We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published bySara Poole
Modified over 3 years ago
©2004 Gerald Katz Disability Buy Sell Your Pathway to Greater Commissions Gerry Katz, MSPA, RHU, ALHC, DABFE Disability Income Concepts, Inc. P.O. Box 266257 Weston, Florida 33326 877-776-3948 (Toll-Free) 954-217-8241 Fax www.disabilityconcepts.com firstname.lastname@example.org National Association of Health Underwriters
©2004 Gerald Katz TOTAL U.S. DI MARKET PLACE PENETRATION Individual Disability35 - 40% Business/Office Overhead 25 - 30% Buy-Sell Disability12 - 15%
©2004 Gerald Katz What Are The Chances Of Recovery? If Disability Begins At Age Chances The Disability Will Continue 5 More Years 32 38.5 % 42 45.3 % 52 51.6 % Society of Actuaries Disability Tables When Disability Has Continued 1 Year
©2004 Gerald Katz What Are The Chances Of Recovery? If Disability Begins At Age Chances The Disability Will Continue 5 More Years 32 49.2 % 42 56.6 % 52 59.7 % Society of Actuaries Disability Tables When Disability Has Continued 2 Years
©2004 Gerald Katz What is a Disability Buy Sell Agreement? A legally binding written agreement between the owners of a business establishing the terms and conditions of the sale and purchase of a disabled owners share of that business.
©2004 Gerald Katz THE PROBLEM Healthy Partner: Is committed to building business or professional practice – using their talent, time and income. Will take calculated business risks to maximize profits. Disabled Partner: Worried if not scared about the future. Not willing to take any business risks and wants only to conserve the value of that business.
©2004 Gerald Katz THE PROBLEM contd Many small and medium size businesses today recognize the business implications of a premature death to an Owner-Employee. Few businesses have provided for a Long Term Disability to the same Owner-Employee. Their Buy-Sell Agreement is usually missing a page!
©2004 Gerald Katz THE PROBLEM contd When Disability Strikes Can Owner-Employee return to productive work? Will business continue on a profitable basis? When Buy-Out is triggered, will the money be there to purchase disabled owners share, at a guaranteed price? Where will the money come from?
©2004 Gerald Katz THE SOLUTION ESTABLISH A PROPERLY FUNDED DISABILITY BUY-SELL AGREEMENT TO THE DISABLED OWNER: 1.Guarantees that business interest will be purchased at specified price. 2.Allows disabled owner after purchase, to convert business value to cash. 3.No need for disabled owners family to be involved in the business to protect their interests. 4.Creates peace of mind about present & future needs.
©2004 Gerald Katz Solution contd TO THE ACTIVE OWNERS: 1.Guarantees disabled owners interest is purchased at definite price. 2.Guarantees active owners of continued control of business. 3.Gives active owners opportunity to replace disabled owner. 4.Guarantees active owners not forced into business with family of disabled owner. 5.Guarantees continuity of business, maintains credit and employee morale.
©2004 Gerald Katz Methods of Funding A Buy-Sell Agreement 1.Cash Payments Costs - 100¢ Ques: Can business afford large cash depletion? Will cash be required for other business needs? 2. Borrow Money Costs - 100¢ Ques: Is money available and at what interest rate? Is loan plus interest too costly to repay?
©2004 Gerald Katz Methods of Funding A Buy-Sell Agreement contd 3.Establish Sinking Fund Costs - 100¢ Ques: Will there be sufficient time to accumulate money? Are funds required for other business needs? 4. Paid from Future Business Earnings Costs - 100¢ Ques: Will earnings be sufficient? Will future earnings be needed for other purposes?
©2004 Gerald Katz Methods of Funding A Buy-Sell Agreement contd 5.Insurance Costs – Less than 100¢ after tax dollars Answers: Cash available at time of need! Conserves owners capital! Insurance company determines disability! Business credit maintained! Budgeted premium payments! Other business assets maintained!
©2004 Gerald Katz TYPES OF DISABILITY BUY-OUT AGREEMENTS 1. Entity Purchase Plan The business, whether a closely held corporation or partnership, purchases disabled owners interest. Note:Business is owner, premium payer and receives the benefits from insurance policy.
©2004 Gerald Katz ENTITY PURCHASE EXAMPLE # 1 # 2 # 3 50% Owner 30% Owner 20% Owner $800,000 VALUE ABC CORP. PURCHASES $400,000 Policy $240,000 Policy $160,000 Policy on # 1 on # 2 on # 3
©2004 Gerald Katz TYPES OF DISABILITY BUY-OUT AGREEMENTS contd 2. Cross Purchase Plan Non-disabled owners purchase disabled owners interest. Note:Each stockholder/partner owns, is premium payer and receives benefits from disability policy covering the other stockholder(s) or partners(s). When more than two insureds are involved, a trusteed arrangement may be advisable.
