insurance

What is Inflation Guard?

By Society Insurance Team in 2021, reposted with permission from Society Insurance

In 2021, we’re seeing a unique economic environment. Supply chains have been affected by the pandemic and a few industries experienced weather-related setbacks. This, along with the new challenge of a labor shortage, is not allowing supply to keep up with demand, which leads to inflation.

Lumber is a relevant example and a commodity that has a significant impact on the cost of claims. The cost of claims in 2021 is significantly more than the cost of claims in recent years. This increase may subside quickly, however, economists believe inflation will persist.

What is Inflation Guard?

Inflation Guard is the automatic annual increase in property values on an insurance policy to keep up with rising costs of construction. It provides carriers with adequate premium to pay for losses and provides policyholders with protection against coinsurance penalties if a coinsurance requirement exists. Many insurance carriers apply an annual 4% Inflation Guard increase. If values don’t keep up with the pace of inflation, insurance premiums will eventually have to take a steeper spike upward.

What is Coinsurance?

Coinsurance language in a policy gives an insurance company the right to reduce the amount of a claim payment if the amount of insurance purchased was inadequate.

What Does This Mean for Policyholders & Insurance Agents? 

Policyholders could be underinsured at the time of total loss and find themselves with significant out-of-pocket costs in order to return to normal operations. If a partial loss occurs and the carrier imposes a coinsurance or underinsured penalty, the policyholder would also experience out-of-pocket costs. If the above occurs, there may be errors and omissions lawsuits against the insurance agent.

Does Society Insurance Include Inflation Guard in Policies?

Society Insurance does include Inflation Guard and does not include coinsurance or underinsured penalties in their policies. This provides protection for both policyholders and agents from some of the challenges in managing property values. Maintaining adequate values on insurance policies is critical. Inflation Guard – and annual conversations between insurance agents and policyholders – can fend off trouble.

Contact Brian Fowler, WisMed Assure Account Director, at 608.442.3718 for a quote or with any questions.

Reposted with permission from Society Insurance

Is your group disability insurance good enough?

Tom Strangstalien

By Tom Strangstalien, Insurance Advisor

May is Disability Insurance Awareness Month. This is the perfect time to evaluate your disability protection, determining if you’re adequately covered and address any potential holes or gaps in your coverage. A common theme I hear when talking with our members is, “I have disability insurance coverage as part of my employee benefits, so do I really need personal disability protection?” For physicians and medical professionals, the answer is almost always yes!

Typical limitations of group coverage

First, there is a cap on the amount of benefits that will be paid out for a claim. If the maximum benefit amount is $10,000 per month and as a physician you’re earning $300,000 per year, you’re not even covering half of your income. Are you willing to roll the dice for a potentially devasting and dramatic lifestyle change?

Second, group disability coverage contains “offset provisions.” This means that if you are drawing payments from other sources upon incurring a disability, the benefits paid by the group policy will be reduced pro-rata. These sources could include things like social security, liability settlements, workers compensation payments, employer provided retirement plan replacement benefits and other accident or short-term disability plans. A properly designed personal disability plan will not contain such provisions.

Next, group disability plans are not portable. In other words, if you change your place of employment or go into practice on your own or as an independent contractor, you will lose the disability protection. If you have incurred some health issues, coverage then can be very expensive or not available to you at all. This is why it’s so important to get a personal disability plan in place as early in life as possible.

Benefits of personal disability insurance

With a personal disability insurance plan, there are many optional benefits available to you. It’s not a one size fits all plan like a group plan tends to be. You can elect additional coverages such as:

  • student loan payment coverage
  • inflation protection
  • catastrophic coverage
  • partial and residual disability coverage levels
  • future increase benefits (you can increase the amount of benefits as your income increases with no additional medical underwriting)

What I want you to take away from this article during Disability Awareness Month is this: take a few minutes and review your current disability protection. If you do not yet have a personal disability plan, get one as soon as possible. Don’t roll the dice with your biggest asset – your ability to earn a substantial income! As the independent insurance agency of the Wisconsin Medical Society, we can shop all of the major insurers, review your current group plan and design a plan that will fully protect you and your family for your lifetime.

