Six reasons to consider supplemental long term disability coverage

Our client, a successful professional with many passions enjoyed a full life and career until a terrible accident left them largely incapacitated with a traumatic brain injury. Not only were they left unable to work, but now needed significant help navigating day-to-day life. While the story is undoubtedly tragic, our client’s insurance program included long term disability coverage that afforded one less challenge, monthly income replacement. If you don’t often think about becoming disabled, you are not alone. We find that most of our clients are often more focused on securing life insurance than long term disability. While we, of course, wholeheartedly support the instinct to safeguard your loved ones in the event of your loss, we also understand how important it is to make sure you—and they—are just as well protected should you experience a sickness or accident that precludes you from earning a living. Unfortunately, statistics show that even if you exercise and eat well to stave off debilitating disease, Americans are eight times more likely to become disabled during their working life than to pass away. In fact, just over 1 in 4 of today’s 20 year olds will incur a disability before they reach age 67, according to the Social Security Administration. Rather than be alarmists, we want to help you make an educated choice about this coverage. Here are some important things to know about long term disability coverage. 1. The long term disability (LTD) policy your company offers covers only a small portion of your income. If you are a high income earner, in particular, your group plan most likely will not provide adequate income replacement. The calculations of these plans consider the needs of the entire collective, so therefore high-income earners end up receiving less-than-full replacement—sometimes only a small fraction of your income. Additionally, it is likely that your monthly benefit will be considered taxable income which would leave you with significantly less than 60% of your income. 2. Your company’s LTD coverage may define “work” differently than you do. As with every type of insurance policy, your contract specifies what is and is not covered. In the case of group disability insurance, that means coverage may not kick in if you are still able to work in some capacity. Some disability contracts have definitions similar to Social Security Disability. These policies only cover those people who have been rendered unable to perform any job based on their level of education and experience. For example, a surgeon who injures their hand and can no longer operate may not qualify for coverage without the right definition of disability. 3. Supplemental LTD policies can be customized to meet your specific need. Because these policies come with many different riders, an advisor can help you customize your coverage and determine what is most appropriate for your situation. 4. Supplemental LTD should be considered by anyone who works, whether they are single or married with children. It may sound obvious, but expenses exist regardless of marital status and physical capabilities. Furthermore, single individuals may be more likely to need to hire aides to help navigate daily tasks 5. Supplemental LTD policies can be customized to meet your specific need. Because these policies come with many different riders, an advisor can help you customize your coverage and determine what is most appropriate for your situation. 6. Supplemental LTD replaces your income through the entirety of your working years. After you file a claim, the carrier will review your medical records to determine if you are unable to perform material functions of your occupation. Once that determination has been made, you will begin to receive a monthly payout that bridges the difference between the payout from your company policy and what your monthly paycheck had been (or the entire paycheck if you are an independent entrepreneur). That check will continue to arrive for the duration of your disability.  or until you reach the age of 65 or so, and you can use the money however you wish. Your earning ability is often one of your biggest assets and losing it can be devastating for you and your family. Long term disability coverage is a shield against such devastation. While coverage costs might deter some, we would argue it’s a small price to pay to replace your future income should the unexpected occur. We are here to help guide you on your current company’s LTD coverage and discuss the potential benefits of adding it to your program. ...

