Types of Insurance Archives | J. Wilcox Insurance Associates

Banking on Yourself for Your Business

Change is inevitable both in life and in business.

We prepare for life’s changes by saving money, buying insurance, and so on. Owning a business is no different, in fact it is even more important for the small business owner to protect themselves from change so they can continue to bring value to their clients.

While there are many different seasons for a business and various strategies to cope with changes, one extremely important factor that affects a business’s ability to weather any storm is adequate cashflow.

For example, one common trend is the expansion and contraction cycles of the economy. Right now, we are seeing high inflation and although we are not technically in a recession, many of us are feeling the pinch. Having adequate cashflow can ease struggles like this.

Y0u are probably asking, “what does this have to do with insurance?”. Insurance is designed to protect, and one of the best ways to protect against the ups and downs of cash flow is to create your own bank. This can be done with cash value life insurance.

There are several types of cash value life insurance and although each product is slightly different to support different needs, they are all based on the same principle. All cash value life insurance policies throw extra money in the form of elevated premiums into investments or investment indices. This in turn yields returns based on the stock market.

The best programs are indexed off the market, meaning that when the economy soars you participate in the growth, when it contracts your accrued money does not diminish. This strategy has been used by some families over the last several decades to build generational wealth.

In the hands of a business owner this strategy can build a very robust emergency savings plan for smoothing out the ups and downs in the economy as well as be instrumental in weathering big changes in the business environment such as the recent COVID19 pandemic. Additionally, because it is life insurance, it can be used in the event of the death or disability of the owner or a key employ as well as ensuring equity in dissolving a business partnership.

To set up an effective program, it is important to consult with an insurance professional. You should also consult with a business continuation specialist to get a more in-depth analysis of how to keep your business going through the variety of changes that we all encounter. For starters check out this article by Patty Bonsera.

If you do not have a good insurance professional on speed dial and want more information, reach out to my office at 719-247-0008.

Celebrate Life

SEPTEMBER IS LIFE INSURANCE AWARENESS MONTH

Especially after the recent pandemic, more people are acknowledging the uncertainty of life and the need for protecting their family or business when they are no longer around.

BUT, how does one protect themselves and their loved ones in the midst of a health crisis?

People often assume that their health insurance will cover most eventualities. This is not necessarily the case. In general, health insurance only provides for treatment of health conditions and there are major gaps (depending on one’s plan) in what treatments/conditions they will cover. It is important to note that even a good health insurance plan will not cover periphery services or extra living expense due to a health issue.

Disability insurance, long term care insurance, as well as a wide variety of supplemental insurance programs attempt to close that gap. However, these programs have many limitations such as, scope of care provided, age restrictions, as well as significant limitations on what counts as a triggering event.

HOWEVER, there is a better option! No longer is life insurance just to help others when you die. Now, there are riders on some life insurance policies that are called living (or accelerated) benefits.

These benefits allow early access to a portion of the death benefit for certain major or long-term health crises. Depending on the trigger it is possible to access anywhere from 50% – 80% of your death benefit. If you have a million-dollar policy, on the low end of the spectrum you would receive around $500,000 as a tax-free lump sum.

This opens a world of possibilities so you can fully live the life you have. With living benefits, you can pay for good care, pay bills, or go take a vacation.

What if you don’t use the benefit?

Often, the living benefit riders are attached to permanent (cash-value policies) so, if you live a long, healthy life you still receive a benefit, or you can always use the normal death benefit. So, whether you live long and healthy, or die young, or some other iteration, you can celebrate life through knowing every eventuality is covered.

The best way to get the right program in place is to talk with your insurance professional. If you are a Colorado resident in need of an insurance professional, feel free to reach out to my office via the contact form.

What You Don’t Know Can Hurt You

One of the things I have become increasingly aware of the longer I am an insurance agent is that there is a ton of misinformation proliferated about this industry. It doesn’t help that it has been organized in such a way that the average person has difficulty understanding the nuances in coverages.