As your financial partner, your WisMed Assure team is here to take care of your personal financial security so that you can take the best possible care of yourself, your family and your patients.

For additional information regarding disability insurance, contact WisMed Assure at insurance@wismedassure.org, complete this online form or call 866.442.3810.

Hybrid Policies Shine in Addressing Long-term Care Concerns

Tom Strangstalien

By Tom Strangstalien, Insurance Advisor

It’s not a secret that the rapidly increasing cost of long-term care is driving dramatic increases in long-term care (LTC) insurance premiums. You may also have been victim or witness to a dramatic increase in long-term care insurance premiums on a policy purchased years ago.

In the 1990s and early 2000s, people realized the potentially huge benefit of buying long-term care insurance. Along with advances in medicine and the benefits of nutrition and exercise, life expectancy increased. Coming with that was the demand for long-term care services, assisted living facilities and home health care. Popularity in long-term care insurance grew exponentially and consumers bought policies with lifetime premiums, ten pay premiums or even single premiums at an affordable price.

Actuaries calculate statistics with acute precision to guide insurance companies to make their profits. However, this is one of very few instances where they missed the mark. Typically, with life and health insurance, a significant number of people will not hold the policy for their lifetime, and the policy will lapse. This lapse rate was miscalculated, as people who purchased these policies held on to them. Furthermore, inflation for this sector of health care was severely under calculated. Simple supply and demand economics manifested cost increases well beyond the costs of other consumer goods and services. Exacerbating the situation was the decrease in interest rates, as long-term bonds are purchased to provide the future benefits.

Now, consumers are experiencing the results of this perfect storm. We are seeing shockingly increased premiums, lowered benefits or even offers by insurance companies to buy-out or provide a dramatically lower paid-up benefit. Thankfully, actuaries have learned the impact of past transgressions and traditional long-term care policies are now priced properly. But what does this mean to you? A very expensive insurance protection, along with the risk that it may never be used, so what should you do?

What happens if you pay for LTC insurance but never actually need it?

Despite long-term care insurance being so costly, I remain steadfast that long-term care protection is paramount to your financial plan! The facts speak for themselves; longtermcare.gov and the AARP agree, 70 percent of people 65 and older will require long-term care and meeting that need will continue to become more expensive.

Genworth’s Cost of Care Survey shows national annual median costs increased across the board for assisted living facilities (6.1%), home care (4.3-4.4%) and skilled nursing facilities (3.2-3.5%). The median monthly cost of an assisted living facility is $4,051, a home health aide costs $4,385 and a private room in a skilled nursing facility $8,517 a month. Genworth estimates these costs will almost double over the next 20 years.

There’s a new option for long-term care planning: hybrid life insurance long-term care policies. Actuaries have been properly pricing life insurance policies for decades. They now know the amount that will be paid out in benefits and when that benefit will be paid. In these hybrid policies, the life insurance benefit can be paid out early if needed for long-term care. If benefits are not used for long-term care, the life insurance amount is paid upon death to the policyholder’s beneficiaries. This addresses the concern of never using the policy. Benefits will not be taxable if paid out for long-term care and the life insurance benefit is paid out income tax free. In the majority of cases, this type of plan outperforms self-funding.

Hybrid policies have a lot going for them:

  • They offer flexible premium payment options. You can make one lump-sum payment, pay over ten or twenty years, or pay premiums over time.
  • It is often easier to qualify for coverage as the insurer knows what will be paid out in benefits.
  • A hybrid policy can also pay for home health care, assisted living, adult day care and even respite care for a loved one.
  • Permanent life insurance policies build cash value that can be cashed out in the future if you feel there’s no longer a need for long-term care protection or independent wealth negates the benefit.