Obtaining life insurance in the age of big data

In the digital age, the drive to protect our loved ones remains as strong as ever, but the process is once again in transition. Insurance companies aren’t far off from making underwriting decisions from the computer algorithms and vast databases that have transformed our modern lives. For anyone who wants new coverage—or to ensure that their existing policies are in order—the potential impact of the new technologies is worth understanding. Here is what you can expect when obtaining life insurance in the 21st century. The process is starting to get faster Long before Silicon Valley’s algorithms and big data, insurance companies were concocting formulas to estimate life expectancy. They would deliver a price for a policy after inputting factors like age, weight, family history, medical condition and propensity to engage in risky behaviors. About five years ago, a select few insurance companies realized that their models were good enough to make some underwriting decisions without a medical exam. The firms offered speedy underwriting programs that required only an application (often online), a telephone interview, and permission for the company to gather electronic information about your health and lifestyle. These programs have become so popular today that many carriers are making them available to more customers with higher policy limits up to a $1M. In the future, parts of the process may be even quicker with talks of insurance carriers analyzing your selfie to determine whether you qualify for the best rates! You might want to hold off on that ancestry test While thus far scientists have only identified a few genes that indicate a heightened risk of certain medical conditions, it’s ultimately the information stored in our DNA that can best predict longevity. While none of the insurance companies in the United States force people to take genetic tests, the carrier can consider those results for underwriting IF they are part of your medical record. (Canada and several European countries have banned this practice, and a few states are considering similar rules.) For now, you should be careful about voluntarily submitting to DNA testing through services like 23 and Me. At the very least make sure they will destroy the sample. Or even better, wait until after you’ve bought your insurance policy before checking out whether grandpa’s tales of Viking ancestry are true. Carriers know more about your life Buying life insurance has always involved a privacy tradeoff: you allow an insurance company to ask your doctor questions and in exchange, you get to protect your family if there is an unexpected loss. Now the fine print on the insurance application also authorizes the underwriter to examine our digital personas. They are not only looking for signs of health and lifestyle risks, but they also want to double check that the information you put on your applications is accurate and complete. These are the main types of data life insurance companies peruse, and how they might impact your application: Past Insurance Applications. Every time you apply for life insurance, some of that information is sent to an MIB (Medical Information Bureau) data clearinghouse. So if you get turned down for insurance from one company, don’t think you can “forget” to mention your heart transplant when you apply to a different carrier—they will have access to other companies’ notes. Prescription Drug Records. Underwriters can typically see all the drugs you’ve taken and the doctors that prescribed them. The files don’t show what conditions the drugs were prescribed for, so this data often raises more questions than answers. Some of those questions can be quite pointed, however, especially, if the company sees you’ve been treated by doctors for conditions you left off of your application. Social Networks and the Rest of the Internet. Your insurance company knows how to use Google too. And there are a bunch of startups that scan publicly available information on social networks for evidence of risky behavior - so if you’ve posted pictures of yourself skydiving, your life insurance rates could be sky high as well. Don’t forget that behavior and lifestyle are strong indicators of life expectancy! State Motor Vehicle Records. For people under 45, car accidents are the leading cause of death, so insurers look for any record of driving while intoxicated, reckless driving, or, increasingly, distracted driving. They even look for speeding tickets! Help is near While the application process is utilizing big data and adapting to new technologies, the value of life insurance remains constant and irreplaceable. The good news is that data will not stop most applicants from obtaining a good policy. However, it can add complexity. We are available to help navigate this quickly-evolving digital landscape as it pertains to your life insurance coverage today and in the future. ...

