthly premium, so consumers choose a deductible amount within their monthly budget.

Coinsurance - The percentage of additional medical expenses that the insured meets in addition to the deductible.  The insurer and the insured split medical costs, typically with the insurer covering 80% of the cost while the insured covers 20%, also known as 80/20 coinsurance.  Some policies have a 100/0, 90/10, or 70/30 split where the insurance company is always responsible for the higher percentage amount.  A reputable major medical insurance policy will also include a ‘stop-loss’ (defined below), that limits the dollar amount of coinsurance that an insured must pay in a given year. Read more

We all know someone who has had a major medical emergency throughout their life.  Medical emergencies such as heart attacks, strokes, and physical accidents can cause victims to become dependent on the help of others for extended periods of time and can cause a significant gap in employment and wage earning.  These long-term medical incapacity scenarios, coupled with the high costs of medical care necessary to recover from such events are the main causes of financial loss.

How do you protect against income loss during a disability period?

While health insurance is designed to protect against financial loss in the event of medical expenses, it does not replace lost income during a period of disability.  Health insurance does not cover monthly mortgage payments, auto and home utility expenses, or food and other daily consumption expenses.

So, how do you protect against income loss during a disability period? Disability insurance.  This specific type of insurance is designed to provide payment of continual, periodic income in the absence of working income due to a qualifying illness or injury disability event. Disability can vary from partial or temporary, to recurrent or permanent, and benefits are paid accordingly.  As a licensed insurance agent, it is important to understand the basics of a disability insurance policy and how to best service your clients.

Also known as disability income insurance or income replacement insurance, it provides for both short and long term protection depending on the nature of the event and is used to provide a continuance of income flow to the insured in the form of monthly payments at around 60% of the pre-disability income level of the insured.  Simply stated, disability insurance provides financial protection against the loss of one’s ability to earn income due to a qualifying injury or illness.

Key Benefits to Consider when Selling Disability Insurance include: Read more

The working class America of today can be characterized as being overly stressed and overworked.  The average worker spends more time at work now than in the past, leading to valuing the concept of time and becoming more efficient in the use of it.  Thus, the trend of online learning is increasing to further an education, acquire a new degree, or attain a government required license.  As Stephen Smith, Professor at Purdue University has stated,

They (workers) value control over and flexibility in scheduling their time.

The reality is that in order to exceed in today’s working economy, individuals must become more flexible and take more initiative towards their success.  In doing so, acquiring a degree or furthering one’s education to increase the ability to earn a higher income has become a task best fulfilled online.

Of the multiple reasons why online learning has become a more popular method of advancing in education, a few main reasons include:

• Convenience
• Cost effectiveness
• Time effectiveness
• Concentrated educational focus vs group learning flow Read more

Health insurance is a vital component to the financial security of any American citizen.  Without it we take the chance of severely and permanently disrupting our financial well-being in the event of a major or catastrophic medical event.

The entire purpose of health insurance is to prevent financial ruin due to a catastrophic medical event such as a heart attack, stroke, catastrophic injury, or any other event that leads to major medical expenses.  It is important to choose the correct type of health plan to prevent this financial scenario and it is the job of the licensed insurance agent to help the applicant apply for the best health plan to fit the applicant’s needs.

A major medical policy includes the following:

• Lifetime benefits maximum
• Deductible
• Coinsurance
• Stop-loss and out-of-pocket maximums
• Co-payments
• Policy limitations and exclusions

In soliciting the correct health insurance policy to clients, it is important to research the correct insurance carriers.  The most popular carriers provide for national coverage, meaning that they protect the insured anywhere they may travel throughout the U.S.  While there are hundreds of insurance companies that offer health coverage, generally it is best to select among the largest, most prominent carriers available. Read more

When selling life insurance, it is important to understand the client’s needs for protection against financial loss.  One of the primary purposes of life insurance is to provide a stream of income for the surviving family beneficiaries if and when the insured breadwinner dies during the policy’s term.  As such, knowing the correct amount of life insurance to fulfill the family’s living needs is vital to providing the necessary funds to maintain the family’s lifestyle and future financial security.

While we would all love to have multi-million dollar life insurance policies to give to our loved ones when we pass away, the premium costs involved would be quite expensive and unrealistic.  In contrast, not providing financial protection for our families in the event of our premature death is not a situation in which we would ever want to put our family.

So, how does a life insurance agent know what amount of life insurance is necessary to satisfy the client’s financial needs?

While everyone has different lifestyles and respective financial needs, several general factors should be considered when providing a client with a financial assessment and respective life insurance recommendation.

The following financial factors should be considered:

• Medical bills and final expense costs (burial) of the deceased insured
• Home mortgage and estate or property taxes (these payment don’t stop when the breadwinner dies!)
• Ongoing utilities and other home maintenance costs
• Any debts incurred by the deceased breadwinner or surviving family (car loans, college loans)
• Cost-of-living needs including food, clothing, and home supplies, health and life insurance payments for the surviving family, medical bills, schooling costs, and any other common ongoing family expenses

In addition to providing financial security to surviving members’ cost-of-living expenses, an insurance agent should also assess the family’s long-term financial needs such as: Read more