The Insurance Doctor

Month: February 2021

  • Marijuana, the Lesser of Two Evils?

    Marijuana, the Lesser of Two Evils?

    As of the writing of this week’s column, New Jersey Governor Phil Murphy was granted an extension to negotiate with lawmakers on two bills to legalize and decriminalize marijuana in New Jersey.  This is after the measures passed both houses of Legislature on 12/17/2020. 

    “Voters overwhelmingly support the legalization of cannabis and we are taking every step necessary to assure legalization and decriminalization become law,” said Assembly Speaker, Craig Coughlin!

    Looking at this issue financially, it’s a no-brainer.  In 16 states, marijuana is fully legalized for both recreational and medicinal purposes.  13 other states (including New York) have decriminalized and legalized medicinal marijuana use.  There are now only 6 states where marijuana is fully illegal.  Legalizing the drug would be a tax revenue boon for a broke New York State, which Governor Andrew Cuomo has already admitted. 

    I have concerns with this as there will be ripple effects far and wide from legalizing recreational pot in New York State.  Medicinal marijuana has been legal in New York State since 2014.  My first concern is underage children and this easy access to pot potentially getting kids hooked on the drug.  Other issues are regulation, law enforcement and DUI (driving under the influence) of drugs.  People are preoccupied enough on the roads with Covid-19.  It stands to reason if pot is fully legalized then New York State would consider releasing prisoners with non-violent, marijuana possession only records.  New York State spends over $70,000 per year per inmate, the most in the country.

    Conditions we know medicinal marijuana can help:

    1. Chronic Pain:  According to the CDC, (Center for Disease Control) 20.4% of Americans are suffering chronic pain issues.  A developing field in medicine is the application of MM (medical marijuana) to alleviate chronic pain as al alternative to opiates.  This field has gained popularity due to the lack of addictive qualities of MM compared to opiates.
    2. Lack of Appetite: Conditions like cancer can sap a person appetite which is dangerous as the body needs the proper food and nutrients daily.
    3. IBS (Irritable Bowel Syndrome): Medicinal Marijuana eases nausea and pain which makes it a viable option to treat IBS.
    4. Lou Gehrig’s Disease AKA ALS: ALS (Amyotrophic Lateral Sclerosis) is a debilitating neuro degenerative disease that progresses in patients over time.  It affects neuro cells in the brain and spinal cord slowly reducing neuro and motor functions over time.  MM has been proven to slow down the degeneration. 
    5. PTSD AKA (Post Traumatic Stress Syndrome):  PTSD is running rampant in America, especially over the last year during Covid.  Medicinal Marijuana (CBD AKA Cannabidiol) seems to breakdown a chemical in the brain that affects pain, mood, and anxiety.

    There are a variety of conditions or diseases one can be suffering from to obtain a Medicinal Marijuana ID Card which can differ slightly by state.  In general, see symptoms and the process below:

    1. Conditions Most States Include Chronic pain, cancer, HIV/Aids, PTSD, IBS, neuropathy, epilepsy, ALS, spinal cord injury, Parkinson’s, and Hepatitis C to name a few.
    2. Doctor Sign Off Form:  One needs to find a doctor to sign off on the medical marijuana form.  This can be difficult as some doctors are hesitant to prescribe it!  Some reasons are moral, and others are a lack of belief insufficient scientific evidence proving its effectiveness.
    3. Proof of Residence: After proving one is suffering from a condition on their state’s acceptable list by getting a physician sign off, one shows proof of residence like a driver’s license or passport.
    4. Interview with Physician: In areas where MM is legal, patients are approved through a MM recommendation and evaluation conducted by a physician with a medical cannabis license.  Once approved, a patient can legally purchase, possess, and in certain states cultivate their own plants.  For more information go to www.MarijuanaDoctors.com.

    Be Positive, Test Negative and Keep the Faith!!

  • Disability Income Insurance. Can you afford NOT to have it?

    Disability Income Insurance. Can you afford NOT to have it?

    Imagine that you own a “SPECIAL MACHINE” that you keep in your basement.  This machine is programmed and able to PRINT MONEY!  How would you treat it?  More than likely, you would baby it and keep it well-oiled, perhaps put a cover on it to prevent it from getting dusty.  You would do everything in your power to PROTECT AND INSURE IT! 

    You would call the insurance company (or your agent/broker) to get a quote for “CASH MACHINE INSURANCE” and they said it would cost between 2%-4% of the amount of money it prints out per year.  This would not be so bad, right?   Think of YOURSELF as the CASH MACHINE, and the cost to replace a portion of your annual income is that 2%-4% insurance premium. 

