The firm of Steven H. Kobrin, LUTCF
In 1991, I entered the life insurance business full-time, and soon formed my own national brokerage. Throughout my career, I have been dedicated to mastering the craft of selling life insurance, and am an expert in helping people get a policy who represent a “higher risk” due to health, lifestyle, or other personal issues. Along the way, I have developed a huge network of industry contacts that enables me to serve as a primary resource for all the insurance needs of my individual and corporate clients.
I now help brokers, advisers, and financial firms across the country utilize my organization and become a primary resource for the insurance needs of their own clients. They form strategic partnerships with my providers so they can stay within their own area of specialization, yet help their clients purchase the other products they need from professionals in those marketplaces. It's a winning formula for all concerned.
I run a linked in group about these strategic partnerships:
On the personal side, I am a religious Jew and avid practitioner of kung fu. I have studied spiritual disciplines and personal development all my adult life. I am a conservative in my political and economic views, and a liberal when it comes to keeping an open mind and a willingness to work with people of all persuasions.
BA in Liberal Arts
I am licensed to sell life insurance in every state except Alaska and Hawaii.
There's no reason to estimate the cash value. Simply call the carrier and ask them what is the current value.
I assume that you didn't buy a product that has both a guaranteed cash value as well as a non- guaranteed value. If you did, then get both numbers.
If you are concerned about the future value of the policy, ask them for an in-force illustration showing current and future values, assuming no future premiums are paid. I stipulate that because I assume that when you say “paid up,” you mean you have stopped paying into the policy.
This is a good time to evaluate your need for life insurance going forward. Make sure you cover all the possible bases, because there could be a number of reasons for why you need coverage.
You can borrow money from life insurance, that has a cash account for use, while the insured is alive. But you need to make sure you understand how these products work so that doing so doesn't backfire on you. Here are three pitfalls to avoid when you take cash out of life insurance:
1) Don't reduce the death benefit
Remember, life insurance is first and foremost a sum of money to take care of your heirs, estate, business, favorite charity, and all others who will carry on your legacy.
Taking money out of the life insurance policy while you are alive could very well reduce the survivor benefit. You don't want to short-change the beneficiary.
2) Don't tamper with the guarantee
Permanent insurance can have the unique feature of guaranteeing your coverage for the rest of your life. These guarantees are based on certain assumptions. Chief among these are that you will stick to a premium-paying schedule, and will keep the cash accumulating at a certain level.
If you take cash out of the policy, you may deplete the cash needed in the policy to ensure the guarantee. The coverage may not last as long as you want.
3) Don't force yourself to pay additional money
Some permanent policies will even ensure the guarantee when you take out cash. But the cost of providing you that guarantee will have to be covered somehow. They very well could ask you for additional premium payments to pick up the difference.
If they do this, then you will be paying more money into the policy than expected.
The moral of the story is this: get an understanding of what you want to use life insurance for – both the living and the death benefit – and make sure you are informed about the ramifications of tinkering with that strategy.
Please feel free to reach out to me with any additional questions.
It's always a good idea to get tax advice from a tax professional. Having said that, I can share some lessons learned from my 25 years experience in the life insurance business.
I think on virtually every claim I have helped file, the beneficiary has taken the benefit in a lump sum. No income tax there. If they had let the company hold on to the money, and distribute it as monthly income, they would've had to pay tax on the interest earned. Then again, they would've had the same obligation had they received a lump sum and invested it in a taxable investment to generate monthly income.
If you want to get really clever about this, you could do the following: take a lump sum life insurance benefit, and put it into a new life insurance policy on yourself. If you play your cards right, it could both accumulate tax-deferred and be distributed tax-free. Of course, you have to need the life insurance, qualify for a good rate, etc. Make sure you know what you're doing here.
Another way to get taxed on the life insurance benefit is to receive money from an estate that is so large, the unified credit won’t shield all its assets. This is an estate tax, not an income tax. With proper estate planning, you can avoid this. (I personally can't wait until the estate tax is repealed so we don't have to worry about that burden. This may seem like blasphemy coming from a guy who makes money selling life insurance to pay estate taxes; but frankly, I don't think the government has any right to my family's money that was already taxed upside down and sideways when earned.)
Just a little political commentary, as long as we are on the topic :)
I'm going to give you an out-of-the-box alternative: don't buy any insurance for long-term care expenses. Since you say you are in good health, do everything you can to stay in good health. This means mentally, physically, spiritually, and financially.
Believe it or not, not everybody becomes so disabled that they can't perform the activities of daily living long enough to qualify for long-term care insurance benefits. Sure, the insurance industry puts out all kinds of statistics showing you what the odds are. In my opinion, however, there is a larger story behind the scenes. That story deals with the degree to which people really do take care of themselves.
As I see it, many, many people do not take proper care of themselves. Their diet is so-so. They exercise somewhat. They put up with more stress and worry then they really need to. They don't address the larger questions in life to find some peace with themselves. They don't do enough to rejuvenate themselves, so they wear down. For these folks, the odds of becoming disabled later in life are higher, and they will probably need long-term care.
I saw this happen with both my parents, and I see it happening now with other family members. I feel bad for them because they have gone through much suffering. They all say “getting old is no fun.” Fine. But you know what? It could be a lot easier if you adopt the right lifestyle.
That is where I have placed my own bet. I work very hard at living a life that gives back to me as much as I give to it. I have not purchased a long-term care insurance policy, and I don't intend to. And don't forget that I am a life insurance salesman, so I really know the importance of these kinds of policies. My bottom line is that I really can't change the fact that I'm going to die someday, and that is why I have life insurance policies. But I do believe I have a lot more control over staying able-bodied.
The decisive factor here is not impacting the beneficiaries of the policy. That should be the priority if you're considering reducing the face amount through a loan. If they would not be adversely affected, I say by all means, go for it. At that age and stage your mom should have a sense of completion and fulfillment.
While you're at it, take a quick inventory of available cash for other expenses your mom might have. What about out-of-pocket charges for medical treatment, things like that? Each one of my parents, as well as my elder aunt and uncle, paid for home aid assistance out of their pocket. If your mom is ailing, give some thought as to whether she will need care.