When your clients are looking for a way to secure a loan, a life insurance policy may be the best bet. In some cases, your client may be required to purchase life insurance to secure their loan.  There is a right way and a wrong way to use life insurance with a loan.

Why give money to a bank that is not owed to them?

Your clients are essentially doing that if they name a bank as a beneficiary on a life insurance policy because of a loan. If your client were to pass away and had named a bank as beneficiary on their policy, even if they had paid off any portion of their loan, the bank would still receive the full benefit amount from the insurance company.  Don’t let this happen.  Banks only require a collateral assignment of a life insurance policy.

What is a Collateral Assignment?

A collateral assignment of life insurance is an agreement appointing a lender with the right to receive the amount of the outstanding loan first. The balance of the benefit would then go to the named beneficiary on the life insurance policy. Here is an example:

Joe and Sue are buying a new home and the bank requires they have a life insurance policy assigned to the bank as collateral. They decide to purchase the life insurance on Joe who is a healthy, non-tobacco using 40-year-old.  The loan is for $250,000 so they purchase a term life insurance policy for that amount on Joe for 30 years.

20 years have now gone by. Joe and Sue have been making their mortgage payments diligently. Their outstanding loan is now $119,700.  Unexpectedly, Joe is in an auto accident and passes away.  Because they had an assignment to the bank, the outstanding amount, $119,700, goes directly to the bank to pay off the mortgage leaving Sue with a home that is paid off. The balance of the $250,000 life insurance benefit, $130,300, is disbursed to Sue and will help her pay any additional expenses.

When can I assign a life insurance policy?

Some lenders will consider using an existing life insurance policy for an assignment. Others may say you must have a new policy.  Either way, using life insurance for a collateral assignment is a fairly common practice that every insurance company can handle.  Here are the steps:

1. Secure a loan
2. If required, apply for a life insurance policy.
3. Once the life insurance policy is placed in force, a collateral assignment form from the life insurance carrier is completed and submitted to the carrier to assign a portion of the benefit to the bank or financial institution.

Helping your clients protect their mortgage is as easy as 1, 2, 3.   Now with Accelerated Underwriting, your clients can purchase up to $500,000 of coverage without a medical exam as well, making it even easier to provide the benefits your clients need.  You don’t have to be the expert; we are here to help.  Simply give us a call at 800.747.4445.

There are many good reasons to replace your client’s life insurance coverage. They may have reached the end of their level premium period and costs are going up.  They may need more coverage or want permanent coverage instead of term.  They may want to try and lower their premium payments.  All great reasons to replace current coverage.  Unfortunately, sometimes people are enticed into replacing their policies for reasons that are not in their best interest.  Therefore, there are now very strict rules, laws, and regulations regarding replacement.

These rules were enacted to:

• Regulate the activities of insurers and agents with respect to replacement
• Protect the interest of the purchaser of life insurance by establishing a standard of conduct
• Ensure the purchaser receives information with which a decision in their best interest may be made
• Reduce the opportunity for misrepresentation and incomplete disclosure
• Establish penalties for failure to comply with the requirements

What are some of the negative effects of replacement? Let’s look at a client’s contestability period, usually the first two years of the policy.  If your insured dies, the insurance carrier can contest the claim based on misrepresentation.  If the policy is replaced, that contestability period restarts.

Replacement of permanent insurance can become a bit more complex when you start looking at surrender fees, causing the policy holder to lose some of their accumulation value with a transfer or exchange of the policy’s cash value.

There is also the issue of churning by life insurance agents, which is the practice of urging a policyholder to replace a policy for the sake of earning a new commission.

It is for these reasons and more that the NAIC (National Association of Insurance Commissioners) has established procedures that must be followed by life insurers and their contracted agents and brokers. While each state’s Department of Insurance can issue its own specific rules and procedures on replacement, all the states are required to follow the regulation established by the NAIC.

So why am I telling you this? As a Brokerage General Agency, we get a lot of push back from agents and advisors about the replacement form.  Here are some examples:

• My client’s level premium term is expiring. Why does my client have to fill out a replacement form? The answer is, your client’s level term does not expire. It becomes an annual renewable term to their age 90 or 95 with premium increasing every year on the policy anniversary. So even though the client’s level premium period has come to an end, the policy itself has not.
• Why do I have to fill out the replacement form even if my client is not replacing coverage? All insurance carriers require the replacement form to be completed whether the existing coverage is being replaced or not. You, BBA Life Brokerage, and the insurance company are required to follow the afore-mentioned replacement regulation. This is their way of making sure that happens.

