The Insurance Doctor

Category: Insurance

  • 12 Fixed Annuity Advantages

    12 Fixed Annuity Advantages

    The Federal Open Market Committee or FOMC is the Federal Reserve’s monetary policymaking body.  It is responsible for the formulation of a policy designed to promote stable prices and economic growth.  Simply put, the FOMC manages the nation’s money supply!

    The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings (usually every six weeks) during the year.  Last month, during their March 15th-16th meetings, the FOMC approved its first interest rate increase for the “Federal Funds Rate” in three years.  The reason for the rate increase is to address spiraling inflation without torpedoing economic growth.

    This brings the “Federal Funds Rate” (the bank lending rate banks charge each other for interbank overnight lending) from zero to between 0.25%-0.5%.  They had kept the rate near zero since the beginning of the Covid-19 pandemic.  The FOMC has all but committed to small increases for each of their next six meetings, which could bring that rate up to 1.9% by year’s end! 

    You might be asking yourself “what does this all mean and how do these interest rate changes impact me and my family?”  The move in the “Federal Funds Rate” corresponds to an increase in the “Prime Rate,” which immediately pushes lending rates higher for most forms of consumer borrowing and credit.  This means mortgage rates, car loans, and some variable student loan interest rates will be increasing. 

    The good news is this also means that bank account and CD (Certificates of Deposit) rates will increase as will fixed annuity rates!  When fixed interest rates go up, it can have a negative effect on the stock market, as conservative investors often reposition funds from the “choppy” stock market in favor of the fixed, predictable, and guaranteed interest rate returns of fixed annuities, CDs and bank accounts. 

    Fixed annuities are written primarily by insurance companies offering safe alternatives that provide fixed, guaranteed, and predictable returns.  They are also one of the more flexible financial products.  Fixed annuities can be converted into a guaranteed income for life, similar to a pension with a guaranteed monthly income.  They make an excellent pension supplement or primary pension if you do not have one.  Fixed (no fee) annuities are often confused with variable annuities which can have high fees. 

    See My Top 12 Advantages of Fixed Annuities below:

    1. Guaranteed Interest Rates: You can choose how long to guarantee your interest rate, usually between 3-7 years.

    2.  Guaranteed Principal: The principal is protected regardless of market conditions, company performance, or the economy.

    3.  Interest Rates: Insurance companies offer higher interest rates usually by 0.25%-0.50% than bank CDs, bonds, or Treasury Bills!

    4.  Tax-Deferred:  You do not pay income taxes until you start withdrawing funds, which allows for faster accumulation providing greater income.

    5.  No Fees:  You pay NO annual management fees while funds accumulate and NO fees on death benefits to heirs!

    6.  Protected From Creditors: If you get sued, creditors cannot go after/attach fixed annuity funds.

    7. Bypasses Probate: Fixed annuity death benefit proceeds bypass probate. They save on estate fees, and court costs and go directly to named beneficiaries outside the will. They are private and therefore cannot be contested.  Usually, the beneficiaries receive the lump sum funds in 1-2 weeks.     

    8. Lifetime Income Options Available:  At any time, your annuity may be converted into a guaranteed lifetime income stream you cannot outlive.  This product works very well for seniors looking for a steady income.  The biggest fear of seniors is the fear of “running out of money!”

    9. Annual Withdrawal Options Available:  Most fixed annuities allow for withdrawals between 10%-20% of the account balance annually.

    10. Annuitization: This unique annuity feature allows the policyholder to take a guaranteed income for life or a shorter-term (such as 10 years) and have a portion of the income excluded from taxation.  There are a variety of guaranteed income combinations to choose from.

    11. State Protection: Should the annuity insurance company become insolvent, there are state protections (depending on which state you reside) with limits between $100,000-$500,000 in most states.

    12. Piece Of Mind:  Fixed Annuities are secure and offer peace of mind to account holders knowing they are guaranteed to not lose money regardless of economic uncertainties.

    In conclusion, Fixed Annuities should have a place in everyone’s portfolio!  

    For more information and a no-fee consultation to discuss your specific needs, feel free to reach out to me at Rob@InsuranceDoctor.us. 