You have options…lots of options to choose from

Hybrid life and long-term care policies come in several shapes and sizes.

  • Linked benefit policies are true hybrids that link a life insurance policy to a long-term care policy. With these, the typical long-term care benefit amount is close to or equals the life insurance amount. The greater the life insurance amount, the greater the LTC benefits.
  • You can also get a long-term care rider on a life insurance policy which only allows you to add LTC coverage at the time you buy the life insurance policy – you can’t add it later.
  • There are chronic illness or critical illness riders that let you accelerate the death benefit to pay for care if you have a qualifying chronic lifetime illness.

If you currently own some form of LTC insurance and want to compare which coverage may fit best into your current financial plan, we are here to comprehensively explore all the options and make sure your plan is suitable and won’t blow up at a time when you may need it most.

If you do not yet have any form of LTC insurance, the longer you wait, the more expensive it will become. I highly recommend exploring a hybrid life insurance / long-term care policy and getting it early. The younger and healthier the better! Avoid crisis mode or future exorbitant premiums.

As your financial partner, your WisMed Assure team is here to take care of your personal financial security so that you can take the best possible care of yourself, your family and your patients.

Contact me today to protect your tomorrow.

tom.strangstalien@wismedassure.org

608.442.3730

Why Residents Need Disability Protection

Tom Strangstalien

By Tom Strangstalien, Insurance Advisor

As a resident or fellow, your biggest asset is quickly becoming your ability to earn an income. Until you become independently wealthy and can sustain a loss of earning power without consequence, it is imperative to have disability protection. But why do this as a resident or fellow, before the dramatic income increase of becoming an attending physician? Can you wait, get on my employer benefits group plan if applicable, and purchase supplemental personal disability insurance when I can better afford it? There are several reasons why this may not be the best choice as you build your overall financial plan.

While a medical resident or fellow, you are entitled to a base amount of coverage without being required to provide proof of financial qualification. Additionally, WisMed Assure works with several insurers that provide discounts to many of the residency programs. Furthermore, Wisconsin Medical Society Members are eligible for even more discounts. Throughout your career, these savings can add up to a monumental amount of money.

Disability insurance protection increases in cost as we age – it will be more expensive every year. By getting a policy early in your career, you’re locking in the price while it’s the most affordable. Another consideration is to purchase a future increase option at this time, where you can increase your protection as your future income increases, without the imposition of any more medical underwriting.

Group disability insurance coverage is a wonderful benefit, and I almost always advise to enroll for the maximum group benefits that you are eligible for, however it often has limitations. It may be capped at an amount that is insufficient to replace your total income if disabled. Portability is also a concern – if you change employers or career paths, the coverage will be lost. Almost always, group coverage contains offsets where any benefits attained from other sources will decrease the benefits paid out by group coverage. A solid personal disability policy, specially designed for physicians and those in the medical field, addresses these inherent risks.

So where should you obtain this vitally important coverage at the most affordable price? Only purchase personal disability insurance coverage through an independent agent who can offer plans from multiple companies. Never allow yourself to be sold a policy by a representative who offers only one plan, and thereby has an innate conflict of interest. The plan should be designed for you, not just a standard policy.

WisMed Assure exists for your benefit and offers plans from the Big 5 insurance companies, with plans specifically designed for physicians. Reach out to us and let us design a plan that fits your needs. James Dahle, MD, of The White Coat Investor states, “Early in residency, buy as large of a high-quality, specialty-specific, own occupation, individual disability insurance policy as an agent is willing to sell you.” Take care of this urgent financial chore today.

For additional information regarding disability insurance, contact WisMed Assure at insurance@wismedassure.org, complete this online form or call 866.442.3810.

BE AWARE AND CHANGE LIVES

By Tom Strangstalien

Insurance Advisor with WisMed Assure

September is Life Insurance Awareness Month. All month long, as I sat sipping my morning coffee, I reflected on how many times I’ve experienced the life changing impact of life insurance.