I would have to agree that having to complete the replacement form along with all those other forms may be a hassle (talk to me about Drop Tickets, an easier way to apply for life insurance). It is, however, a necessary evil to cover your hiney!!

It is a new year; a fresh start; a time to begin new plans. Even though you may make some great new goals for yourself, most will fail. In fact, a staggering 80% of New Year’s resolutions fail by the second week of February!

So how can you set yourself up for success in 2018? Well, perhaps instead of goals and resolutions, you decide to create new habits to help you both in your personal and business life.  I can’t necessarily help in your personal life, but I may be able to help on the business side.  According to the European Journal of Social Psychology it takes an average of two months to form a habit, so my first piece of advice is to start with something small.  Or if you want to start with something big, break it down into smaller bites.  You know how to eat an elephant, don’t you?

Here are some small ideas that can make a big impact in 2018 for you.

1. Ask every one of your clients about their life insurance plan. You can ask something like “When was the last time your life insurance was reviewed” or “Now that we have your car and home taken care of, what about your loved one’s financial future” or “If you had a money-making machine in your attic, would you insure it? Well did you know you are the money-making machine and we can make sure you and your family are protected”.
2. Try using some new technology. Go online and “drop a ticket” the next time you have a client that wants to apply for term life insurance. It will save you time, again and again.
3. Ask each of your business clients if they have their key people covered against their loss.   An easy term insurance sale can be the solution.
4. Get to know the added benefits of term life insurance. Not all term life insurance is alike. You may have better conversion options with some. You may have living benefits for Chronic Illness on others. Some may not require a paramedical exam. It is good to know for your clients’ sake.
5. Get to understand the excuses for not owning life insurance and overcome them.
   1. It’s too expensive – Most Americans, in fact, 8 in 10, overestimate the cost of life insurance by almost 3 times. Let’s get you a quote and see if the cost will fit for you.
   2. I won’t qualify – How do you know if you don’t try!? There is no cost to applying for life insurance, and you don’t have to pay for it until you accept the policy. All it takes is a bit of time.
   3. I don’t like needles – Neither do I! Luckily today there are some carriers that no longer require you to get poked!
   4. They will be fine – fact is more than ¼ of households would have immediate trouble paying living expenses if the primary wage earner died.

Repetition is what forms great habits, so remind yourself each morning that you are going to ask every one of your clients about protecting the ones they love in 2018. Remember as well that you are not alone.  You have a great team here at BBA Life Brokerage that has your back.  Now go out there and make 2018 your best year ever!!

Cyber Monday! Black Friday! Shopping ads coming at us like bullets.  Shop, shop, shop.  Spend, spend spend!  Don’t get me wrong, there are a lot of good deals out there right now that you can take advantage of but in the long run, do we really need all that stuff?  Today, with credit card and online shopping, there is more data being collected about our homes, our shopping habits and our spending.

Here are some interesting facts about our spending gathered by Joshua Becker:

1. The average American household has 300,000 items in it today (LA Times)
2. The average size of the American home has nearly tripled in size over the past 50 years (NPR).
3. 25% of people with two-car garages don’t have room to park cars inside them and 32% only have room for one vehicle (U.S. Department of Energy).
4. 3.1% of the world’s children live in America, but they own 40% of the toys consumed globally (UCLA).
5. The average American family spends $1,700 on clothes annually (Forbes)
6. The average American throws away 65 pounds of clothing per year (Huffington Post)
7. Americans spend more on shoes, jewelry, and watches ($100 billion) than on higher education (Psychology Today).
8. Americans spend $1.2 trillion annually on nonessential goods – in other words, items they don’t need (The Wall Street Journal).

I too get a bit excited by the hype and I do buy gifts for family and friends this time of year, but there is still that nagging issue of lack of life insurance ownership with all of this spending going on. More people protect their “things” with insurance than protect their loved ones with life insurance according to Life Happens.  Here are some additional interesting facts from the 2017 Insurance Barometer Study.

• The most common financial concern is the ability to afford a comfortable retirement. Retirement has remained a top concern for the seven years of tracking financial concerns. Yet Americans keep spending!

• People see the need for life insurance particularly for parents with young children. Eight in 10 say that a married person with one or more young children needs life insurance. Yet ownership is down.

• Consumer demand for life insurance is greater than actual ownership. Seventy percent say they need life insurance, yet only 59% own life insurance. Could it be procrastination or just because no one has offered it to them?

