July 15, 2018

Life Insurance Products

Life Insurance Products with Steven LaBroi, Wealth Strategist – July 15, 2018

Tawana: Good morning. Thank you so much for coming back. Our Chief Strategist, our Chief Wealth Strategist is here. Steven LaBroi, from the LaBroi Insurance Group LLC, good morning to you!

Steven LaBroi: Good morning once again. So appreciated to be here on Sunday.

Tawana: All right. You know what? Half the year is gone.

Steven LaBroi: Oh, my God, yes.

Tawana: I know. You hate to look at it that way, but half the year is gone already, and we still are preparing for so many different things, as we are … as my husband says, rapidly, he’s getting to 60. I’m just in my mid-50s, so, but there are things that we just have to get in place here, for our retirement. For impending death, because we all got to die, okay?

Steven LaBroi: Right. Of course.

Tawana: That that’s the reality, and we’re going to talk about some life insurance today. Breaking down life insurance. Because there’s so many different policies or products, if you will, out there, and we need some help. Okay? So tell us what we need to know about these products.

Steven LaBroi: Yes. I want to really talk today about the different life insurance products, even business insurance and long term care. We’re experiencing so much, in terms of good things these days. We have self-employment. We’re back to work. The employment percentages are up, and people have side hustles, and all of we’re talking about now is truly planning, and staying on top of our planning.

Steven LaBroi: I will start with just going down the row, just giving some, what I think are some strategic explanations of some of the cliches and some of the things I hear my clients out here, so-

Tawana: So start with term life. Because that’s the one we hear the most about. Well, I want to hear about whole life. But you’re going to explain it. But let’s start with term life.

Steven LaBroi: Yes. Term insurance. Term life insurance. You hear about it on TV. A lot of commercials. Some people talk about whole life, but term insurance what we cliche as the cheap insurance. Insurance, life insurance is all still about planning something in the future. But understand, term insurance is just to cover loss of income, or to cover assets that you need to be paid, just in case of a tragic loss.

Tawana: Okay.

Steven LaBroi: But you know at that time, the policy will go up in price, potentially, and you can get a quote. But you don’t have to take a medical exam. So when you call it cheap insurance, you’re really Knowing that it’s an objective, and you’re just trying to cover loss of income, or make sure your family is good, just in case you go home early.

Tawana: So if I have a 30-year policy in term life, and I’m not dead at that time, I have not passed on, so I can renew that. But you’re saying that the prices will probably be different, way different. Okay.

Steven LaBroi: Yeah. Well, as you know, insurance is, a lot of it’s based on age and health.

Tawana: Right.

Steven LaBroi: So we’re talking about 30 years into the future, and if you’re still in great health, still working out, the prices will be consistent. But your age will be different.

Tawana: Right, right.

Steven LaBroi: And so you want to look at the terms of the policy, or the actual benefits of the policy, that either it can converted to whole life. Or like you said, potentially renewed, into another term policy. We know that after age 85, you can’t get life insurance anyway.

Tawana: Yeah.

Steven LaBroi: So you got to get it before age 85. My grandmother always wanted to get it after 85, and I had to tell her that she couldn’t get it. Yeah, it’s definitely something that we have to look at, but it’s just set objectively for covering loss of income. It has very little other strategic benefit, unlike some of the others that we’ll talk about.

Tawana: Okay. So let’s go right into whole life insurance. That’s something else that we’re seeing a lot of, on television. You see these older people talking about whole life insurance. Is that for seniors? Or is that for anybody?

Steven LaBroi: Well, life insurance is for anybody, long as you qualify.

Tawana: Ah.

Steven LaBroi: The kind of commercials you see on TV are pretty slated towards lower face value policies, maybe up to $25,000. A lot of times they’re geared towards people who waited later in life, who don’t have life insurance, and they didn’t plan early. And so, you get these policies to make sure that your end of life services or celebration is covered, that you don’t leave any bills for your children or for your loved ones.

Steven LaBroi: But whole life in itself can be a strategic plan, if we pay attention to it. It has its own tax code, 7702, and it has provisions that can be put in place, if you strategize with your agent, so that you can use it throughout your entire life for different things. If it’s done properly, [Tawana 00:06:12], even the death benefit grows over time. So we have to be able to look at it from a very strategic perspective, not just from a product, and it’s more expensive, and term life is cheap.