One example of a misunderstanding that came back to bite me hard was regarding life insurance. Back in my previous career, I knew nothing about insurance, especially life insurance. I did not realize that underwriting for individual life policies was very selective. To the point where most major illnesses, especially those that are rare and not well studied, are barred from being covered. Since my health condition had just recently been diagnosed and I was still coming to terms with it, I just assumed I could get more later.

Fast forward 9 years and I became an insurance professional. One of the first things I realized was that the small amount of insurance from my previous job would barely bury me and I needed more. Sadly, it was too late. Because no one bothered to explain the system to me, I operated off of bad assumptions because I didn’t know better.

That is why I choose to educate others, so they can hopefully avoid similar situations. Obviously, people don’t realize what they don’t know. That is why it is important to have a good agent who will help you to navigate this very confusing industry. If you don’t have a good agent, feel free to reach out to my office.

The Coverage Your Business Needs

In our world today there are a variety of threats to businesses especially small businesses. Top of everybody’s mind is COVID, which is typically not a risk insurers will cover at least in the traditional sense. However, there are other risks that business owners think little of until it is too late.

There are three areas of coverage that most businessses need but tend to be under covered in. The first is cyber liability coverage, secondly, employment practice liability coverage, and lastly, key person insurance. There are others that are more industry specific and I will touch on those in the future.

Everyone knows that cyber attack is a ever present threat. The nightly news regularly has spots about large corporations that have gotten breached by cyber criminals. Most small business owners seem to think it only affects major chains, but the reality is major chains are the only ones that live to tell about it. As a small business owner the smallest breach can cost tens of thousands to correct and repair. The process is very complex in addition to being expensive and drives many out of business. If a company has a brick and mortar, does e-commerce, or takes credit cards at all they need cyber protection.

Employment practice liability is applicable to anyone who has W-2 employees. We live in a very litigious society and even the best of us make mistakes in managing our staff. Employment practice liability protects the owner from lawsuits arising out of accusations of wrongful terminatilon or other discriminitory conduct. Beware however, that in this time of COVID insurers are very wary of covering businesses for this particularly because so many have been laid off and hence lawsuits for wrongful termination are more likely

Key person insurance is the best way to cover your business from loss of certain key employees due to disability or death. This insurance is not subject to the same limitations that other coverages have when dealing with pandemics. If you have key person insurance in place, then it wouldn’t matter what disabled or killed the employee, the fact that they could no longer work triggers a payout to the business to replace that individual. This insurance is incredibly powerful as it can help businesses of all sizes and varieties.

To ensure these coverages are on your policy you should consult your agent. If you need an agent, I am happy to review your policy with y0u. Simply fill out the form below and my office will be in touch.

Dangerous Myths About Life Insurance

I hear it all the time when I talk with people about life insurance.

“I am good because…”

There are many of these excuses and I made many of them myself. The most common misconceptions are also the most dangerous because they leave people assuming they are good when usuallly they are not. Here are the top 3 “I am good” traps people fall into.

I have a policy through work
I am young and healthy.
I can’t afford it/I don’t need that much.

I have a policy through work

I have heard this numerous times from people. Many medium to large companies offer life insurance to their employees as a work benefit. While this in itself is all well and good, the policies are often very small and if the employer pays the premium they control the policy, meaning that if you seperate from them ever your life coverage vanishes.

Even if you carry the policy with you when you move on they are typically only good for replacing a year or two salary and the premium typically doubles or worse. This is not good news for a family, like many I work with, who rely on both incomes to run the household . It is even worse if one spouse brings in most or all the income. I was working with a client, I’ll call him Dave, who brought home 90,000 of the household 100,000 income. Dave’s work policy pays 200,000 upon his death. Like a many young families, he has 2 little kids and a mortgage. I asked him one question. “How long…?”

How long does your wife get to keep the house, the kids fed and clothed, and maintain some sense of normalcy before she is out of money?

We opted to get Dave a supplemental policy to fill the gaps left by the work policy.

