If you’ve ever seen the movie “Major League,” you probably remember it was about a baseball team made up of the biggest misfits anyone could put together. It was a team built to fail. (Spoiler alert: No, literally – the owner actually wanted the team to lose so they could move to another city.)
“Wild Thing” Ricky Vaughn had a great fastball, but, unfortunately, it was rarely a strike. Pedro Cerrano could hit a fastball into the next zip code … but couldn’t touch a curve ball. Willie Mays Hayes could run like the wind – too bad he couldn’t actually hit the ball so he could run the bases. Plus, manager Charlie Donovan used to manage a tire store … how could he manage to help this misfit team win?
The better question you may be asking is, “What does this have to do with long-term care planning?” Well, let me explain.
First of all, the players on this team were out for one thing: themselves. Their focus was on what was best for them individually, not what was best for the team. They were blind to their real problems. This was especially true for Vaughn – he was literally blind to the strike zone and needed glasses to focus! When the rest of the team realized they were set up to fail, their focus changed, too. They had to come together, drop their old habits, and start focusing on what mattered.
The same is true when it comes to long-term care planning. Both advisors and clients seem to be blind to what matters. I can understand why clients may be blind – we aren’t giving them the right tools (glasses) to focus on what they should really be looking at. As financial professionals, we have to make sure we’re throwing something they can actually hit, not lobbing in lazy pitches.
If we continue along this path, we’ll start walking in runs, losing games (sales), and the team (clients) may move to another city (advisor). So, how do we pitch so our clients can hit homeruns?
The next time you’re ready to pitch long-term care to your clients, grab your Wild Thing glasses and get focused – you’ll win more games and take your clients to the World Series. If you continue to lob your throws across the plate? You’re only setting yourself up to fail.
Chad Eyrich is proud to help keep families together with long-term care planning. He helps advisors and their clients avoid the potential financial devastation of an LTC event by providing strategies around traditional, asset-based and linked-benefit insurance. In addition to earning his Long-Term Care Professional and Certified in Long-Term Care designations, Chad has a life and health insurance license, and a property and casualty insurance license.
Editor’s Note: The need for efficient retirement planning is evergreen, so we decided to re-publish this post from 2015. We’ve updated the numbers, but the conclusion remains: a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.
But, has anyone really analyzed these comparisons and their validity? Let’s take a closer look at why life insurance is often compared to Roth IRAs with additional benefits.
To qualify for a Roth IRA, your clients have to fall under income certain limits established by the IRS. If they’re married filing jointly, their income has to be less than $184,000 to qualify for a full contribution. If filing single, their income has to be under $117,000. In addition to income limits, Roth IRAs also have annual contribution limits – currently the limit is $5,500, but people age 50 and over can contribute up to $1,000 extra per year to “catch up” before they retire.
Life insurance, on the other hand, isn’t bound by any IRS income or contribution limits. Instead, it’s bound by insurable interest and medical qualifications.
In a Roth, your clients always have access to the basis without penalty. However, if they’re looking to access cash in excess of the basis before age 59½, they’ll incur a 10 percent tax penalty. There are exceptions for first-time homebuyers and qualified educational expenses, however.
With life insurance, your clients may incur surrender charges in the first 10 to 20 years, depending on the contract. Outside of surrender charges, there’s no penalty for accessing the cash value in excess of basis before age 59½. It’s important that early withdrawals are closely monitored, however, as they could affect the performance of the contract and create a tax liability if the policy lapses.
Life insurance policies are self-completing and provide beneficiaries a tax-free death benefit – which is greater than the account balance – should the client die before retirement. (Please note that life insurance has cost-of-insurance charges to provide this benefit.) With a Roth IRA, the account balance passes to beneficiaries and may be subject to taxes.
Beyond age 59 ½, both contracts allow the client to access the gain without paying capital gains tax. Neither contract requires a minimum distribution at age 70½ like a traditional IRA.
Life insurance and Roth IRAs have several similarities. However, a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.
It happens all the time. Your client has no serious medical impairments, takes no scary medications, and has excellent build, blood pressure and family history. You sit down to fill out the application and ask a few remaining questions, such as, “Have you been convicted of a DUI/DWI in the past?”
This is when the case can go sideways.
We all know the facts. Driving under the influence of alcohol or drugs places the driver, as well as others on the road, at risk. Yet, people continue to do it. In 2014, 9967 people died in drunk driving crashes – one every 53 minutes.* This is why motor vehicle reports are routinely ordered.