• 4 in 10 households without any life insurance would have immediate trouble paying living expenses if they were to lose their primary wage earner.

• 8 in 10 Americans overestimate the true cost of life insurance. So, they don’t buy it!

Certainly, life insurance is not as fun to buy as new clothes, jewelry, electronics or cars but it is important to keep the ability to spend normally in place for loved ones should you die unexpectedly.

There are no special deals on life insurance, but the cost has come down over the years and is definitely not as much as most consumers believe. Plus, the process has become much easier with “Drop Ticket” applications and underwriting processes that no longer require the gathering of labs or a paramedical exam.

Help your client get through all the clutter of the stuff in their life and focus on what is important, protecting the ones they love. Show them how life insurance can do just that.  We are here to help.  Questions?  Just give us a call or send an email.

Why more Americans are not purchasing life benefits with a chronic illness or long-term care rider is beyond me! It should be a no brainer, a slam dunk.  Where else can you create a pool of money so quickly, with the first payment, that will take care of you while you are living or take care of your loved ones when you die?

Here are just a few stats that should make our hair stand up on end:

• Approximately every 40 seconds, an American will have a heart attack.
• 92% of older adults have at least one chronic disease; 77% have at least 2.
• Every 40 seconds someone in the US has a stroke.
• Every 66 seconds someone develops Alzheimer’s Disease – see resources

The average couple retiring at age 65 can expect to pay $260,000 to cover their health care costs in retirement. This is for their health care costs only!  What about everything else?  It is estimated that 20 years from now the cost for assisted living in the state of Texas will go from $3,500 monthly to $6,321 based on 3% inflation.  Care in a nursing home semi-private room goes from $4,563 monthly to $10,932!  That is staggering!  How can anyone afford to pay for that?  Most Americans have little savings and no long-term care benefits!  (Check out this handy Cost of Care tool.)

Enter life insurance with living benefits or as I like to say, “You have the opportunity to create a pool of money for life and your loved ones by discovering the power of living benefits.”

Here are 5 great reasons to offer your clients the added benefit of life insurance with living benefits:

• Your clients understand they need to have something in place to help them take care of health care costs as they age. They just have not gotten down to doing it or think long-term care insurance is too expensive. Life insurance with living benefits may be a perfect fit. You just need to mention it to them.
• If your client is already considering life insurance, adding living benefits does not add that much to the cost. Let’s consider a 45-year-old male, preferred, non-nicotine user needing $500,000 of lifetime coverage. He can purchase a Guaranteed UL for $3,994 annually with no living benefit rider or $4,671 with a chronic illness rider, that is only $677.00 for the policy that pays out 2% of the death benefit or $10,000 monthly if he cannot perform 2 of the 6 activities of daily living until the pool of money (the life insurance benefit) runs out or he passes and the balance of the pool of money is paid to the beneficiary. All income tax free!
• You don’t lose it if you don’t use it. One of the arguments you may have heard about long-term care insurance is “What if I don’t use it?” This policy will pay your client while they are living or if they don’t need the living benefits, it will help support their loved ones when they pass.
• It is not that difficult to explain or understand. To me, a chronic illness rider in a life insurance policy is straight forward. If your client cannot perform 2 of the 6 activities of daily living and has a chronic diagnosis by a doctor (not all policies require the “chronic” diagnosis anymore) they will receive their monthly benefit amount based on the policy rider. I realize this is pretty basic and each policy has stipulations, but that really is it.
• You are offering something unique to your client that your competition is not. Although living benefits on life insurance policies is gaining traction, not that many clients are aware of them because not that many agents are offering them. Put it in your quiver of benefits to discuss with your clients every time you visit about life insurance.   The worst that can happen is they say no. The best that can happen is you will have given them a better retirement because they now have a pool of money to handle their additional health care costs.

Life insurance with living benefits may not fit for all clients, but how will you know if you don’t ask?

If you would like to learn more about how life insurance with living benefits works, simply give me a call and I would be happy to discuss it with you.

August has been quite a month! Personally, I have now experienced two things that will change my life forever.  You may recall my last post, “Mom Would Have Liked it”, concerning the passing of my mom. The last weekend in August a big bully, Hurricane Harvey, blew through and devastated a good part of Texas leaving the gulf coast looking like a war zone.  The city of Corpus Christi fared well considering what happened 30 miles northeast of us in Port Aransas, Rockport and several other small coastal towns.