I’m young and healthy

20-30 year olds without major health issues often feel as if they don’t need life insurance, espcially if they are not married and don’t have kids. The truth is this is the best time to get life insurance for 2 reasons.

No other time in life will it be this affordable or this easy to get.. For young adults that are still single, they don’t need much coverage but it is good to get a start while you can breeze through underwriting.
It guarantees insurability. You never know when disaster will strike, in fact the best case scenario guarantees that you will get older, have health problems, and die. By getting life insurance before that time you are ensuring that you have available protection that can be converted into more long term solutions that meet life’s changing needs.

I can’t afford it

This is perhaps the dumbest excuse ever. i know because it was tbe one I made until it was too late. My wife and I got married in 2008, 2 years later I started showing symptoms of what would eventiually be diagnosed as a progressive neurological disorder called Cerebellar Ataxia.

Hindsight is 20/20. Had I known then what I know now, I would have made room in the slim budget for enough life insurance to fulfill my marriage vows to protect my wife. I should have done this on our wedding day or at least heeded the symptoms 2 years later before being rendered uninsurable by the diagnosis. I was given another opportunity in 2015 to get a policy through work that because I paid into it was mine for keeps. I opted for a minimal policy to cover burial. I simply didn’t think through how my wife would be affected financially by the likelihood of my early death.

Having made such agregious mistakes myself, I am passionate about helping people avoid the pitfals I fell into. If you or a loved one are unsure about the state of your life protection or if you have been assuming you’re good, Take a few minutes to contact yoour insurance advisor to make sure you are good. If you need help feel free to contact my office at 719-247-0008 or fill out the form below.

What You Never Knew About Life Insurance

September is Life Insurance Awareness Month.

You may be asking yourself, “what is the point?” I mean who cares, really?

According to research by LIMRA (a non profit group supporing financial services) 75% of U.S. households realize that life insurance is important and about 40% feel concerned and worried about life insurance.

So what is it that concerns us? We just don’t know enough. Most people grasp the need for home and auto but life insurance is very abstract until a family uses it.

With an increasing number of ads and telemarketing designed to sell life policies over a distance it is no wonder we don’t understand. The best way to learn is to work with a financial adviser or insurance agent who is trained. The following is a summary of what life insurance can do.

Life insurance’s primary goal is to replacce economic loss from early death, but it can do a whole lot more. Many companies have living benefit riders or accelerated death benefit riders that pay out around 75-90% of the death benefit upon a severe or terminal illness. There are also numerous other riders, or add ons, that protect against disability, changing needs, forgetting a premium and more. Talk with your agent about how you can make life insurance work for you.

A little understood benefit of life insurance is its ability to grow wealth. This is a very complex topic but some basic pointers are:

Life insurance should not be the primary or only savings vehicle but it is a valuable way to grow money.
Life insurance proceeds (cash value or death benefit) are accessible tax free.
It is very powerful for the young.
As with any money growth plan, it takes commitment.

So how do you figure out the amount of life insurance your family needs?

Although the best way is to talk with your individual agent,There are several great tools and calculators available online, like life happens. Generally with my clients I look at, any debt, income replacement needs, outstanding mortgage, and higher education for the kids/grandkids. It is also important to account for budget and overall financial goals especially in regard to cash growth through life insurance.

Particularly in light of the pandemic it is critical we be aware of life insurance and how it can help us. If you have questions, talk with your agent, If you don’t have an agent fill out the form and my office will reach out.

Does Cheap Car Insurance Make Sense?

As an insurance professional I run into people regularly whose primary concern is to get the cheapest coverage. They like to ask,

How low can I go?

I have a friend, who carried pretty standard auto insurance liability limits with 100,000 per person injured in an accident and matching coverage for underinsured motorists. One morning while taking his dog for a walk he got clipped by a driver who had the same amount of coverage on his own policy.

My friend required years of physical therapy and multiple surgeries to repair the damage to his body. This ran him upwards of half a million in surgeries alone. Now for those of you who are good at math you are realizing that the driver’s liability coverage plus my friend’s underinsured motorist coverage add up to 200,000 towards paying my friend’s medical bills. Of course, however you do your math my friend now was on the hook for hundreds of thousands over the course of multiple years.

