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Many of your clients are unaware of how important they are.  People don’t generally think about what would happen to them if they were to suddenly be unable to perform their jobs for an extended period of time due to injury or illness. Having the conversation about the need for Disability insurance doesn’t have to be awkward.  Let’s explore how we can go about discussing this essential protective tool with your clients so that their terrible horrible no good very bad day doesn’t end up ruining their finances.

Bring yourself up to speed:  What are the different types of Disability Insurance

There are various types of Disability Insurance available to provide financial protection in the event of an individual becoming disabled and unable to work. We’ll explain each of them here so that you go into the conversation prepared.  

Short-Term Disability Insurance: This provides a temporary income for up to two years after the onset of a disability. This type of insurance generally pays out a percentage of the policyholder’s salary on a weekly or monthly basis, depending on the terms and conditions of the policy.

 Long-Term Disability Insurance: This pays out benefits for an extended period if you are unable to return to work due to your disability. The length and terms of this coverage depend on the policy and may be anywhere from two years up to retirement age. Long-term disability policies may also include an inflation rider that adjusts payments over time as costs increase.

Group Disability Insurance This is used for providing coverage through group policies offered by employers or associations. As with other types of disability insurance, incoming benefits usually represent a percentage of your income while you are not able to work due to your disability; however, these policies may have lower premiums than individual plans because they leverage pooling across multiple policyholders.

Catastrophic Disability Insurance: This helps protect against income loss due to permanent disabilities that require specialized care or equipment, including paralysis and blindness. It typically pays out benefits that exceed those provided by short-term or long-term disability plans and covers any lost wages from being unable to work due to a disabling illness or injury. Catastrophic insurance also offers funding for home modifications or medical treatments required as a result of the disablement.

Business Overhead Expense (BOE):  This can reimburse business owners for certain operating expenses if their ability to run their business is compromised because they become disabled and can no longer run it themselves. These overhead expenses could include rent, utilities, employee salaries, and taxes during the period when they cannot actively manage their business operations due to illness or injury-related disability. BOE insurance generally includes other features such as providing payment for professional services used in transitioning ownership temporarily while they are disabled so that their business can continue uninterrupted during that period.

Don’t hesitate to contact the team at CORE if you have any questions about the ins and outs of these different policies.  We are here for you!

Conversation basics:  5 tips to help you talk to your client about Disability Insurance

Here are 5 useful tips about how you can speak to your client about Disability Insurance

1. Emphasize the importance of protecting their income: Many people understand the importance of life insurance, but may not realize the importance of protecting their income in case of a disability. By highlighting the potential financial impact of a disability on their ability to pay bills and support their family, you can help them understand the value of disability insurance.
2. Tailor your approach to their specific needs: Each client will have unique concerns and priorities, so it’s important to tailor your approach to their specific needs. For example, a client who is self-employed may be particularly concerned about protecting their income, while a client who has a family may be more interested in coverage that includes rehabilitation benefits.
3. Explain the different types of disability insurance: There are several different types of disability insurance, such as short-term, long-term, and own-occupation coverage. By explaining the differences and the benefits of each, you can help your clients choose the coverage that is best for them.
4. Address any misconceptions or concerns they may have: Some clients may have misconceptions or concerns about disability insurance, such as the cost or the likelihood of making a claim. By addressing these concerns and providing accurate information, you can help them make an informed decision.
5. Offer a variety of options: Not every insurance provider offers disability insurance, so it is important to offer a variety of options to your clients so they can choose the one that best fits their needs and budget.

We can help you start the conversation

The team at CORE is committed to helping you sell new lines of business to your clients.  Offering them the best available options to keep their lives on track no matter what might happen is at the center of your relationship with them.  Helping you succeed is at the center of our relationship with you.  Reach out and learn more about what we can do for you!

The Estate Tax, on its face, seems unfair to most people. Essentially the federal government (and several state governments) levy a second tax on money that a person has accumulated over their lifetime after that person passes away. While people under the current threshold of $12.97 million dollars will not have to pay the Estate Tax, those families with assets and wealth beyond that will pay close to 40% in some cases on any value above the threshold. Let that sink in for a minute.