Steven LaBroi: But from a strategic perspective, and have a clear discussion as to, what would you like it to look it in the future, when there’s potentially time for you to use it while you’re living? Because a lot of these policies also have accelerated death benefits, so if you’re ever chronically ill, critically ill or terminally ill, you can pull some of the money down off the policy while you’re living, to help you with healthcare costs. So it’s very important to strategize and potentially look at this extremely earlier in life.

Tawana: So when we hear, “permanent life insurance,” is that the same as whole life insurance?

Steven LaBroi: Yes it is.

Tawana: Okay.

Steven LaBroi: Permanent life is a category. Whole life is a product.

Tawana: Ah, okay.

Steven LaBroi: A permanent life can encompass several things, of whole life, indexed universal life, variable universal life. Any product that will last your entire life. It’s interesting that the words really tell what they are. Whole life is your entire life. Permanent life means your entire life. So the category is permanent life, the product is whole life and even some of the products, on indexed universal means that you have some type of index involved, or market index involved.

Tawana: Like investments.

Steven LaBroi: Yes.

Tawana: Okay.

Steven LaBroi: Yes.

Tawana: Okay. Other ones that you really wanted to talk about. Employer life insurance, and a lot of us have that on our jobs.

Steven LaBroi: Yeah.

Tawana: But there are caveats to that, right?

Steven LaBroi: I wanted to make sure I brought this out. Because the first thing people will tell you is, “I got life insurance on my job.” And it’s really the truth, but it’s group life insurance.

Tawana: Right.

Steven LaBroi: But even in that policy, there are provisions that you have to pay attention to. A lot of times, majority of times, those policies just end when the job is over.

Tawana: Exactly.

Steven LaBroi: So if you stay there through retirement, and you can be older, you may not have life insurance. If you leave the job early, you may not have life insurance. You just have to understand, yes, they’re free or nominal-

Tawana: Right.

Steven LaBroi: In terms of pricing. You can, maybe two or three times your salary.

Tawana: Right, right.

Steven LaBroi: And no medical. You can go in with preexisting conditions and still have life insurance. It still has to be strategized with what your plans are. Some of them are convertible to whole life when you leave. Some of them are portable. Portable means that you can take it with you.

Tawana: Right.

Steven LaBroi: But then some of them you can take with you, and the prices just continue to increase every five years, maybe every year. It’s really clear, even to talk to an agent, about what you have on your job. Because a lot of times, your HR people can’t explain it to you.

Tawana: They just know you want health insurance. Here you go, check the box.

Steven LaBroi: That’s right.

Tawana: Okay, so, let’s talk about business insurance. I have a friend who’s kind of going through a little something with business insurance right now, and was asking him to explain it. And he really couldn’t explain it to me.

Steven LaBroi: Yeah, business insurance? You know, the general business insurance is purchased through your property and casualty companies, your regular companies that do auto and homeowner’s. But life insurance agents provide what is called, the two main ones that I know of are called key man insurance, or buy-sell agreements. Both have to do with the principals in the company.

Steven LaBroi: Key man is just what it says. If there’s a key employee, maybe a great salesperson’s who bringing in the majority of your revenue, maybe a person who manages all your operations, and you may be an absentee business owner, but the business is going extremely well, key man insurance gives you the ability to have life insurance on that person, just in case something happens to that person. So you can continue with business continuity.

Tawana: Right. And how many times have we seen somebody pass on in the business, and the business goes under? We’ve seen that.

Steven LaBroi: Yes.

Tawana: Yeah, we’ve seen that a number of times.

Steven LaBroi: Yes, and you have to be careful, because if you got something going strong … even if you got a family-owned business, maybe you got somebody, a trusted relative who’s working in a key position, and you love that person, but that person may get sick? Or something happens to that person? Then you’re really in, you’re in a dual situation, because you lost a family member, but then you lost a key person in your company.

Tawana: Right.

Steven LaBroi: The buy-sell agreement is similar to that, but it helps when you have partners, if you have a partnership and something happens to one of the partners, usually that estate of that partner or spouse, or the estate, assumes the partnership. If you have a buy-sell agreement in place, with insurance on place in each partner, then the surviving partner can purchase the business-

Tawana: Right.

Steven LaBroi: From the decreased partner, and to make sure that the business stays in place. Because a lot of times, Tawana, the spouse of the partner doesn’t know anything about the business.

Tawana: Exactly.

Steven LaBroi: Or is not interested in it. It may just, they may be grieving, and not want to come to work-

Tawana: Right.

Steven LaBroi: Through a process. So this way, things are already in place, because, as I tell people, insurance is about planning and strategizing for choices and options in the future. This way, you’re in, you’re putting yourself in a position where you’re covered either way. Because, like you said in the beginning, our health will decline, and at some point, we have to go.