Why life insurance shouldn’t be overlooked during estate planning

“Use it or lose it.” That’s the message estate lawyers and financial advisors are giving their clients regarding the estate and gift tax exemption. Estate tax limits established under the Tax Cuts and Jobs Act are set to be cut in half at the end of 2025.  So there’s a good chance you and your advisors will soon be exploring gift and estate planning techniques that lock in the current exemption, not least making gifts to trusts. While you’re at it, we suggest you talk with an insurance professional about the benefits of incorporating life insurance into those plans. Families that are successful enough to have to worry about estate taxes don’t usually think much about life insurance, assuming they don’t need protection against unexpected income loss. And even those who recognize the tax-free investment benefits of life insurance often don’t understand the full extent of its potential. At Alliant, we take the time to get clients thinking differently because there are compelling reasons for families—yes, including the wealthiest—to explore this under-utilized investment when putting together their estate plan. They are: Achieving maximal tax efficiency of your estate  First some math: Currently, the lifetime gift and estate tax exemption is at an all-time high of $11.58 million. Any amount over that is subject to the gift tax (at the same rate as the estate tax, 40%) unless it is drawn down against that $11.58 million. For example, if you give your heirs $5 million tax-free today, that leaves exempt $6.58 million more of your eventual estate under current laws. Keep in mind that doesn’t include annual gift exclusions: $15,000 or $30,000 per couple, which you can give tax-free to as many people as you want. While lifetime gifting provides value only if it grows, annual gifting does offer immediate value. But there is potentially much longer-term value to be gained by putting it in a trust and investing it wisely. Here’s where life insurance can play a role. While other investments require time to grow; insurance does not—it’s worth the full value with the payment of a single premium. Further, the return on that investment is tax-free at competitive rates. Better yet, it isn’t taxed as it grows, unlike most other investments that create tax along the way. Further, it receives a “step-up in basis” at your death, so heirs won’t pay capital gains taxes when the policy pays out as they would if they inherit from a more traditional investment instead. Liquidity to cover estate tax bills If most of your estate is in the form of real estate or a privately held business, your heirs may not have the readily available cash to pay what could be a hefty estate tax bill, due within nine months of your death. This could force heirs to sell off assets—some which they might otherwise have kept—quickly and even potentially at a below-market price. A life insurance policy provides the necessary liquidity to pay the tax bill without forcing their hand. Leaving a legacy Your heirs are sure to receive the full amount of a life insurance policy upon one’s death, and some people use this guarantee to enable a “guilt-free retirement.” With children provided for by the payout, parents can spend other assets however they want. Similarly, in second marriages with children from the first, life insurance is a simple way to leave a legacy, while leaving assets to a spouse. An attractive return How good an investment is a life insurance policy? To calculate that, assume you have the average life expectancy of someone your age and gender. In today's market, the effective annual returns for life policies using this assumption is between 4% and 6% tax-free. That’s the equivalent of a taxable investment with a 6% to 8% return— better than the yield of many other low-risk investment options in the current environment. Indeed, the effective returns alone suggest that you should be considering life insurance as part of your estate plan. Add in its other benefits—comes unburdened by capital gains, requires no time to reach its full potential, and offers guaranteed returns—and a life policy becomes even more intriguing. That said, everyone’s situation is unique. Because of that, nothing can replace the advice of a skilled estate tax lawyer and investment advisor working alongside a knowledgeable insurance professional. We have spent decades advising some of the world’s most successful people on the best ways to incorporate life insurance into their estate plans. We would be delighted to answer your questions and to share our experience with you and your trusted team of professional advisors. ...

Alliant's leaders discuss the unprecedented insurance market

The insurance market is going through significant changes, many of which we have mentioned before: more difficulty in securing insurance, higher premiums nationwide, even non-renewals. But the situation continues to evolve, and there are early signs that the market will stabilize. To give you a clearer idea of where things stand and what the future may hold, two members of our leadership team share their thoughts. Is the current market as tough as everyone says?   Cindy Zobian, EVP, Managing Director: Simply put, we have never seen market conditions like these before. In essence, it’s a capacity issue: the rate of natural disasters—and the damage caused by them—have increased exponentially while home values and rebuilding costs have gone sky high. Mark Recht, SVP: Case in point: we just got another announcement from a carrier about adjustments caused by inflation. Unfortunately, higher premiums and insurance challenges aren’t just happening to property owners in areas prone to most natural disasters, such as California and Florida. Those are countrywide phenomena. There is currently a cloud casted over the market. CZ: That said, we can see glimmers of light at the end of the tunnel! Well, that’s hopeful. What makes you optimistic about the future?   MR: We saw a similar market a while back in Florida after Hurricane Andrew, but within a few years, things had shifted for the better. Homeowners learned to incorporate new and better risk-mitigation methods, the government placed stricter building codes, technology helped us to map the riskiest areas, and we incorporated more flexibility into insurance programs. Together, that all worked to stabilize the situation. As for the current moment, Cindy and I just met with reinsurers [Note: As a reminder, reinsurers assume a portion of carriers’ risks] and they told us they are in the process of figuring out how to add more capacity. If they can take on more risk, carriers will be able to as well. CZ: We have seen many insurance trends over the years, but, ultimately, they come down to finding a middle ground in the marketplace. That’s what the industry is striving for again today. I’m not saying the problems will be solved in a year, but our decades in the business have us hopeful that things will get easier eventually. At the same time, I don’t think insurance is going to be a buyer’s market again. What is Alliant Private Client doing to help policyholders in this market?   CZ: We are being proactive. We don’t wait to get non-renewal notices or other surprises. Our team is constantly on the lookout for unexpected solutions to lost coverage. MR: For instance, clients are becoming more comfortable with unregulated solutions, so that has allowed us to be more creative in our use of non-admitted options. And without being arrogant, the fact that we are one of the largest brokers in the country gives us significant clout among carriers who have begun to prioritize trading partners. We are also working more with different organizations, and sometimes even direct writers, to be able to offer solutions that make things easier for our clients. And what can clients do to make things easier on themselves?   MR: First and foremost, they need to recognize that it really is no longer a buyer’s market. These days, the priority is finding a suitable solution; pricing is secondary. Also, they should consider consolidating insurance solutions under one broker because carriers may, for example, be willing to take on your multi-million-dollar house in California’s brush territory if they are also insuring your less-expensive ranch in Idaho. You lose that benefit if you are dealing with multiple brokers. CZ: Also, when you get a bill, pay it on time. If you let your policy lapse, you might not be able to get it back. And be really thoughtful about making claims. Putting through even a $50,000 claim might hurt your premiums and renewal prospects. Be sure to discuss every potential claim with your broker first. Then they will help guide you on whether or not it’s in your best interest to put forth that claim. MR: And whenever you receive notice of a critical requirement—be it to trim brush or put in vents—follow through. Maybe you could ignore these in the past, but not anymore. Today, failure to comply might result in a policy cancellation. CZ: And lastly, of course, our clients should know that we are always here to help with questions and concerns about their risk management strategy. ...

