One of three vital steps to protect your medical practice from the very common exposure of an employment related lawsuit is to have Employment Practices Liability Insurance or EPLI. As an employer, you are responsible for not only your own interactions and compliance with employment law, but for everything employees do with the public and each other. I recommend having at least $1 million in coverage in this area, as legal defense costs alone can be six figures, as are many awards. EPLI covers wrongful acts of employees as well as claims of wrongful termination, sexual harassment or discrimination. But it doesn’t stop there. The list includes, but is not limited to: defamation of character, privacy breaches, being passed over for a promotion or even the lack of an employee evaluation. Evaluation can actually be defined on broader terms by being deprived of a career opportunity. One of the largest exposures could be the breach of the employment contract. It could include human resources where the management of employee benefits was poorly overseen. Most EPLI policies will cover legal costs whether the employer wins the suit or not. But it generally doesn’t cover civil or criminal fine assessments or punitive damages.   Read more…

Key Points to Remember: Umbrella policies are not magic shields against anything that might happen, no matter how much it costs. They are an essential first line of defense and the most cost effective and basic first step in your asset-protection plan. In many cases a one million dollar umbrella can cost just a few hundred dollars a year. They have limits that are very clearly defined by the insurance company. If the personal liability umbrella, the one that’s typically related to your home and auto coverage, is what you are considering, it probably won’t cover issues not reasonably related to either of those base policies in most cases. So, for example, a dog bite that occurs at your home may be covered, but a lawsuit by an employee almost certainly will not. My advice to clients is buy every dollar of insurance you can reasonably afford for as many reasonably predictable risks as possible. Assume there will be a gap in the coverage at some point so be certain that you’re personal assets are organized and protected. Implement an asset-protection plan that legally separates your personal and professional assets and liabilities today, while you still have right to do so. I get dozens of   Read more…

Can a society take on the additional hardship of surviving dependents? Life insurance is one of the great redemptive solutions to our economic health as a nation and that’s precisely why the government has granted tax advantages to life insurance. It’s simply in the best interest of country. With individual freedom comes individual responsibility. Being a good steward of your family’s finances depends upon having the proper insurance policies in place in case the unexpected occurs. Life insurance for the breadwinner and business owner protects all their dependents and business partners. It insulates against financial loss. The economic leverage can be substantial and for most scenarios, life insurance proceeds are tax-free.  But cash value life insurance has additional tax-free features like tax-free income via collateralized policy loans as long as the policy is kept in force for the life of the policy insured. The cash value life insurance policy must be issued as a non-modified endowment contract. Tax-free distributions of loans, under these conditions, are not characterized as a form of income and are not includable in the provisional income test for Social Security benefits. There is a menu of crediting options to choose from, based on your risk tolerance.   Read more…

Life insurance can be the great equalizer in a world of inequality. Retired couples can statistically bank on the woman outliving her husband 87% of the time. The average female survivor lives to age 93. That means that half of American women will live longer than that! Recently, Susannah Jones lived to the age 116. She was born in 1899, giving her the distinction of being America’s last tri- centurion. But she’s not the oldest documented person in the Guinness Book of World Records. That honor is held by Jean Calment who died in 1997 at 122 years, 164 days. Women generally outlast their husbands and live longer, a lot longer. Living longer can generally be a good thing if you have wealth and your health. But many middle class widows have neither. When their husbands pass away, they generally lose their spousal benefit in lieu of their husband’s benefit. So if the husband’s Social Security monthly benefit is $2,500 and her benefit is $1,250, she’ll elect to have her husband’s larger benefit, but she loses hers in the election process. They were earning $45,000 a year in Social Security benefits, now she’s earning only $30,000 in benefits. For most   Read more…

Small business owners rarely have an overall plan that dictates the daily operations of their business and maps the achievement of the milestone goals they set along the way. But a business exit plan is just as important as its start up strategy. Who will own your business at retirement? Who will own your business if something happens to you? Do you have partners? Are they equal partners? Do you want your spouse to own your business, or do you want it to be divided up among your family? What are you doing to recruit, retain and reward your key employees? These are just a few of the important items that need to be addressed as a business owner. One common goal when you’re building a business is to one day sell it to partners, key employees or even a competitor. Often closely held family businesses desire to transfer the company to family members. The ultimate sale of your business at retirement is ideal, but life doesn’t always cooperate. Life insurance can fund business succession plans if things don’t go as planned. Life insurance can fund the transfer of ownership with discounted dollars for those family members or business partners   Read more…