In today’s market, a client with a DUI or DWI will not likely get best rates for five years. Even if the incident was a one-time mistake, as many are, statistics show the average drunk driver has driven drunk more than 80 times before the first arrest.* Insurance companies are statistic driven, so the actuaries tell them your client is indeed a higher risk.
Most carriers will put a flat rating on a client with a DUI during the first few years, but we have carriers who are more forgiving as it relates to a one-time event. One in particular will allow a Table B rating, even if the event is less than one year out, as long as there are no other concerns and the client is over the age of 21.
Of course, not all DUI’s are one-time events. About one-third of all drivers arrested or convicted of drunk driving are repeat offenders.* What should you do if this is the case?
First, remember not all DUIs are looked at through the same lens. If your client had a DUI in his/her 20s, then another 30 years later while coming home from a business meeting, the first incident is often written off as “youthful indiscretion.” Underwriters know the brain of a 21-year-old is not as developed as that of a 45-year-old, so we can be understanding. In these situations, a cover letter is of the utmost importance.
On the other hand, if we see a client with more than one DUI in his/her later adult years, we worry about alcohol abuse and will ask more questions. We will be looking very closely at medical, social, family and work history for any red flags of abuse. We will ask if the client still drinks and, if so, how often. We will want to know if client belongs to any organizations or has undergone any treatment.
Our Alcohol Usage Questionnaire can help you get to the heart of the matter. This form questions alcohol use and/or abuse as well as the driving record. You may feel awkward asking these questions, but it is even more uncomfortable telling a client he/she has been declined after going through the entire underwriting process.
No matter the situation, we encourage you to ask questions and get all the facts. Check out the resources below. If you have a specific scenario you would like to discuss, please reach out to me at laura.dagle@Ashbrokerage.com.
*MADD Drunk Driving Statistics: http://www.madd.org/drunk-driving/about/drunk-driving-statistics.html
Ash Brokerage comprehensive questionnaire for DUI and Alcohol use/abuse: https://www2.ashbrokerage.com/docs/forms/impairment/Alcohol.pdf
Centers for Disease Control and Prevention. http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6430a2.htm
National Highway Traffic Safety Administration http://www.nhtsa.gov/people/outreach/traftech/1995/TT085.htm
U.S. Department of Health and Human Services – Substance abuse http://www.samhsa.gov/data/sites/default/files/NSDUHresultsPDFWHTML2013/Web/NSDUHresults2013.pdf
Laura Dagle has been in the insurance industry for more 35 years, during which time she has been both a producer and an underwriter. As someone who has seen the business from “both sides,” she is keenly aware of your desire to have the smoothest process, easiest underwriting and best possible outcome. As a 20-plus year member of a 12-step program, she has a special interest in alcohol-related cases and an understanding of the complications as a result of its use or misuse.
No other sport allows you to develop a lasting professional bond like golf does. Whether it’s with clients or colleagues, golf will get you out of the office and into nature, allowing you to build or renew relationships in a relaxed setting.
If you want to get more out of your meetings, you should consider making your next appointment out on the links for a few reasons:
But remember, the sport isn’t always easy. Built on a culture of integrity, it can be a true test of your character. Golf is something you can always practice but never perfect, which requires serious patience and resilience. We all know it can be easy to get angry over a bad shot (it happens!) … but if you lose your temper on the course, you could also lose a client.
When you’re out with your buddies, you can be as competitive as you want. But, when you’re out with your clients, you don’t want to take the game too seriously. To ensure everyone has a good time, consider these tips when you plan your next professional outing:
Whether you’re a regular golfer or occasional putt-putter, your clients will appreciate an outing with you. Take advantage of the time to bond, talk a little business, and have fun.
As a Life Insurance Portfolio Analyst at Ash Brokerage, Chris Kratzert helps advisors ensure their clients’ existing policies remain the best available solutions to meet their needs. He has been with Ash for more than six years, and has a business marketing degree from Ball State University.
As a golfer, Chris has a current handicap index of +0.3 and has played in amateur tournaments at the state and national level. He comes from a family of great golfers – his grandfather, William Kratzert, was a country club professional, and his uncle, Billy Kratzert, and aunt, Cathy Gerring, have won on professional tours. Currently, his uncle is a golf analyst at The Golf Channel and various networks.
© 2018 Ash Brokerage LLC.