8 faqs about life insurance during covid-19

Among the many effects of the COVID-19 pandemic is an acute awareness of one’s mortality. Given the circumstances, it is natural to worry about what would happen to those closest to us if we were no longer here. As such, many clients have called to discuss life insurance—some want new policies, some want more coverage and others want to make sure their existing portfolio is in good standing. In an effort to provide clients, and their professional advisors, with the most pertinent information, here are the answers to some common questions about how the current health crisis is, and isn’t, impacting the life insurance marketplace. 1. Will my life insurance cover me or loved ones if I succumb to COVID-19? Yes. 2. Is it possible to obtain a new life insurance policy now? Yes, and in fact we are working every day to get people covered—not just to protect individual family members but also against the loss of key individuals in their businesses. However, we are seeing some limitations to new coverage, particularly for older individuals: most carriers have stopped issuing new policies for anyone over the age of 80; some have limited or stopped issuing policies to those who are 70 and older; and some are limiting coverage for those who are 60 and older with pre-existing conditions. Another potential issue is foreign travel. Even in pre-pandemic times, carriers would always ask clients about plans to go abroad. It is no surprise that right now we are seeing them refuse policies to those with plane tickets abroad. 3. Can I obtain a new policy if I have tested positive for COVID-19? Yes, but not until you are symptom free for a prescribed period of time—generally 30 days but that can vary slightly. Once you have cleared that hurdle, though, your bout with the virus will have no effect on your obtaining a new policy. 4. Will I need an in-person medical exam to get new coverage? The coronavirus spurred innovations in underwriting that carriers had discussed but failed to act on for years. Many are now willing to forgo an in-person medical exam for most policies under $3 million (and for some as high as $5 million). Instead, carriers are relying on data analytics and doctor’s medical records. In fact, because many doctors’ offices are also impacted by the pandemic, carriers are now accepting reports from recently completed physical examinations, which they access by logging onto existing patient portals (with the patient’s approval, of course). 5. Is life insurance more expensive now? No—and yes. Because the great majority of tragic deaths from COVID-19 are among the elderly, carriers are not worried about an increased mortality among the insurance pool. So, in that sense, pricing is not rising due to COVID-19. That said, the coronavirus has put pressure on the economy, which the Federal Reserve has responded to by bottoming out interest rates. That has affected carriers’ investment returns, so premiums for some policies are, in fact, increasing. But, so far, only for some, which is why this is a good time to explore policies. 6. How do I know if I have enough coverage, or if what I have is in good standing? Call your insurance broker! We will make sure everything is in order, and review the amount, the termination date (if relevant), and any change in your concerns, needs or beneficiaries. One client, who is married with three children, recently realized her brother was her beneficiary instead of her husband! If you decide you need additional coverage, we will explore new policies rather than amending your current one, because that is generally less costly. 7. If I’m experiencing financial hardship, can I take advantage of the government-mandated grace periods for payment? This is tricky—life insurance carriers are following the guidelines, but in some cases delayed payment will mean a lag in coverage, and that may not be in your best interest. Additionally, if you pass the grace period, most carriers will offer the option to reinstate, but you may have to fill out a health questionnaire to do so, and obviously someone fighting COVID-19 would not qualify. It is all about the fine print, so please give us a call before deciding to delay payment. 8. Can I use my life insurance to access cash? Some policies have cash value, and we certainly have clients who are opting to let their cash value pay their premiums. But you need to make sure you understand exactly how that will affect your policy going forward, since doing this can be disruptive. Some policies require that the insured pay every premium, while others are more flexible. Discuss the fine print with your insurance professional before taking this step. We understand that this is a challenging and worrisome time for everyone. If we can help provide peace of mind by reviewing your existing life insurance policies or exploring new options, please reach out to us. It would be our privilege to assist you at this moment. ...