  • Disability Insurance, Rolling the Dice

    Disability Insurance, Rolling the Dice

    I just returned from an extended Las Vegas Super Bowl Weekend and was thinking about what to write this week while on the plane back to JFK airport.  In many ways, insurance is gambling! 

    There is a high probability of a disability occurrence happening, such as someone becoming disabled either mentally or physically.  As an Independent Insurance Advisor, also known as a “Field Underwriter,” my job is to ask questions then listen.  This is why we have 2 ears and 1 mouth as we are supposed to listen twice as much as we speak.  Nearly 50% of ALL individuals ages 34 or younger will be disabled for 90 days or longer prior to age 65. 

    As per the Commissioners Individual Disability Tables, CSO/Society of Actuaries, see the chart below:

    Age     Odds of Long-Term Disability     Average disability length

    30                   51%                                                    4.7 years

    35                   48%                                                    5.1 years

    45                   40%                                                    5.8 years

    50                   34%                                                    6.2 year        

    There are generally 2 types of disability income insurance:

    1. Group Disability Income Insurance: Group disability insurance is usually offered by an employer at no cost or for a nominal fee taken out monthly directly from your paycheck.
    2. Individual Disability Income Insurance: Individual disability income insurance (DI) is usually purchased from an agent or broker, similar to life insurance.  There are significant advantages to doing business with an independent insurance broker!

    Advantages of Group Disability Insurance:

    1. Premiums are Affordable
    2. Some policies are portable meaning you can keep it if/when you leave the company
    3. The Business Owner can protect key personnel in the event of disability

    Disadvantages of Group Disability Insurance:

    1. Most policies have a monthly disability income “BENEFIT CAP” which is far less than the employee would need to provide for one’s family
    2. Few policies have an “Own Occupation” definition of disability, meaning it is much harder to trigger a claim versus individual policies.

    Our first task is to assess the risk probability based on the clients’ age, medical history, income level, occupation, amount of coverage, and details of the policy.  We come up with a monthly income need (usually between 40%-65% of income) then shop the policy to different insurance companies.  We then present between 1-3 company options to the client for review.  An Agent can ONLY present 1 company option!  My job is to find a comfortable premium to transfer the majority of the disability risk to the insurance company.

    Regardless of a person’s age, the ability to earn an income is usually their most valuable resource.  Disability income insurance is the one type of insurance that workers cannot do without!  If this is the case, why do less than 50% of adult Americans own a personal disability income insurance policy?  The answer is based on cost, as a typical individual disability income policy will cost between 2%-4% of a person’s salary, depending mostly on age.  This is why it makes sense to apply for an individual disability income policy as young as possible.

    Accidents are what most people think are the main cause of disability. This is incorrect!  Depression and back pain are the most likely to trigger a disability claim.  This has been exacerbated by Covid-19.  Disabilities can be triggered mentally or physically.  As an example, my friend is on disability from post-traumatic stress disorder (PTSD) from Hurricane Sandy. 

    It is critical to consider how your bills would be paid in the event of a disability lasting more than 3 months.  Workers should consider how long they would be able to cover their expenses.  Couples should also consider whether they can survive on one partner’s paycheck if the other were to become ill or injured.  In most cases, an individual private disability income policy is the best way to handle this risk!

    My top 3 tips to consider when buying an individual disability income insurance policy to protect you and your family:

    1. Get Disability Insurance Quotes from an Independent Broker:  An independent insurance broker has a macro view of the marketplace and multiple insurance companies to shop rates and benefits for you.  For example, we have one insurance company that will cover a disability due to a botched elective plastic surgery procedure. 
    2. Buy the “Own Occupation” definition of disability: Not all companies have this definition and some charge extra for it as a rider.  For example, a right-handed surgeon gets his or her right hand mangled when closing the car door.  With an “Own Occupation” policy, said surgeon goes on claim and can collect benefits and still work supervising others.  A policy without “Own Occupation” would have an “any occupation in their field” definition and would NOT be on claim in the previous example.
    3. Do NOT Take a Tax Deduction for insurance premiums paid: This is where your CPA can make a big mistake getting “greedy” for deductions.  If you pay your premiums with “after tax” dollars, 100% of your monthly benefits are TAX FREE!  If you take the small annual premium tax deduction, 100% of your monthly benefits are taxable!