    The purpose of disability income insurance is to replace the income when one is left unable to work.  Most working Americans need their income to survive!  Because wage earners almost always depend on an income stream, protecting this income is CRITICAL towards financial security!  Yet, well over 100 million working Americans have no private disability income insurance. 

    Many people have a misconception that accidents are the #1 cause of disabilities.  This is incorrect, as the number 1 CAUSE for disability is DEPRESSION/MENTAL NERVOUS.   These cases are now way up due to Covid-19.  Back pain is the number 2 cause.

                There are 2 types of disability income insurance:

    1. Group Disability Income Insurance: Group disability income insurance is usually offered by an employer at no cost or for a nominal fee/premium taken out of your paycheck.
    2. Individual Disability Insurance: Individual disability income insurance (DI) is usually purchased from an agent or broker, somewhat akin to life insurance. 

    Disability income (DI) is a unique type of insurance.  It is CRUCIAL insurance that protects against the loss of income when the policyholder is unable to work for months or years following an injury or illness.

    This is one area of insurance where “broker error” and “CPA error” can really hurt you.  These are THE BIGGEST MISTAKES your broker and/or CPA can make:

    1. Selling Based on Price: This is a common mistake agents and brokers make to “just make a sale.”  There are 5 or 6 companies in New York State that offer strong plans; however, there are differences between policies that must be pointed out.
    2. Using the Disability Insurance Annual Premium to Take a Tax Deduction:  Many accountants and agents make mistakes by getting greedy and suggesting taking the small tax deduction which can have enormous lifetime repercussions.  If DI policies are paid with “after-tax” dollars, then ALL the monthly benefits are received INCOME TAX-FREE!  If disability policies are paid with “pre-tax premiums,” then ALL the benefits received are 100% taxable!  For example, a 40-year- old that gets permanently disabled would receive 25 years of monthly income benefit to age 65 that would ALL be taxable because of “bad advice” from their insurance broker and/or CPA. 
    3. Incorrectly Completing the Disability Insurance Application:  Completing these disability insurance applications can be an arduous process.  Many insurance agents cut corners and rush this critical part of the process. 
    4. NOT Selling a Disability Policy with “OWN OCCUPATION” as the Definition of Disability:  It irks me to review the policies that others have sold without this critical definition.  See the example below.

    To best explain errors 3 and 4, an example should make it clear.  If a right-handed surgeon gets his or her right hand mangled in a car accident and they have “OWN OCCUPATION” as their definition of disability, they can go on a claim and (while getting paid on a claim) supervise others.  The “OTHER DEFINITION” would be something akin to “they cannot work in ANY AREA of their chosen field.”  In this scenario, the surgeon would NOT be on claim and forced to take a MAJOR PAY CUT!  The problem with group disability is that very few of those group policies have the “OWN OCCUPATION DEFINITION OF DISABILITY,” which can make the difference between going on claim or being ineligible.  If you own individual disability income insurance, I suggest going to your policy’s declaration page 1 and reading your definition of disability! 

    Back in 2009 my friend, John, called me and asked for help.  (John and his Mother were existing life insurance clients).  John had applied and been rated double the standard premium rate for disability insurance and asked for my help after apologizing that he did not know I handle this type of insurance.  He is a physical therapist who was employed at the Rikers Island outpatient facility and he had a side gig supervising exercise programs for seniors at their homes after their hospital discharge.  His previous broker did NOT ask him the proper questions and incorrectly completed the DI application listing 100% of his time spent at Rikers.  John earns about $100,000 annually, was 38 at the time, and in excellent health as a non-smoker.   

    After further discussions, I discovered John was splitting his hours equally between the 2 jobs.   Thus, I crafted his application showing the split to a different insurance company.  In conclusion, I was able to reduce his premium in half to $250/month for a $5500/month income benefit to age 65.  John called me 3 years ago as he was unfortunately beaten up at Rikers Island in an unprovoked vicious attack and is now on permanent disability collecting TAX-FREE monthly checks for another 16 years until he turns 65!

    For individuals and families, this is must-have insurance!  A good profile candidate is age 25-50 and earning a minimum of $75,000/year.  White-collar jobs are usually less expensive than blue-collar due to injury risk. 

    For a FREE policy review or to discuss disability income insurance quotes for you or your business email “contact me re disability” to Rob@InsuranceDoctor.us.  Stay Safe and Keep the Faith!