Although most of our team here at BBA Life Brokerage had minimal damage, fences down, tree limbs broken and some roof damage, the condo I own in Port Aransas is totaled! Now I, as so many others, am going through the process of cleaning up and rebuilding, which I know is going to take months.  For me, this also includes a loss of revenue. For so many others the loss is much greater.

So, what have I learned from all of this?

1. Life changes in an instant and you are not in control of that change. That bully Harvey took several days to come across the gulf but he transformed our lives so quickly.
2. You need to be fully prepared for what is coming. I happened to be in San Antonio on Thursday afternoon prior to Harvey’s arrival, still thinking in the back of my mind that it’s not really going to hit us. But trying to be prepared, I went into a grocery story on my way home to pick up some things. When I walked around the store I thought to myself, what do I really need?
3. The aftermath can be even more difficult than the storm itself. There are so many questions that arise after a storm. Is everyone ok? Now what do we do? Who do we call? Where is all of my insurance paperwork? What is covered and what is not? You must be prepared to work through all of these questions. Keeping organized and having good records of your insurance and properties will help.
4. When a catastrophe strikes, neighbors, friends and strangers come to your aid. My husband and I went to our condo the first day we were let back onto North Padre Island and in to Port Aransas. It was somewhat of a ghost town then; a few residents and business owners assessing the damage. The following Saturday, the small beach town was packed with volunteers and food vendors giving away free food and water. Others were giving away free cleaning supplies. Already many businesses and residents had pulled destroyed items outside and there were piles of debris along the road. They were getting on with life. And when you volunteer, strangers become friends.
5. Although there was a minimal loss of life with Harvey, it could have been much worse. How utterly devastating it could have been to lose your home or business and the life of one you love at the same time. Help your clients make sure they have all their insurance in place for the “what if’s”. Homeowners, wind, flood, personal property, and life insurance among a few.

A storm like Harvey may not happen here again for years, and your client may live to a ripe old age of 90 but….what if!?! Make certain your clients are well prepared for disasters.  They come on quickly and they can be brutal.

My mother passed away last week. I don’t tell you this for sympathy because my mother was 90 years old and had a wonderful, full life.  However, her quality of life had gone down quickly over the past year and she simply died of old age, just like we all hope to do.

I am writing this because this is the first death I have experienced up close. I have been in the life insurance business over 30 years but have never had a family member close to me pass where I had to take care of the process that happens after death.  The process was relatively simple in this case because my parents had pre-paid their funeral arrangements at a local funeral home.  My dad and I, Dad is 94 by the way, went to the funeral home, made a few decisions, signed the paperwork and were out of the funeral home in about an hour.  My mom had also left an unexpected note telling us where she wanted her memorial service and what music she wanted.  It was a blessing.

After visiting with the funeral home, we went to the church she had chosen and made the arrangements for a service the next Saturday. The service went very well, we had lots of friends and family, shed a few tears and had a few laughs.  Mom would have liked it.

Had my parents pre-planning not been done, there would have been a lot of additional stress and confusion as to what to do. I can’t tell you how much I appreciated their forethought.

What they didn’t have forethought about however was their longevity. Mom made it to 90 and didn’t incur a multitude of medical bills.  With some home care help, my dad could care for her up until shortly before she passed, although it was exhausting him.  It was not a good situation but putting her in a nursing facility was not what we wanted to do, plus my parents had no long-term care coverage.  At the end, we did have to put Mom in a nursing home.  Through hospice we received 5 days of care at no cost. It would then have gone to $168.00 per day, which my father could not have afforded.  You see at 94 he is just making ends meet in the retirement community he lives in, and is spry enough that he could have several more years in him.  Their nest egg and the results of inflation on social security and his pension would have been good up to age 85 or so; however, 94 plus becomes difficult financially.  (Another Reason to Own Life Insurance Over age 85).  Mom did have a small life insurance policy, $8500, which will be a great help to Dad, but things could have gone much worse.  More care and higher medical bills could have eaten through the little Dad has, and then his living expenses would be falling to me and my brother.  Now we have the concern over Dad’s finances and medical care.

I hear people say regularly, “I won’t live past 85” or “I don’t want to live that long”. Well friends, we don’t have much choice.  We don’t choose when we are born and we don’t choose when we die.  What we can do however is plan properly.  Plan your funeral.  Plan your service.  Plan the songs you want people to remember you with.  Plan for living too long.  Plan to have life insurance in place for “when” you die to take care of those you leave behind.  Plan for the living. Have at least a will in place for the ease of distribution of what you have. Help make the process of your death, whenever it occurs, a bit easier.