    Are you confused?  These are critical individual and family planning decisions that should not be taken lightly.  For a better understanding of these policies and rates, feel free to reach out to me at Rob@InsuranceDoctor.us.

  • 6 Tips to find the RIGHT insurance broker

    6 Tips to find the RIGHT insurance broker

    One thing this pandemic has done is flush out poor advisors, as there is no hiding during Covid-19.  CPAs, Attorneys, Insurance Advisors, Stockbrokers and Financial Planners should be well-aware of the latest Covid-19 updates, income tax and estate tax rule changes to properly advise their clientele.

    I have been on many Zoom Panels, Seminars, Workshops, and Podcasts over the last 14 months, and it is disturbing how clueless many advisors are!  I feel bad for those that are taking their advice.

    Insurance brokers and agents are trusted with matching their clients with the most suitable life, health, homeowners, auto and business insurance policies.

    Every insurance company has a specialty niche product and pricing sweet points, they are not all the same!  It is important that your broker of choice is well-versed in policy differences from one company to another, and is informed of the latest news, trends, and new advanced products coming to market. Your broker should understand your needs and concerns and be capable of explaining your options in a simple and understandable fashion.

    Follow these tips on what to look for in finding the right insurance broker or agent:

    TIP 1: Knowledge and Experience:  There is no substitute for experience.  Look for brokers that have been in their field for a minimum of 5 years.  The better ones will also have advanced planning designations (higher education) next to their names.  Look for at least one of the following 3 designations: CLU (Chartered Life Underwriter) CFP (Certified Financial Planner) or CSA (Certified Senior Advisor).  The more designations, the more educated and well-rounded your broker will be.

    TIP 2: Independent Agents:  The following may be counter intuitive.  Brokers are in a better position to help you than “captive agents” thatIndependent only represent one company.  Independent brokers represent you client, and offer numerous insurance policy options.  They must be well-versed on all policies to find the best fit for you.  Captive agents (i.e. Allstate, New York Life etc.) are employees of their respective companies.  They usually offer proprietary products first to qualify for their company-sponsored trips and subsidized health insurance.  Make sure your agent places your needs before their own!

    TIP 3 Fee Structure:  Most of the established independent brokers do not charge a fee for time or services.  They receive compensation from whichever insurance company you decide to do business with.  Beware of agents, planners and advisors that charge steep upfront consultation fees! 

    TIP 4 Get a Second Opinion:  Most people are already working with an agent or broker.  Do yourself a favor and get a second opinion using the tips given in this article.  You will be surprised at what you can learn from a free consultation with an independent broker. 

    TIP 5 Due Diligence:  Invest the time to call several brokers.  Start a list and seek advice from friends, family, or colleagues that are satisfied with their broker. Check reviews on google business, the internet and gather as much information as possible. 

    TIP 6 Quality Service: Part of quality service is timely service.  When you call around, make a note of how long the advisor takes to get back to you.  Usually, like a first date, that first communication sets the tone for the relationship.

    President Biden has outlined his proposals for sweeping income and estate tax changes.  These proposals, if passed, can and will affect multiple generations of Americans going forward.  Not knowing about these rules while advising clients is a form of advisor malpractice.

    If these 6 tips fail, reach out to me at Rob@InsuranceDoctor.us!

  • Covid Briefing #21

    Covid Briefing #21

    There is an old saying, “Ignorance is Bliss!”  My new saying during this Covid-19 era is “Ignorance is Super-Expensive!”  In my 30-year career, I have never seen more advisor ignorance and malpractice.  Keep this in consideration if this is the first you are hearing about this.