  • Bidenomics- Part 2

    Bidenomics- Part 2

    Since Joe Biden was inaugurated on the 20th of January, it is a good time to address some changes he might make based on his platform. The question is, what does “BIDENOMICS” mean to your wallet or purse?

    Over the years, I have found that politicians’ actions are often incongruent with their words. Here are some of his proposed tax changes:

    1.   Those Making Under $400,000 Will Be Unaffected: His proposal is to leave those earners alone and add a “Social Security Increase Tax” of 6.2% on ALL income earned over $400,000. Social security is in jeopardy as baby boomers (10,000 people turn 65 every day) born from 1946-1964, are withdrawing social security benefits faster than working Americans are contributing; hence, the affluent would be bridging the social security gap. 

    2.   Income Earners Over $1,000,000 Would Incur Higher Capital Gains Taxes: Americans with over $1 million in total income would see income received from dividends, as well as capital gains, taxed like their wages. In this scenario, if you had a stock or business sale, your capital gains tax doubles from 20% to roughly 40%. This would change many business and investment decisions. You should consider making those sales now, as usually these changes are “Grandfathered.”

    3.   Corporate Tax Rates Would Be Increased: His proposal would increase corporate tax rates from 21% to 28%, a 33% increase. This is a big change that could have corporations reevaluate moving or setting up subsidiaries overseas. 

    In essence, his proposals would be taxing the rich and protecting the middle class. Based on our current national and state budget deficits, I do see the middle class paying more taxes eventually.

    President Biden has vastly different viewpoints on many issues than former President Trump, especially on energy, climate change, health care, and infrastructure. The “Green New Deal” was a centerpiece in Biden’s campaign.

    Some areas where President Biden said he would concentrate on include:

    –      Traditional Infrastructure

    –      Digital Infrastructure

    –      Electric Cars

    –      Cannabis

    –      Telemedicine

    –      Green and Clean Energy

    There has been much unhappiness and angst over the fact that Congress had taken so long to pass an additional stimulus package, since the one that ended on July 31, 2020.

    Some highlights of Biden’s $1.9 Trillion stimulus relief plan called The American Rescue Plan include:

    –      Extended Unemployment Benefits ($120B)

    Jobless workers will get $300-$400/week through September 2021.

    –      Schools and Colleges ($170B)

    –      The Federal minimum wage increases to $15/hour.

    –      COVID-19 ($100B) includes $70B to expand testing and immunization centers and $30B for PPE.

    –      A 2nd Stimulus Check ($166B)

    Individuals making less than $75,000/year receive $600, couples making up to $150,000/year receive their target $1,400 and $600/child.

    –      State and Local Governments (350B)

    –      Small Business Boost ($325B) Including

    Triple P (Paycheck Protection Program) Funding ($284B) plus $20B for businesses in low-income communities, and $15B for struggling live venues, movie theatres and museums to name a few venues.

    What we do NOT know:

    1.   How much money the government will continue to print?

    2.   When or if the Covid-19 virus will end?

    3.   When will companies bring people back to work or IF they will bring employees back?

     What we DO know:

    1.   Income taxes will go up on the wealthy!

    2.   Estate taxes will go up on the wealthy!

    Biden’s Taxes on Wealthy Estates: example of a $100M estate (#’s are in Millions)

    Value of the Original Asset  ($100M)                                      $100

    Cap gains taxed as ordinary income 39.6% + 3.8% NIIT*=  43.4%

    Capital gains tax owed:                                                              $43.40

    Value of the Remaining Estate:                                               $56.60

    Biden’s estate tax exemption ($3.5 million)                             $3.50

    Taxable estate                                                                               $53.10

    Biden’s estate tax rate (45%)                                                        45%

    Taxes owed on the estate                                 $43.40+         $23.90

    Total taxes paid on a $100 million asset                   =          $67.30

    Effective tax rate                                                                          67.3%

    *Note: NIIT (Net Investment Income Tax) is an Obama care tax.

    This may or may not happen; however, if everything Biden proposed becomes law, there will be a renewed interest in ILIT (Irrevocable Life Insurance Trust) owned life insurance to leverage off life insurance companies (instead of paying dollar for dollar) to pay these estate taxes (due 9 months from death in cash) with pennies on the dollar, which my firm we can assist with.

    Feel Free to reach out to Robert Intelisano CLU, CSA, LUTCF who is a CSA (Certified Senior Advisor) and owner of Intelisano & Associates, Inc. since 1999 at Rob@InsuranceDoctor.us.