©2004 Gerald Katz CROSS PURCHASE EXAMPLE ABC Corp. $800,000 VALUE # 1 # 2 # 3 50% Owner 30% Owner 20% Owner Purchases Purchases Purchases $120,000 Policy On #2 and $80,000 Policy On #3 $200,000 Policy On #1 and $80,000 Policy On #3 $200,000 Policy On #1 and $120,000 Policy On #2
©2004 Gerald Katz Typical Buy Sell Disability Policy & Underwriting Requirements
©2004 Gerald Katz FORMS OF DISABILITY BUY SELL INSURANCE POLICIES A.Lump Sum Benefit Pay-Out B.Monthly Benefit Pay-Out C.Combination of A & B
©2004 Gerald Katz Typical Policy (2) Policy Design Issue Ages:18-57/60 Elimination Periods (Trigger Point):12 Mo., 18 Mo., 24 Mo., 36 Mo. Minimum & Maximum Issue:$5,000 - $1,500,000 to $2,000,000 (usually limited to 100% ownership interest)
©2004 Gerald Katz Typical Policy (3 ) Pay-Out Periods: 1.Lump-Sum Paid in Full After Trigger Point 2.Monthly Installments 12 Months to 120 Months Installments
©2004 Gerald Katz Typical Policy (4) 3.Combination of 1 and 2 Initial Down-Payment Plus Installment Period OR Flexible Funding – Up To 10 Yrs. Pay-Out Usual No. of Insureds: Usually Limited to 10 Limited Options Available
©2004 Gerald Katz Typical Policy (5) Underwriting Requirements: A.Executed Buy Sell Agreement usually necessary before company issues B.Must specify Definition of Total Disability C.Trigger Point for Benefits D.Formula or Method to Calculate Purchase Price E.Commencement Date of Agreement F.Insurance Company usually requires 1-2 years Balance Sheet and Profit & Loss Statements
©2004 Gerald Katz G.All owners must usually apply for coverage. H.Buy Sell coverage usually limited to full-time Owner-Employees. I.Executed Buy Sell Agreement or Proof of Sale needed at claim time. NOTE:There must be an obligation never an option to buy and to sell insureds entire business interest at trigger point. Typical Policy (6) Underwriting Requirements (contd):
©2004 Gerald Katz Disability Buy Sell Valuation Formulas I. Professional Corporations 100% of Net Worth + 1 Times Salaries or Income of Owners/Partners (Not to Exceed Specific Maximum) OR 1 ½ - 2 Times Salaries or Income of Owners/Partners (Not to Exceed Specific Maximum) = Value of Professional Service Corporation
©2004 Gerald Katz II.Commercial Businesses A. Net Value Method 100% of Net Worth OR 1 – 1-1/2 Times Salary or Gross Income of Owners/Partners = Value of Business Organization Valuation contd
©2004 Gerald Katz B. Capitalization of Earnings Method 4 - 8 Times Net Earnings (Depending Upon Length of Business Existence And Growth of Earnings) = Value of Business Organization Valuation contd
©2004 Gerald Katz Problem With Using Traditional Disability Income Insurance Policy To Fund Buy Sell Agreement They are designed to provide personal income to purchase food, clothing and other necessities of life. They cannot also provide additional benefits to complete Buy Sell agreement. What happens if disabled insured recovers after buy sell is triggered? Burden of remaining payments shift to business and active owners. Amount of coverage available is limited to normal issue and participation limits and is based on insureds income, not value of business interest.
©2004 Gerald Katz TAXATION OF DISABILITY BUY SELL PLANS Premiums:Not deductible by either corporation or partnership (IRC Sec. 265) Benefits:Received income tax-free (IRC Sec. 104(a)(3) NOTE:Disabled Owner-Employee is taxed only on the gain from sale of business interest. May qualify for installment sale tax treatment if at least one payment is received by seller after close of tax year.
©2004 Gerald Katz Prospecting For Disability Buy Sell Clients & Sales 1.Look for closely held small corporation or partnerships with 2-5 active working owners. 2.Firms should be profitable business in existence at least two to three years. 3. For professional corporations (physicians, dentists, attorneys, CPAs, etc.) they generally do not have to be in business more than one year. 4. Do not prospect in mom & pop business arena or in blue-collar businesses. They generally are not offered buy sell.
Principal Life Insurance Company Disability Buy-Out Insurance Presented By: Name Principal Life Title.
1 What happens when a Business Partner becomes disabled? Would they want to sell their share of the business? Would they want to buy out the healthy partner(s)?
1 Presented By: Lori Boggs Sales Manager MetLife Rich Van Liew Asst. Director Underwriting Asst. Director Underwriting Principal Life Disability Buy-Sell.
Business Continuation Planning. Is the business readily marketable? Can the assets be easily converted to cash for the benefit of your family? Is.
Buy/Sell Agreements. If you had died last night…how would these questions be answered today? Who is running the business? To whom do they report? How.
Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 14 Annuities and Individual Retirement Accounts.
Product Provisions Source Brokerage, Inc.. Choosing a DI Product Strong company Flexible plan Competitive price.