This casts a new perspective on the question above. The question should not be, “how low can I go?” but “how much is enough?” For that I refer to my previous article with that title. There is a balance that needs to be struck between risk protection and not blowing the budget, and for that it is invaluable to have an insurance advisor.

We don’t really grasp the importance of insurance until we use it like my friend and the driver that hit him. If you are unsure about your coverage or have questions it is critical for you to find and retain a quality insurance advisor. If you need an insurance expert I am happy to meet that need. Either fill out the form or call my office at 719-247-0008.

Executive Bonus 162 and Small Business

According to the IRS, business entities can deduct all reasonable expenses including compensation in a given tax year. (IRS tax code section 162 (a)1).

This opens a world of possibilities to employers large and small. Many take advantage of this provision by offering an executive bonus in the form of cash value life insurance for key executives within a company. There are many good articles available online about how this flexible bonus plan can help businesses generally such as this one from Bolicoli.com

As a new entrepreneur I am passionate about small business. Although big businesses often choose to reward key executives without the government oversight and regulations that accompany other more traditional benefits packages, small business owners are more concerned with paying today’s bills and success of their business in the future.

Small business owners are a high risk population, if they die or become disabled the likelihood that the business closes its doors for good increases dramatically. This impacts employees, family, and customers of the business. Additionally if the business falls on hard times like we’ve had recently with the COVID pandemic capital is not available to help a business survive.

Furthermore, if everything goes well and the owner is ready to sell the business and retire, it can be very helpful to have a supplemental tax free income stream in retirement. Or, as is often the case, the business becomes part of the inheritance it is helpful to have liquid (tax free) cash available to apportion inheritance amongst multiple heirs that may or may not wish to continue the business.

Structuring cash value life insurance as an executive bonus plan billed through the business can resolve all 4 issues. If a business owner dies early the death benefit can go to a beneficiary of their choice, generally a spouse. It can also act as a key person benefit to help wind the business down and avoid sudden layoffs and loss from inability to sell the business. If a disaster hits like COVID, the owner can access cash values to help either the business or family survive or both.

On the other hand, if everything goes great, the cash value in an executive bonus life policy can be accessed tax free to help retirement. Then, when the owner passes there is adequate liquid inheritance to divvy up amongst the heirs, without having to liquidate or in any way damage the business.

Some rules of thumb as with all other life insurance is that sooner is better. A 40 year old for example, will be able to get a more affordable policy than a 50 year old all else being equal. However, the principle also applies,” better late than never.”

To find out more about this very powerful tool you’ll want to consult with your personal insurance professional and your accountant or CPA. If you don’t have an insurance advisor, feel free to contact me via the below form or call 719-247-0008.

Life Insurance is for Living

DO YOU WANT FINANCIAL FREEDOM FOR YOUR FAMILY?

DO YOU WANT YOUR DREAMS SECURED REGARDLESS OF YOUR HEALTH?

DO YOU WANT YOUR FAMILY’S ABUNDANCE TO OUT LIVE YOU?

You can achieve the above with life insurance. In fact you can achieve it whether you live long or die early through cash value life insurance.

Cash value insurances come in a variety of shapes and sizes, but there are two basic categories – Whole Life and Universal Life. Whole Life has limited uses and is generally outdated and outclassed by Universal Life.

Universal Life or UL is a relatively recent product with some really nifty features. Almost all UL’s have:

The ability to be accessed tax free.
The benefit of saving while protecting income from loss.
Many IUL”s are now sold with living benefits to allow you to access the money prior to death in cases of severe injury or illness.

The UL was designed to be flexible and efficient. As such, the basic UL has developed into a number of different products that target specific goals that consumers have. Most of these differences are based on what happens with the extra cash value in the account. The main variations are the Variable Universal Life, the Indexed Universal Life, and the Fixed Universal Life.