Tawana: That’s right. It’s a part of life, is death.

Steven LaBroi: Yes.

Tawana: It really is. Health insurance and the individual market outside of a company? What’s going on with that right now?

Steven LaBroi: Just a quick note I wanted to make, because on the news recently, the government has taken away some of the payments to the insurers? At least that’s what’s been talked about. That just means all those subsidies that the Affordable Care Act or Obamacare was putting in place to help us afford health insurance on the open market.

Steven LaBroi: Now quite frankly, a lot of people are working for companies now, and they don’t have to be concerned about this, because their health insurance is provided by their company. But those self-employed people, like myself and others, that are still getting insurance on the open market? Be very careful and pay attention. There are a lot of things that can affect your budgets, regarding health insurance, that you can’t do anything about. So just pay attention to what’s going on in the news.

Tawana: All right. One of my favorite, favorite things to talk about, long term insurance. We had a personal experience with this, my mom’s dear friend, and that’s when I began to really, really take notice about long term care. It’s so important, and again, something that … how many Baby Boomers we got? Everybody’s aging, and we get about 4,000 people who turn 85 every day, that’s amazing.

Steven LaBroi: Yeah.

Tawana: Yeah.

Steven LaBroi: Yes, and on the opposite end of that, is 10,000 people turn 65 every day.

Tawana: Ooh! My goodness.

Steven LaBroi: So we’re talking about a huge population-

Tawana: Right.

Steven LaBroi: Swell of people who are going to possibly need services, as we live longer, so … yeah, long term care? It became a phenomenon, maybe 20 years ago? Then a lot of companies dropped out of the market, because they found out that they hadn’t really planned for this longevity. And so the policies weren’t operating properly.

Tawana: Right.

Steven LaBroi: Now, they’re coming back strong. There are strategic ways of getting long term care. It usually entails, if you can’t two of four average daily living programs … basically, bathing, dressing, transferring, toilet incontinence and eating … if you can’t two of the four, your long term care policy could kick in.

Steven LaBroi: It’s an interesting thing, because you pay for it upfront, for a monthly benefit. Usually it may take 90 days for that benefit to kick in, once you put a claim in. Unless you buy a policy that gives you the benefit right away.

Steven LaBroi: There are different types of policies and you must read them. I think there are about 10 companies still in the market. And I would say quote all of them, I’m not biased on any of the companies, so that you can see clearly. Because we’re talking about at a time in your life when you’re going to need these benefits the most.

Steven LaBroi: There are more single people today, with fewer, with smaller families-

Tawana: Right.

Steven LaBroi: And so, some people may live in certain cities, and their kids live in another city. So it’s very important to know that policies that cover both spouses, if you’re married, called joint life policies. And there actually are good policies that are return on premium. Return on premium means that if you never use it, you get your money back.

Tawana: Oh, I love that!

Steven LaBroi: Some policies … yeah, I thought it was really cool. Because, at the end of the day, if you don’t end up using it, and you can get your money back, you can strategize on another-

Tawana: Right!

Steven LaBroi: [inaudible 00:16:31] planning process.

Tawana: Right, right.

Steven LaBroi: You can put yourself in a position so that your money never … so that you never outlive your money.

Tawana: I think that is such a huge concern. You know, of course, my [inaudible 00:16:45] and your grandmother. She outlived her money, and so, thank God my grandfather had a whole life policy. When he passed on, almost 30 years ago, he paid off the house, the land, he paid off everything. So all she has is taxes and her utilities. That’s it. See, she got nine kids, so everybody is like, “Here you. Here you go, we got that.”

Steven LaBroi: Wow. Yup.

Tawana: She’s with less stress. That’s why she’s still got her mind. Because she’s lived a stress free life-

Steven LaBroi: Right.

Tawana: For the last 30 years.

Steven LaBroi: That’s right.

Tawana: I’m sure she misses my grandfather, but she didn’t have to worry about anything!

Steven LaBroi: Right.

Tawana: That was just amazing. It’s such, he was such a businessman, though, and he was always thinking ahead.

Steven LaBroi: I love it.

Tawana: Yup.

Steven LaBroi: I love it, yeah. Yeah, I wanted to chat a little bit about annuities.

Tawana: Yes!

Steven LaBroi: People hear that all the time. There’s commercials with people saying they hate annuities. There’s commercials with people saying, “Pay attention to annuities,” but if nothing else, let me just give people a little bit of the structure. We call it, I call it the new pension plans, because after the ’70s, a lot of the manufacturing in this country have gone away. And a lot of them, even those that are still here, are taking away those pensions. Take care of you for the rest of your life.