Issue ages: 0-80 Standard & Preferred UW classes Coverage available to age 120 Tobacco and Non-Tobacco Rates No Lapse Guarantee 3% Guarantee Interest Rate.
Buy Sell Agreements For Agent Use Only Not for Distribution to the Public Buy / Sell Agreements.
SI 15608PPT (Rev 1/14) Buy/Sell Funding Disability Insurance at The Standard For producer training only. Not for use with consumers.
Life Insurance Basics Module 2 Fixed Universal Life Insurance (Current Assumption) ©2011 Genworth Financial, Inc. All rights reserved /16/11.
UNICARE Start. UNICARE is part of WellPoint Health Networks, Inc., one of the largest health care companies in the nation! WellPoint is a Fortune 500.
Review Basic Accounting. Fundamentals Assets are anything the business owns that has a dollar value (debit balance on the “T-accounts”) Liabilities are.
Attract & Retain Your Employees Build & Preserve Your Business Protect Your Family Larry Ricke and Mike Ricke are registered representatives offering securities.
Cn ©2004 ING page 1 Succession Planning for Small Businesses.
Fidelity & Guaranty Life Insurance Company 1 Value Select Term SM.
LTC and the Employer LTC Advisory July Todays Employer Workplace The aging of America is, predictably, having an impact on business The child care.
Disability Buy Sell Insurance. If one or more business partners becomes disabled... Would they want to sell your share of the business? Would they want.
Life Insurance in a Qualified Plan Chapter 13 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company1 What is it? Qualified.
Key Employee Life Insurance Chapter 31 Tools & Techniques of Life Insurance Planning What is it? Life insurance policy owned by and payable.
Principal Life Insurance Company Protect Business Owners Against Disabilitys Triple Threat Presented By: Don Schamay, CFP Disability Income Regional Vice.
Life Insurance Basics. Agenda Who needs life insurance? How do you calculate the amount needed? What types of life insurance are available?
The ABC’s of DI. Provides Accurate and Authoritative Information Content Accuracy is not Guaranteed Does not Render Legal, Accounting, Tax or other Professional.
Disability 101 WSCFF Life & Disability Plan Presented by: DiMartino Associates, Inc. Becky Wallen February 11, 2010.
Life Insurance In Qualified Plans Chapter 32 Tools & Techniques of Life Insurance Planning What is it? Life insurance is purchased and owned.
Cost of Capital Chapter 13. Cost of Capital Defined Cost of capital: percentage cost of permanent funds employed in business, or firm’s capital structure.
© 2004 ME™ (Your Money Education Resource™) 1 Estate Planning Chapter 12: Special Elections and Post Mortem Planning.
Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company. Business Continuation Planning.
Chapter 14 Annuities and Individual Retirement Accounts.
1 Ins301 Chp15 –Part1 Life Insurance and Annuities Terminology Types of life insurance products Tax treatment of life insurance Term insurance Endowment.
Introduction u Leasing and hire purchase are financial facilities which allow a business to use an asset over a fixed period, in return for regular payments.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2014 OnCourse Learning.
1 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC Important Notice The following presentation has been developed and approved for use by authorized.
15084PPT DI 301 (3/10) ©2010 Standard Insurance Company DI 301 Effective corporate disability insurance solutions for benefits managers and employees For.
Business is owned and run by one individual Nearly 76% of all businesses Owner receives all of its profits and bear all of its losses.
Chapter 12: Life Insurance Planning. Objectives Identify the purpose of life insurance and the reasons for buying it. Recognize that the need for life.
Income protection solutions for key employees For financial professional use only. Not for use in sales situations.
For rep/agent use only. Not for further distribution.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2010 by South-Western, Cengage Learning.
Do not put content on the brand signature area For agent/registered representative use only. Not for public distribution. ©2014 Voya Services Company.
Business Reducing Term Unique Product, Unique Opportunity FOR AGENT AND BROKER USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC
Americo Financial Life and Annuity Insurance Company Agent Training Guide Why Americo? Life Insurance Overview Product Summary Questions? Comments? A friendly.
An Approved Member Benefit Program Disability Income Plan Financial Protection Against Lifes Uncertainties EMRA.
National Life Insurance Company ® | Life Insurance Company of the Southwest ® National Life Group is a trade name of National Life Insurance Company, Montpelier,
Copyright © 2007 Prentice-Hall. All rights reserved 1 Long-Term Liabilities Chapter 15.
Policy Reserve. Policy reserve also known as legal reserve are major liability of insurance company Under the level-premium method, premiums are overpaid.
RISK MANAGEMENT: AN INTRODUCTION TO FINANCIAL ENGINEERING Chapter 24.
CHAPTER 14 Statement of Cash Flows. The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin 14-2 Chapter Opening To make informed investment and credit.
Selling your Business to Employees IoD and ESOP Centre 15 May 2012.
Survivor’s Income Benefit Plan Chapter 53 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 A Survivor’s Income Benefit.
© 2017 SlidePlayer.com Inc. All rights reserved.