    There have been MAJOR CHANGES in tax deadlines and proposed changes in tax, gifting, and estate planning rules, proposed on March 29th by Bernie Sanders, which I will review below.  My “Elite 8” list of changes to be concerned about are:

    1. The Federal CARES Act One Year Hiatus on Required Withdrawals from IRA’s and Most 401k’s is Over in 2021:  This means the RMD (required minimum distribution) must be taken in 2021.  The amount is based on the age of the account holder.  For example, a 72-year-old with an $100,000 IRA must withdraw $3,906 this year.  A 75-year-old is required to withdraw $4,367 this year. 
    2. Obamacare Health Insurance Exchange Enrollment Date Extended Again: This means the health insurance open-enrollment period now is extended to Sunday, August 15th for those individuals who want to enroll.
    3. The Federal and New York State Income Tax Return Deadline was Extended: These 2 deadlines were extended from April 15th to Monday, May 17th. 
    4. Stimulus Payments Were Deemed Not Taxable: This is major news for Americans who have received one or more stimulus payments.  They are technically considered an advance on a tax credit known as The Recovery Rebate Credit.
    5. What Happens if You Missed a Stimulus Payment? You can recover it through the Recovery Rebate Credit when filing your 2020 tax return.  It can be found on line 30 of Form 1040 or 1040-SR.  Consult with your CPA or tax advisor on this.
    6. The PPP (Paycheck Protection Program) Application Deadline Extended: Eligible business owners may apply for needed funds through Memorial Day, Monday, May 31st.  For questions regarding the PPP, email me at Rob@InsuranceDoctor.us.  We can assist and connect you to banks who want to help at no cost for my Wave readers!
    7. The CDC (Centers for Disease Control) Extended the Eviction Moratorium Date: The nationwide ban on certain residential evictions was extended to at least Wednesday, June 30th!
    8. On March 25th, 2021, Senator Bernie Sanders Introduced the “For the 99.5 Percent Act”: These sweeping changes, if enacted into law, would change the way families pass money down to their children, and dramatically increase the taxes children must pay within 9 months from their parents’ death!  Proposed changes include but are not limited to: A. Reducing the current $15,000/ per person unlimited gift tax exclusion to a maximum of $20,000 per year in total.  B. Reducing the current $11,700,000 per person estate tax exclusion to $3,500,000 per person. C. Limiting lifetime gifts to $1,000,000 per person in total.

    Are you confused yet?  There has never been a more important time to rely on your advisors.  Reach out now to your CPA, Attorneys, Insurance Broker, Investment Advisor and Financial Planner to review these monumental changes.  This is what you pay them for, and your money-moves now will have an impact on your family for many years to come!  Feel free to reach out to me for guidance at Rob@InsuranceDoctor.us.

    Be Positive, Test Negative and Keep the Faith!

  • Thinking Clearly in the Middle of Chaos

    Thinking Clearly in the Middle of Chaos

    You don’t need me to tell you that this country is upside down right now.  There has never been a more important time to think clearly and adapt to the current situation.  With 40 million unemployed and another 10 million not seeking work, many are in a “financial” survival mode.  One in three Americans have yet to receive their unemployment checks!  Most advisors suggest keeping an “emergency fund” of 6 months income.  Even for those who have heeded the advice, the six-month fund is dwindling as New York City has been slow to reopen.

    The way unemployment is structured, with the Federal Government adding $600/week in addition to the state unemployment benefits, can be a deterrent to employees returning to work.  In New York State, the maximum is $504/week plus the $600= $1,104/week.  This could represent a raise for many, so why go back to work when you can stay home and possibly earn more money?  New Jersey caps out at $681/week, Connecticut at $649.  Florida has the lowest cap at $275; however, they have no city or state income tax.  The highest cap is Massachusetts, which has a range of $769-$1,220 depending upon the eligibility.  These numbers don’t mesh well with the Paycheck Protection Program (The Triple P), because business owners have to spend the money now over the next 8 weeks when their employees refuse to return to work.

