1. Bulletproof Your Lifestyle: Insurance Strategies for Legal Professionals Your partners in profit and efficiency

2.  Insure Things You Can’t Afford to Lose  Some things are insured because an outside source (lender) requires it. For example, mortgage lenders require you insure your house.

3. Types of Insurance to be discussed today  Life Insurance  Disability Insurance  Health Insurance

4. Life Insurance  How much do I need?  What is the right type?  What determines cost?  What is the best type?

5. How much do I need?  “Math” component  Emotion component

6. Math Component

7. Emotion Component  Math tells you minimum needed  Rest is a personal decision

8. Types of Life Insurance  Term  Yearly Renewable Term  Level Term  Decreasing Term  Permanent  Whole Life  Universal Life  Variable Life  Equity Indexed Life

9. Yearly Renewable Term  Premiums increase annually as you age  Death benefit remains level  Must review at least every 3 years to keep cost effective

10. Level Term  Premiums level for guarantee period  Guarantee periods 5, 10, 15, 20, 25 years  Death benefit remains level  Cost effective for longer term situations

11. Decreasing Term  Premium is level for term (20 to 30) years  Death benefit declines as you age  Typically used for debt  “Dinosaur”  Not very cost effective

12. Whole Life  Premium is fixed for life of policy  Can be structured to be “paid up”  Cash value develops to keep premium level until death  Designed to be in force until death

13. Universal Life  Flexible Premium Adjustable Life  Minimum, Target, Maximum Premium  Develops cash value like whole life but with premium flexibility

14. Variable Life  Fixed premium like whole life  Develops cash value  Cash value can be directed by owner into sub-accounts  Greater return potential  Greater risk  Direct market exposure

15. Equity Indexed Life  Fixed premium  Develops cash value  Crediting rate on cash value is determined by indirect exposure to market

16. Combinations  Universal Variable Life  Universal Equity Indexed Life

17. What Determines Cost  Type of Insurance  Underwriting  Super Preferred  Preferred  Standard  Rated  Sex  Smoking  Family History  Height/Weight  Personal Medical History  Blood Profile  HOS

18. What is the Best Type?  Facts determine this  Good and bad versions of every type  Tool belt  Use right tool

19.  If the death benefit is needed for a specific period of time  Especially at younger ages  Term

20.  If the death benefit is needed until death occurs, whenever that may be  Some form of permanent  Individual facts determine which type of permanent and how designed

21. Examples  Working professional couple, young children, still building personal wealth  Term  Policy to fund ILIT for Estate Settlement  Permanent  Significant age difference in couple  Either  Depends on facts

22. Designing Permanent Insurance Premium Cash Value Death Benefit Build Cash Value (i.e. Deferred Comp Maximum Minimum Maximum Permanent Death Benefit (i.e. ILIT)

23. Why Design to Build Cash?  All policies have a fixed cost component  If you want to build cash value efficiently, you must “overfund” the policy within IRS guidelines  80% of S&P 500 that have deferred comp plans informally fund them with overfunded permanent life insurance.  Creditor Protection, Tax Shelter, Self Completing

24. Disability Insurance  Short Term (STD)  Pays up to 90 days  Long Term (LTD)  Pays after 90 days  Pays income if you are sick or injured and can’t work

25. Group or Individual  Group  Lower initial cost  Guarantee issue  Short premium guarantee  More limits on contractual provisions

26. Group or Individual  Individual  Higher initial cost  Medically underwritten  Long term premium guarantee  More liberal contractual provisions

27. Components of Disability Insurance  Elimination Period (EP)  This is your “deductible”. How many days before benefits accrue.  Benefit Period (BP)  How long are benefits paid; 5 years, Age 65, Lifetime.  Monthly Benefit  Dollar amount of total monthly benefit. Generally 60-70% of gross.

28. Components of Disability Insurance  Own Occupation Period/Definition  Should protect occupation for benefit period. Should be fairly short and simple, i.e. “Unable to do the main duties of your own occupation…”  Residual or Partial  Provides a supplement to earned income being generated while working part time.

29. Components of Disability Insurance  Cost of Living Adjustments (COLA)  Be wary, very expensive rider, rarely is a factor in most claims. Only applied while on claim.  Indexed Benefits/Update Benefits  Adjusts monthly benefit amount each year automatically to account for inflation.  Guaranteed Increase Option  Guarantees right to increase monthly benefit in the future based solely on financial qualification regardless of current health.

30. For Most Clients  Combination of Group and Individual is most cost effective  Structure premium payments so benefits are tax free  Combo approach can cover a greater % of income

31. Disability Overhead Expense  Primarily for professionals  Pays overhead expenses while they are disabled  Premiums are deductible  Benefits are taxable but used to pay deductible expenses  Keep practice operating for return or sale  Structure with short EP (30 days) and short BP (12 to 18 months)

32. Health Insurance  Group  Individual

33. Group Health  Can be guarantee issue  Can be written as low as 2 or 3 people on plan

34. Individual Health Insurance  Underwriting more challenging  Focus on keeping premium as low as possible  Young and healthy larger deductible

35. HSA’s  High Deductible  Coupled with tax favored account that you own and control

36. Applications of Insurance Products  Life Insurance  Income to family  Income to business (key person)  Stock redemption/Buy out  Estate liquidity  Deferred comp/SERPs

37. Disability Insurance  Income to self/family  Cover overhead expenses

38. Case Study  Orthopedic Surgeon paying over $12,000 per year for $5,000,000 of level term  Underwriting classification, standard Table B, due to congenital heart issue.  Condition is NOT life threatening  Construct case with treating physician’s support

39. Case Study Outcome  Reclassified to Preferred Rates  Premium reduced to a little over $5000 per year  Challenge underwriting class until certain it is the best offer

40. Case Study Maximizing Disability Coverage Monthly Pre Disability Income $20,000 In order to maximize coverage, individual MUST be in place before Group At very high incomes, may have to add specialty line (Lloyds of London) to cover income $10,000 Group LTD $10,000 Individual LTD

41. Thank You Larry W. Dykes, CLU, ChFC, AAMS 317.708.0383 ldykes@SkyView-Partners.com SkyView Partners 1050 E. 86 th Street, # 55-C Indianapolis, IN 46240 http://www.linkedin.com/in/larrydykes