Steven LaBroi: Only certain entities, maybe governments, schools, have lifetime benefits after you leave. But pay attention to that real closely. Annuities are private products that insurance companies provide, that could have lifetime income and death benefits attached. They’re essentially savings programs that have the ability to make money on the market, while the market goes up, but the money is not directly participating in the market.

Steven LaBroi: When the market goes down, they provide for no less of your funds. So how about that? No loss of your funds, but as the market goes up, you have a chance of participating in increased dollars in your account.

Tawana: So if we have an annuity, we decide on an annuity, can we roll over our own 401(k)s or our pensions or anything into that? Or no?

Steven LaBroi: Yes.

Tawana: Okay.

Steven LaBroi: You can, but they’re … usually, the 401(k)s, the IRAs, the 403(b)s, have your agent really look closely. It usually has to be a account that is not with your current employer.

Tawana: Ah.

Steven LaBroi: Your current employer has an account that you’re participating in and you can’t touch that. But a lot of times, if we’ve had two or three or four or five jobs, and we participated really strongly in those programs, and a lot of times, you can’t contribute to them anymore. So they just sit there, and you may able to manipulate the investments that they’re in, to try to manage it. But you can’t add money in-

Tawana: Got it.

Steven LaBroi: In case of losses.

Tawana: Got it, got it.

Steven LaBroi: You can’t add money to good opportunities in case of more gains. Sometimes it’s prudent to move them into annuities, so you can have no losses, but potential gains. And you know that those dollars are going to be there.

Steven LaBroi: Plus, the opportunity to have a benefit for lifetime income, which means that the insurance companies are going to make a promise, and show you the number of what you’re goin to be able to get annually or monthly.

Steven LaBroi: You’ll be in a position to not have to worry about it, even if your money runs out, because then the insurance company will provide you with that income.

Tawana: That’s right.

Steven LaBroi: Even if your principal, the money you put in, runs out.

Tawana: So I always say, leave the stuff. Leave your things up to the professionals, and so, there is strategy when you use … especially in wealth management. There’s nothing but strategy, and so, even with life insurance products, there’s strategy, right?

Steven LaBroi: The whole idea is to strategize it for a future time when you think you’re going to need it. Or you would like to use it. Or even using it throughout the entire time that you have the product. It’s not about what you think, “It needs to be done today.” Because things change. Life change. I love what you said: strategy is so important.

Steven LaBroi: And so, it’s important to sit down with an agent, and strategize on … just, maybe brainstorm scenarios.

Tawana: Yeah.

Steven LaBroi: What ifs.

Tawana: But I think having somebody to bounce some questions off of, so you will fully understand what it is that you are trying to do, what you’re trying to accomplish for your retirement. Because we’re all moving toward retirement, whether you like it or not.

Steven LaBroi: Yes, yes. You just do not want to outlive your money, because times are just getting more and more expensive. They’re getting more precarious, in terms of all the things that we can’t affect, and so, focusing on our own personal finances is so important.

Steven LaBroi: I think you’re right. It’s just a matter of making sure that, throughout our lives, we can put a strategic plan together. And we can make changes to it along the way. Building assets and strategizing on the comfort and the security of our families, and those around us.

Steven LaBroi: Even if we’re single people, like myself, at the end of the day, I’m going to leave my assets to an organization or an entity or a charity of my choice. Maybe even my college.

Tawana: Oh, yeah. Yeah. There’s so many different places that you can do that. And the love that. The organizations love that. Tell folks what and how they can reach out to you for consultation, ask any questions, any concerns. Where do they need to go?

Steven LaBroi: Yes. Please e-mail me at slabroi@labroinsurancegroup. Facebook, LaBroi Insurance Group.

Steven LaBroi: I’m on Instagram: Let’s Bank On It. You can always call me at 202-544-6226, and I will get back with you. We can sit down, and have a discussion, or e-mail back and forth. Ideas are very very important to have.

Tawana: Yeah.

Steven LaBroi: And then, striking out and implementing it. So again, I appreciate you for this Sunday morning talk.

Tawana: All right, and LaBroi is L-A-B-R-O-I, okay? Steven, thank you so much for joining us. Steven, thank you so much for joining us. Steven LaBroi, our Chief Wealth Strategist this morning, with the LaBroi Insurance Group. Thanks for joining us.

Steven LaBroi: Thank you.