If a family’s total assets are $15 million dollars, the heirs will have to come up with $800,000 dollars cash to pay Uncle Sam. The problem is that while their family is wealthy, that wealth might be in the form of a business, a family farm, homes, and other real assets. This forces families to sell precious assets to pay the Estate Tax. Let’s learn about the ways your client can leverage life insurance to alleviate this incredible tax burden.

Life insurance for the win: Hedging against the Estate Tax with sound policies

Life insurance can be a valuable tool for hedging against estate taxes, as it can provide a significant death benefit that can be used to pay off any taxes owed. Here are some of the best ways to leverage life insurance in order to hedge against estate taxes:

1. Use life insurance to pay off estate taxes: One of the most straightforward ways to use life insurance to hedge against estate taxes is to purchase a policy that will pay out a death benefit large enough to cover any taxes owed. This can be especially useful for individuals with a high net worth, as estate taxes can be quite substantial.
2. Create an irrevocable life insurance trust (ILIT): An ILIT is a trust that is created to hold a life insurance policy, and it can be used to provide a source of funds to pay estate taxes. The trust can be set up so that the death benefit is paid out to the beneficiaries tax-free, which can greatly reduce the overall tax burden.
3. Make use of the annual gift tax exclusion: Another way to use life insurance to hedge against estate taxes is to make use of the annual gift tax exclusion. This allows an individual to gift up to a certain amount each year to an individual without incurring any gift taxes. This can be used to purchase a life insurance policy and transfer it to an ILIT or to another individual.
4. Use life insurance to fund a buy-sell agreement: Many business owners use life insurance to fund a buy-sell agreement, which provides a way for the business to continue in the event of the death of one of the owners. This can also be used to provide a source of funds to pay estate taxes in the event of the death of a business owner.
5. Use permanent life insurance: Life insurance policies that accumulate cash value, such as whole life or universal life, can be used to hedge against estate taxes as the cash value in the policy can be used to pay off taxes or to provide a source of funds for the beneficiaries. This allows the policyholder to accumulate cash value over time, which can be used to pay estate taxes or for other purposes.

The irresistible benefits of an Irrevocable Trust and Life Insurance for wealthy families

A life insurance policy placed inside an Irrevocable Trust is one of the most effective tools for avoiding Estate Taxes. This tool is beneficial because it allows individuals to provide for their heirs without having to pay a high rate of taxes on their estate. When set up properly, the proceeds from the life insurance policy are paid directly to the trust upon death, thus bypassing any probate or estate taxes. By paying out before taxes are due, this helps reduce the overall tax burden of the estate.

One major benefit of an Irrevocable Trust is that it eliminates any potential creditor claims against the trust beneficiary. Since a trust can be used as an asset protection tool, this means that creditors cannot access funds that are within the trust after death. The assets remain protected and secure against potential claims or actions taken by creditors and other parties who may have an interest in the estate itself.

In addition to providing protection against creditor claims, these trusts offer several other tax advantages such as “stepped-up” basis and income tax savings on gains from investments within it. When a trust is established lifetime gifting can also occur which will reduce future estate taxes and possibly eliminate them depending on how much money was gifted away during life. 

With proper planning, expensive Federal Estate Tax can be completely avoided if there are enough assets in the trust upon death because all assets passed to beneficiaries are excluded from taxation under federal law.

By using an Irrevocable Trust along with a life insurance policy, individuals can ensure their families or heirs receive financial security without being burdened by large amounts of taxes when they die. With appropriate planning and execution, it’s possible to minimize or even avoid costly Estate Taxes while still providing valuable benefits for loved ones at the same time.

Tying it all together

Now you understand how life insurance can be a valuable tool for hedging against estate taxes. By purchasing a policy that will pay out a death benefit large enough to cover any taxes owed, creating an irrevocable life insurance trust, making use of the annual gift tax exclusion, using life insurance to fund a buy-sell agreement, and using permanent life insurance, it can help reduce the overall tax burden and provide a source of funds for the beneficiaries.

Your clients depend on you to understand these nuances so that you can help them achieve and maintain their financial and life insurance needs.  CORE is here to help you navigate these rules and taxes on behalf of your client.  Let us know how we can help you get the most value for your client’s hard-earned money.