Yes, it takes time to plan. Yes, it’s not always easy, but it is smart.  Talk to your insurance agent or trusted advisors.  If you don’t have any, give me a call to help you find them.  It’s important!

You know, we are not immortal. Many of us may think we are, but in the end, we are not.

That is why, if we are smart, or for us that are in the life insurance business, we are smart enough to help our clients with their planning by explaining to them the difference between “If I Die” and “When I Die”, because there is a difference. By the way, this is not my idea, I heard Joe Ross, ChFC, CLU, CRC, VP Sales Productivity & Business Development with AIG speak at a recent meeting.  It just really got me thinking because so many of us think about “If” we die and not “When” we die.  It should all be about when we die. Some of us will die earlier in life and some of us later.

That being said, the “When” is often turned into an “If”. If I die too soon will my family be taken care of?  If I die too soon, how will the mortgage get paid?  If I die too soon, will my kids be able to afford college? These are all legitimate questions no doubt, and it is smart to be prepared for the “ifs” particularly in the pre-retirement years.  But now let’s talk about “when” you die.

When we die. It is a tough subject but so important to think and talk about.  I hear it a lot, “My kids are grown, the mortgage is paid off, why do I still need life insurance?”.  There are still risks of financial loss and some great reasons to have life insurance in place in the post retirement years.  We all plan to go into retirement with our spouse, do some traveling, enjoy the grandkids and have a peaceful, comfortable retirement for perhaps 20 years.  Here are some reasons why that may not be the case:

• When one spouse dies earlier in retirement and the other lives to a ripe old age of 95 or 100, which is happening more and more often, will there be enough income to sustain the one that is left living longer than expected?
• Health care costs can eat into retirement income like crazy! The lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% for people age 65 and older. [ AARP. Beyond 50.2003: A Report to the Nation on Independent Living and Disability, 2003, (11 Jan 2005).] Most Americans do not have long term care insurance to help pay for this, so retirement income will be eaten away in health care costs.
• Even if you do have a nice nest egg put away, what about the financial risks? Interest rates, inflation, cost of living could all leave financial hardship.
• Then there is my story. Being blessed with parents who have both lived into their 90’s but they are outliving their retirement savings and I have been supplementing their income for several years. I am happy to do it but, that is money I could and should be saving for my own retirement.

All of these issues could be resolved by having life insurance in place for ‘’When” you die. Which means not renting term insurance but owning permanent insurance that will be with you the rest of your life and take care of your loved ones “when” you die!

Consider making permanent life insurance part of the plan going forward for you and your clients. There are many types available to make permanent planning affordable.  Give me a call if you want to talk.

On occasion, individuals like to play “Truth or Dare” with life insurance companies. Sometimes it is deliberate and sometimes it’s not. Those doing it deliberately are basically not providing honest information to the carrier.  Can’t they just go back to the carrier and say “Oops, sorry, I forgot!”?

Lack of candor or being dishonest to a life insurance company is a big deal. It involves both the omission and/or misrepresentation of information. The first issue is being dishonest in the application process. If your client would happen to get away with it and a policy goes inforce, they would be putting their loved ones at risk of not receiving benefits when an investigation is done at death.

Secondarily, the fundamental hurdle with lack of candor is the question of what else they might be hiding. The carrier needs to trust the information that their mortality decision is based upon.

Some carriers take a hard and fast line on lack of candor. You lie to the insurance carrier, you are declined.  Others take a broader view of the significance of the information – how relevant is the information that is missing?  Trying to hide things like heart issues, stroke, cancer, mental disorders, substance abuse, multiple DUIs and adverse financial history are a big deal in the underwriting process and will result in an immediate decline.

In speaking with one of our carriers I found they are also having problems in this area with the language barrier and some clients that do not speak English as a first language. The carriers are concerned that the proposed insured may not have an understanding of the questions asked, the contract language and/or what they are attesting to with their signature.

So can your client still get coverage if they omitted information on an application? The answer is maybe.  They can apply to a different carrier being fully truthful and disclosing all medical or financial information requested and depending upon if they are insurable, they can get coverage.  Unfortunately your client has now wasted their time, your time and the carrier’s time trying to get away with not admitting all of the relevant information when they first applied for life insurance.

Bottom line, tell your client to be honest on their life insurance application so it won’t come back to bite them later! Let them know, with all of the big data out there today, the carriers will find out.