Life insurance is generally viewed as protection for the breadwinners of a family and a way to fund favorite charities. It’s used in corporate coverage for business partners and key employees. But whole life cash value insurance has been viewed a conservative savings vehicle that can generate tax-free income via policy loans.1 Policy loan distributions are not includable for the provisional income test to determine Social Security benefit taxation. Many conservative savers use whole life insurance as a bond alternative that has done quite well against the yields of ten-year treasury rates. The dividends and projected performance are not guaranteed, but the contractual cost of insurance and interest credited is guaranteed. That fundamental fact can redefine the low beta risk using a whole life insurance policy. Conservative savers appreciate the contractual guarantees, which are subordinated by many blue chip mutual companies with strong balance sheet financials. You still have a death benefit, but the design of the plan is based on tax-deferred accumulation and tax-free distributions via collateralized policy loans. Whole life insurance, as a bond alternative, is gaining some significant traction in advisory circles, who are looking to protect their clients from undo exposure in the bond market, especially   Read more…

The 1% solution (sometimes 2%) is an economic theory of protecting assets and human capital with 1% of your entire assets during your working years. Many advisers use it as a rule of thumb, but like all theories there are exceptions to the rule. But that being said, it’s an easy method to remember and apply. Consider the financial applications in everyday life. Protecting family income by insuring the family breadwinners is one of the cornerstones of defensive financial planning. Life insurance can not only replace the income lost due to the death of the breadwinner, but also can pay off indebtedness and fund the future dreams of its surviving family members. And along similar lines of thought, it’s wise to protect business partners with life insurance that can fund the succession plan or protect a key employee of the firm. Spending or setting aside 1% of your total assets can deliver meaningful protection and some peace of mind. Some degree of wealth accumulation is a financial goal of most Americans. Setting aside 1% of your total assets to fund tax deferred accumulation and tax-free distributions is a play on saving for retirement as well as a way to create   Read more…

Life insurance is generally calculated on debt, future obligations and dependent charities, but rarely is the notion of calculating and replacing human capital for a breadwinner or key employee. The average person in our western democracies can work between 35 and 40 years. What does a person earn during their working lifetime?  What is their earning power worth? What is the value of their human capital? How can you replace income generated from a family member, business associate or a contributor from a charity? Consider economist Tom Hegna’s explanation of lifetime earnings and human capital. “Let me explain… When you begin your career, you have a greater proportion of wealth in human capital because you have many more years to earn compared to the time you’ve spent acquiring financial capital. As you progress through your career, the numbers change and your financial capital outweighs your human capital because you’ve been accumulating financial capital over the years, and you will have fewer prime earning years.” There are calculators that can generate a rough estimate of your human capital. It’s not a quantitative assessment, just a good place to start. But a good example of lifetime earnings can be found in your   Read more…

There is a real math and science to optimizing your dollars in retirement and no other product line combines economic leverage, tax advantages and guaranteed benefits like life insurance can. Take an example of a healthy married couple who has identified $100,000 that can be earmarked for their four grandchildren. They don’t want to risk the monies in the market so they are considering a five-year CD rate of 2.25%, or a five-year annuity rate of 3.00%. The CDs are taxable. The annuity is tax deferred, but ultimately taxable. But the same $100,000 in a survivorship guaranteed universal life insurance policy could generate around $500,000 tax-free. That’s leveraged, tax advantaged and guaranteed. Often seniors have favorite charities that they have been contributing to for an extended period of time and have a desire for those charities to continue into perpetuity. Gifting with life insurance can multiply the value of the gift many times over. But for many retirees, their monthly cash flow doesn’t permit them to contribute much every month, and they usually don’t have much money left at the end of their lives to give to charity. Their hearts are big, but their wallets are small. Here’s where life   Read more…

You need to keep your policy and all its associated documentation in your safety deposit box at your bank or a fireproof metal file at home where you keep all your important papers. Original Proposal: Before you purchased your life insurance policy, your agent presented a proposal illustrating the projected performance of the policy. That proposal was more than likely part of your decision-making process in purchasing the policy. The original proposal should be kept with the policy. Policy: When the policy was delivered, you had a “free look” offered to you and, depending upon what state you live in, you may have 20 to 30 days to consider whether you’ll keep the policy or not. Once you decide to keep the policy and pay the premium, your contract is in force. Supporting Documents: Some policies are owned by or are beneficiaries of businesses, trusts or other third parties. Those supporting documents need to be kept with the policy and are necessary to review a policy for tax purposes or ownership changes that may need to be updated. Annual Statement: Every year, you’ll receive an annual statement that outlines an overview of the policy’s premiums and cash values if it’s   Read more…