Four ways to improve your life insurance program

Even as some parts of the country slowly begin to “re-open,” many of our clients continue to spend far more time at home than usual. We’d like to propose a home activity that offers a potential benefit to both your finances and your sanity: reviewing your insurance program. Yes, we know … exciting. And maybe because we love what we do, it is to us. But either way, a relatively small effort could lead to objectively big advantages, via the potential to lower premiums and maintain peace of mind. Here’s what you need to do. 1. Review your collections. There are three ways to insure a valuable collection, whether it is art, wine, or baseball cards: by listing each piece individually on a schedule, by obtaining a single blanket policy, or with a hybrid of the two. If your policy is itemized, make sure: • No pieces are unlisted, particularly recent purchases. • Nothing needs to be removed (that is, you still own everything the list says you do). • The value of each item is up-to-date. (Note: Many galleries and appraisers are working virtually these days, should you need a consultation.) If you’ve insured the collection as a whole under blanket coverage, make sure: • No individual piece exceeds the maximum per item limit stated in the policy. If, say, the value of an artist’s work has skyrocketed, you need to consider moving it to a separate scheduled policy. Your broker can help you here! • The listed overall collection value reflects current value. 2. Find time for your annual review. In general, your broker will review your portfolio annually which will help protect you in the event your lifestyle or needs have changed over the year. For example, you might have forgotten to tell your insurance broker that little Susie is officially licensed and on the road! These conversations are crucial to risk management, and luckily, all you need to do is answer our questions. Here are some things that might be discussed during this review (hint: you can prepare your answers ahead of time): • Is there something, such as a car you sold, or someone, such as a young driver who no longer lives at home, be removed from the policy? • Have all recent purchases been protected—say, a new piece of land or a home purchased without a mortgage? • Are there any other risks that may need proper coverage, such as mold or cyber issues—or whatever worry that keeps you awake at night? 3. Review your life insurance. With so many new health concerns to consider, now is a smart time to revisit your life insurance program, including disability and long-term care. Clients are often surprised to learn that a policy they believe to be guaranteed is, in fact, not. Similarly, be aware that newer policies may better suit your current needs, which tend to change over the years. Here are a few topics to discuss: • What coverages do you have in place and how much is their total value? When is it all set to expire? • Do any changes in your lifestyle or life objectives necessitate exploring updated insurance options? 4. Review any information that can lead to lower premiums. Many insurance companies reward policy holders for taking actions that minimize risk. You may not be able to install new systems now, but determining what you might want to put in place and who you might contract to do so when you can, could pay off for you later. Consider: • Adding new protections to your home, such as a water leak detection system, a temperature monitor linked to a central fire station, or a permanent backup generator. • If you’ve already done so, please let us know so that we can alert your carrier. Additionally, small lifestyle changes could mean savings in your premiums. So let us know if: • You had been renting out a home but are no longer. • You no longer own a home, car or boat that had been insured. • You no longer employ household staff. (If this is the case, you can eliminate workers’ compensation and employee practices liability insurance.) These are unsettling times for everyone, but we remain steadfast in our goal: to help decrease your worries. Although reviewing the above steps may not be high on your to-do list today, they can help continue to properly protect your family and belongings during and after these uncertain times. As always, we wish you and yours health and of course, safety. ...