The firm of Steven H. Kobrin, LUTCF
I am second generation in the life insurance business, and have brought our local general agency on to the national stage. In doing so, my team and I have created an independent brokerage with a truly unique platform of services, for both consumers and their advisors. These include:
* A policy for virtually every applicant, from preferred risk to high-risk.
* Applications approved at the rate quoted
* Complementary policy audits for all clients to ensure optimum product performance.
When I am away from my desk, I am spending time with my family, especially my darling granddaughter. I am a serious martial arts practitioner, as well as a student of philosophy, religion, and psychology.
BA in Liberal Arts
I am licensed to sell life insurance in every state except Alaska and Hawaii.
This is a very common question among business owners applying for a bank loan. Let's look at an example.
Bob wants to borrow $2 million from his local bank, to expand his business. His banker agrees to lend him the money, but wants to have life insurance in place on Bob's life. Why? Because if Bob tragically dies before the loan is paid off, his banker doesn't want to have to chase his wife or his estate for the money.
So, the race is on for Bob to get a policy. He wants that coverage quickly so he can close the loan and get his money. He gets prequalified for coverage, finds a company that will give him good underwriting, and submits an application. The application is approved, the policy is delivered, he pays for it, and the coverage is put into force.
Now he is ready to execute a collateral assignment. He gets a form from his bank, or from the insurance company – whichever the bank prefers – and completes it. His wife is the beneficiary, and the bank is the assignee. He gets the money from the bank and sinks it into his business.
Now let's suppose he unfortunately meets his demise a year later. His wife files a claim. The claims department of the insurance company pulls the file and notices that the benefit has been collaterally assigned to the bank. They contact the bank and ask for documentation of any outstanding balance on the loan. The bank provides this, gets paid, and then Bob's wife gets the rest of the death benefit.
The use of a collateral assignment makes sure the lender gets paid only what they are due. If the bank had been made the beneficiary, they would've been given the full death benefit, even if some of the loan had already been paid off. They would've been overpaid, and Bob's wife would've been given nothing.
If you are applying for life insurance to secure your own business loan, remember that there is no reason to make the lender the beneficiary. Use a collateral assignment and make sure your broker walks you through its execution.
Please feel free to contact me with additional questions.
For me, all the conversation about using life insurance as a retirement vehicle focuses on two points: the need for a death benefit, and the cost of the death benefit.
You can't escape the fact that life insurance is a death benefit oriented product. It was designed to enable you to take care of your heirs in a very cost-effective matter. Each dollar of benefit literally cost pennies in premium, and there is probably no better way to leverage money for your estate.
Let's suppose that you know this, and like this, and have already arranged for your family, business, and favorite charity to receive a legacy through other policies you have. Since all your estate needs are taken care of, you can now afford to use a life insurance policy purely as a cash accumulation vehicle. Could it still be cost-effective for you?
The big factor here is the cost of insuring you. A significant portion of your premium payment will go towards maintaining the death benefit, even though you may not need it. That's the way the product is built. So now the question is: are the expenses of the life insurance policy lower than the expenses of other products that don't have the overhead of a death benefit to support? They do, of course, have admin expenses, and potential tax consequences, and so on. In total, which product will cost you less?
Here's what I suggest you do; get prequalified for life insurance. Make sure that you are being offered the absolutely lowest premium available. Then do a comparison between the life insurance policy and other potential options to accumulate cash. See which one puts more money in your pocket at the end of the day. That's the product to go with.
Feel free to contact me with any additional questions.
I think that Kevin Michels has provided you with solid advice to stabilize your finances. I would like to add a non-financial angle to the conversation.
I recently accompanied both my parents to their final destination. They were also octogenarians. In addition, I have an aunt and uncle both approaching age 100, and I am by their side as well.
All four of my elders have had the same goal as you and your wife; to be comfortable, and not worry. Stabilizing their finances was indeed essential to accomplishing that. But there was a lot more to do.
I think that what has most led to their peace of mind has been making peace with themselves. I’ve noticed how they each have undergone a process of coming to grips with who they are and what they've done in life. Some have found the process easier than others, but all have found it necessary to do. It's all about deep personal reflection, and involves a lot of forgiveness. As best as I can tell, it also involves a lot of tying together the loose ends, and “writing a good last chapter for their life book.”
When people no longer have the opportunity to generate additional income, they rightfully are concerned about making what they have last as long as will be needed. But on top of that, I think they need to make a final “accounting of the soul.” That reconciliation will be much more important than their bank balance, when their journey ends.
It sounds like you are talking about a policy in which the total death benefit includes the face amount and the cash surrender value. In that case, the total amount payable to you should be over the $100,000.
The carrier should pay the total amount automatically. A simple phone call to the claims department will give you an answer.
I am sorry for your loss. I just went through this process with both my mother, and a client who was also a close friend. It's very tough losing people. Having some ready cash does make it a bit easier:)
I am sure you are asking about dividends from investments. Don't forget that some life insurance policies also pay dividends. See below.
To tell you the truth, I think the question regarding these is whether not they are passive income or portfolio income. I'm going to guess portfolio income, but you should check with your accountant.
"If you have a cash value life insurance policy that pays dividends, you may be liable to pay taxes on the amount of dividends that exceed the amount of the premiums paid for the policy. Otherwise, policy dividends are generally not taxable. Again, you will receive a Form 1099-DIV by Jan. 31 citing the amount of dividends paid that must be included in your taxable income." http://www.foxbusiness.com/features/2013/05/23/taxability-life-insurance.html