    The public knows this “generosity” won’t last forever, so many are tightening up on their spending.  If you’re on a salary, you can’t increase revenues, only decrease expenses.  Here are a few tips to reduce expenses:

    1. Whole Life Insurance: If you have a traditional dividend-paying life insurance policy (the older the better), consider changing your dividend option to “reduce premiums.”  For example, you have an old $50,000 policy, the premium is $1,000/year and your dividend is currently $600.  You can change the $600 dividend to “reduce the premium” and now you would only have to pay the $400 difference, saving you 60%.
    2. Auto Insurance: Since many are self-quarantining, auto insurers are reducing prices.  Some are giving credits.  It’s a good time to shop the auto insurance market.
    3. Life Insurance Settlements: During the Covid-19 pandemic, “Life Insurance Settlements” can be a lifeline for seniors who could be struggling financially, and who own a life insurance policy in danger of lapsing.  These policies can hold significant re-sale value.  We have been able to sell policies with zero cash value for 20%-30% of the death benefit.  It’s important for seniors to realize they can sell their policy for a lump-sum of cash, instead of having to continue to pay premiums. We have 23 Funders who bid against each other in an auction, which ensures our clients will get the maximum lump-sum offer.

    Feel free to reach out to me to continue these conversations at Rob@InsuranceDoctor.us or www.InsuranceDoctor.us and complete our simple contact e-form.

    Be Safe and Wash those Hands!

  • Lost? 6 Steps for Finding a Lost Life Insurance Policy

    When people die, it’s not uncommon for their life insurance benefits to remain unclaimed because their beneficiaries didn’t know about the policy.   Life insurance companies try to contact beneficiaries however people often move, don’t check their emails and sometimes change their names.  Fortunately there are solutions for tracking down policies by using these 6 tips!

    1. Search for insurance documents: Look through paper files, financial folders, safe deposits boxes or home safes. Check for bills, the insurance broker’s insurance, new york, queens, financial planninbusiness card, the cell phone or address book of the deceased for information.
    2. Check financial records: Check bank statements, financial ledgers and copies of checks to see if payments were made to any insurance companies.
    3. Contact the decedent’s employer: If the decedent was employed or recently left a job check with their employer. Many companies offer small group term policies that could cover funeral expenses.  Also these group plans may have been continued or converted into a permanent policy when the job ended.
    4. Contact the unclaimed property office: Every state has a department for unclaimed property. If a life insurance company is aware of the death of a policyholder and cannot locate the beneficiary, the policy is reported to the unclaimed property office in most cases.  The funds are submitted to the unclaimed property office in the state where the policy was purchased.  If the decedent moved several times it may be necessary to contact the offices of each state they resided in the past.
    5. Check the MIB database: The MIB group is a not-for-profit company made up of life and health insurance affiliates. They keep a database of all policies written in 1996 or after by companies that are members of the group.  Since the fee is about $75 save this as the last resort.
    6. Tell family, beneficiaries and/or friends: Many people never tell their beneficiaries about their policy because of the grim nature of the subject.  We suggest completing a simple “estate directory” which lists policies, beneficiaries and where the files are being kept.  To learn more feel free to contact us at Rob@InsuranceDoctor.us.
  • 5 Tips How to Find a Good Insurance Broker

    5 Tips How to Find a Good Insurance Broker

    Insurance brokers and agents are trusted with fitting their clients into suitable life, health, homeowners & business policies to name a few.

    There are numerous insurance providers and they are not all the same.  It’s important that the broker you choose is well-versed in policy differences from company to company and informed of the latest news, trends, and products. He/she also needs to be concerned with your personal planning needs and capable of explaining your options in a way you can understand.

    Follow these tips on what to look for in finding a right insurance broker or agent:

    TIP 1: Knowledge and experience:  There is no substitute for experience! Look for brokers that have been in their field for a minimum of 5 years.  Proficient brokers will usually also have advanced planning designations (insurance degrees) next to their names.  Look for at least one of the following 3 designations: CLU (chartered life underwriter) CFP (certified financial planner) or CSA (certified senior advisor).

    TIP 2: Independent brokers, not agents:  This may be counter-intuitive.  In reality, independent brokers are in a better position to help you than “captive agents”.  The independent broker represents numerous insurance companies and must be well-versed on all their policies in order to find the best one for you.  The captive agent (i.e. Allstate or New York Life) often promote their own company products first in order to qualify for their company-sponsored trips and subsidized health insurance.  Make sure your broker places your needs before their own!

    TIP 3: Fee structure:  Most of the established independent brokers don’t charge a fee for time and/or services.  They receive compensation from whichever insurance company you decide to do business with.  Beware of agents/planners and advisors that charge steep upfront consultation fees.