Variable Universal Life

There is a continuum of risk involved in the money growth portion of the UL. The most risky but potentially most profitable is the Variable Universal Life which functions in the market like a traditional investment, this is administered by a licensed investment professional and if done wrong can cost the investor dearly. I have had family who were ill advised to get into a VUL and were lucky to break even on their investment.

Indexed Universal Life

The Indexed Universal Life or IUL is great for young to middle age couples or families who are trying to grow their money. Unlike the VUL, the IUL is indexed off the market and typically has a floor at 0% so if the market tanks the owner does not lose any money. The best IUL’s have a growth ceiling at 8%-12%. Many financial gurus teach that 10-12% is the optimal growth in a good investment. This means that while the IUL is a safer vehicle than m0st traditional investments it is also on par with them for growth potential. Add the ability to access funds tax free and protect your family or business at the same time and the IUL is an ideal money growth vehicle.

Fixed Universal Life

Fixed Universal Life products are the most secure from risk. Some are even sold as guaranteed return of premium. In that sense they operate more like a term that lasts your whole life or if you make use of the cash back they become FREE.

In looking at whether cash value insurance is a good fit for your savings portfolio you should talk with your financial/insurance advisor about what you want it to do for you. If you don’t have a professional insurance advisor, fill out the attached form and I will be happy to meet with you via zoom or in person to evaluate your needs.

The Many Uses of Life Insurance

Life insurance is perhaps one of the most misunderstood and under utilized forms of insurance.

Most people are aware that life insurance can serve as an effective financial replacement for loss of income when a loved one dies. but it is so much more than that. Structured appropriately, life insurance can protect an estate, provide tax free income for retirement, protect a business, and be used by a business to attract and keep quality employees.

The variety of life insurance uses can best be understood by looking at two different buckets, personal uses and business uses.

Personal

Most people understand the basic concept of income replacement, but often avoid it since it involves talking about death. A more positive way to look at it is you are giving your loved ones the opportunity to live. Looked at this way, the topic isn’t so depressing. To provide this opportunity to your loved ones you need to consider how well you want them covered and how long you want the income replacement to last. A professional insurance/financial advisor can help with this

Two other uses of life insurance for individuals are protecting an estate and securing supplemental tax free income in retirement. These two applications are more complex and so it is best to consult with your financial advisor and tax advisor as well as in the case of an estate, your attorney.

Life insurance protects an estate in two ways. Because proceeds are tax free, you can use them either as direct inheritance in lieu of other taxable means of inheritance, or in the case of cash value policy you can use the cash value to meet the tax demands of the estate. Again, each individual situation is different and it is best to get advice from your financial advisor.

Using a cash value life policy to fund a tax free retirement is one of the most creative and fun uses of life insurance. Because life insurance is favored by the IRS, it is possible to use it like an unlimited ROTH and grow and access accumulation of wealth tax free. For more detail on this feature of life insurance I highly recommend Tax Free Retirement by Patrick Kelly.

Business

Because they operate as entities, businesses can use life insurance in similar ways to individuals. The most common uses are protecting the business from a significant death and rewarding employees.

Businesses need protection from the loss of key employees as well as be safeguarded from loss of a managing partner. Protecting a business from the loss of a key employee is much like protecting a family from the loss of the breadwinner. Instead of having individual relatives as beneficiaries, the corporation or a representative thereof is the recipient of the proceeds and then they are used to replace that loss.

In the case of joint ownership, the owners can fund a buy-sell agreement using life insurance. This is a more complex process depending on the size and value of the business and the number and stake of the partners. It is best not only to have an insurance professional but a legal professional to help ensure things are set out in a proper manner. The thrust behind this insurance is that the remaining partner can buy out the heirs of the deceased partner, and therefore continue the business using the life insurance.

Businesses can also utilize cash value life policies to attract and maintain valuable employees through the executive bonus plan 162. This is based off of section 162 in the IRS tax code and is unqualified money, meaning there are a lot fewer restrictions legally and more freedom for the business.