    TIP 4: Get a second opinion:  Most people are already working with an agent/broker.  Do yourself a favor and get a second opinion using the tips given in this article.  You will be surprised at what you can learn from a free consultation with an independent broker.

    TIP 5:  Due diligence:  Invest the time to call 2 or 3 brokers.  Start a small list and ask around.  Friends, family or colleagues that are satisfied with their broker are a good place to start.  Check for their presence and reviews on the internet and gather as much information as possible.

  • 7 reasons New Yorkers should shop homeowners insurance now!

    Hurricane Sandy did $19b of damage to the city in 2012!  Many people (my family included) lost their coastal homes and were shorted 100’s of thousands of dollars from big-name insurance carriers that also raised rates.  We were offered $16,000 for shingles on a demolished $2m+ beach house.  With 520 miles of coastline, NY has more people living in high-risk areas than any city in the USA.  Now there’s a homeowner’s insurance solution, here’s why:homeowners insurance new york disaster

    1. One of our insurance carriers just dropped NYS rates over 30%. Some places in NYC by 38% off of already competitive rates to gain market share!
    2. They don’t care how near or far away you are from the water!
    3. My analyst who tracks this says they are the lowest NY rates he has seen in his 20+ year career!
    4. Product features include liability up to $1mil. Water back-up up to $25,000 on the policy.  Home system protection (covers the pipe that runs under the ground from home to city line).  90% of big name carriers don’t cover it.  Equipment breakdown coverage includes mainly hot water heaters, boilers, and central AC units that malfunction due to blackouts.
    5. All new clients will keep low rates the 2nd year as the carrier will revise new business rates based on their market share and loss ratios.
    6. This carrier will also work very well for 2 family homes as long as they are owner-occupied.
    7. The ONLY homes they won’t write are; Flat roofs, non-owner occupied and Fire Island homes. Rates are slightly credit driven.

    The time to shop is NOW, don’t wait for your renewals!

  • 5 reasons seniors should sell their life ins. policy in 2018

    5 reasons seniors should sell their life ins. policy in 2018

    Many seniors are creatures of habit and are holding onto their large life insurance policies with expensive premiums that they may no longer need or afford.  Based on the new Tax Law Reform, 2018 could be the best time to sell their policy.

    1. The Estate Tax has been increased: The tax exemption has been raised to $11,200,000 per person, $22,400,000 per couple hence the policy may no longer be needed to pay any estate tax.
    2. Tax law change on selling life insurance policies: People who sell their policies will now receive the same treatment as those who cash surrender their policy. In many cases, selling the policy can net 2-4 times more than the current cash value!
    3. 20+ settlement companies bid on your policy: We have access to 20+ settlement companies that will bid on buying your policy for much more than the current cash surrender value.
    4. Term policies can also be sold: Even term policies with zero cash value can often be sold for cash.
    5. Receive money instead of paying expensive premiums: Many seniors are on a fixed income and struggle to pay premiums. This way they can receive a lump sum of cash and no longer have to pay those premiums which should improve their quality of life.

    Reach out to us to find out how it works and to obtain a no cost, no obligation quote on how much money you, your parents and/or grandparents can get by selling their policy!

     

  • 6 Reasons Insurance Companies Know Everything About You

    6 Reasons Insurance Companies Know Everything About You

    You may want to think twice what you tell your doctor on your next visit.  Medical records are now online.  When you sign a HIPPA (health ins privacy) form to apply for life, disability and/or a long-term care policy the following information is available with a few mouse clicks:

    1. On-line medical records: Insurance companies can and will be able to see what medications you take by doing a pharmacy scan.
    2. Driving record: Companies can pull up an MVR (motor vehicle report) which can show drunk driving etc.
    3. The MIB: Medical Information Bureau: This isn’t the Men in Black movie, LOL. Companies can see whenever you apply for other insurance policies whether or not you take them.
    4. Criminal Record: Databases are linked and they can check on your prior arrest records.
    5. Memberships: Companies can see what type of groups, clubs and or organizations you belong to.
    6. Social Media: Some companies will look you up on Facebook, LinkedIn, etc to see what type or person you are and your public posts.