Even though I’ve been a life insurance agent for more than two decades, there are times when even I take for granted this life changing tool within our financial tool box. There are dozens of stories I can tell about how life insurance has truly been a difference maker in the lives of so many. Four of these stories stand out in particular because they had a direct personal impact on me.

Rene’s Home

Rene designed a plan, utilizing universal life insurance to potentially pay off the mortgage on her home early. The policy insured the lives of her and her husband jointly, and we funded the policy in such a way to grow the cash value quickly, yet be friendly to the family budget. 

One day, John mentioned to Rene that he had a lump on the back of his tongue which was bothering him. Being a nurse, Rene advised John, that he probably should get it checked out by their Doctor.  John battled cancer for the next four months. The family took care of him at home, until the day came when John passed away in his sleep.

 I received a call from Rene months later. Choking back tears, she told me because of the plan that was intended to pay the mortgage off early, the life insurance allowed her to remain in the home with her two daughters. She went on to tell me that she was going back to college to advance her status to a Registered Nurse. After much expression of gratitude and profuse thanks, she ended by telling me I helped the family change their life. Speechless at first, I finally said, “Yes, life insurance is a game changer.” 

Rene is debt free, cherishing her career as a registered nurse, while her two daughters attend college in Eau Claire.

Don’s Hockey Legacy

My son is a hockey player. Our small-town hockey rink was actually a make shift park shelter. I cherish the times that we set up the chiller to make the ice for the season, construct the walls, bring in the bleachers, and keep the rink maintained throughout the winter season. Our rink was viewed as a joke, and with a little bit of disdain by our fellow competitors throughout the state. 

However, we were really good. In fact, we took home many tournament trophies, state youth championship titles, and as a high school advanced to the state tournament on multiple occasions. How amazing would it be if we had a real rink? In discussing ideas with the parent committee on how to pursue such an aggressive endeavor, I suggested we approach community benefactors. 

I proposed an idea to Don, a very successful businessman in the community, that we fund a $5 million life insurance policy to someday create a community hockey arena and event center, bearing his family’s name. After deliberation with his tax accountant, he learned the charitable pursuit would provide a large benefit to him “tax wise”. His family stands proud of their patriarch, as they regularly witness the use of the family named facility. Don made a difference, and his legacy lives on.

Life Can Go On

Wayne would do anything for me, and pretty much for everyone. 

He helped me put up my tree stands for deer hunting every season. He taught me the ropes to hunt for ginseng in the fall and morel mushrooms in the spring. When the Brewers would play during the summer, I would frequently see Wayne and Carla’s truck pulling into our driveway, with their daughter Carlie in tow, to have a cold one, watch the Brewers, and do our best to discover the meaning of life. 

As with all of my friends, I encouraged Wayne to purchase a term life insurance policy. Their budget was tight, but we were able to formulate a significant amount of coverage with an affordable price. 

On a really soggy rainy day in the spring of 2016, Wayne, Carla, and Carlie ventured out to Carla’s mother’s land, located in Iowa. They would frequently take these trips, and while Carla visited with her mother, Wayne would maintain the family farm.

Shortly after crossing the bridge into Minnesota, and initiating the trip south to the Iowa border, Carla saw a tree give way on the bluff above. There was no time to react. The tree landed on the roof of the truck, killing Wayne instantly, breaking Carla’s neck, and leaving Carlie with head trauma and face lacerations. 

Carla was now a single parent, in a neck brace for months. Carlie recovered, cherishing the moments with her father and hero. I stood silent at the funeral, as the military salute and folding of the flag took place. Doing their best to emulate Wayne, the family stood tall, confident, and proud. Life would go on, and they would be “ok”. 

My Friend Randy

Randy was my best friend. We went to high school together, were college roommates for four years, and his brother married my sister. I recruited Randy to join our team in the “insurance business”. After some hesitation, Randy joined the team, and we spent many nights together learning the business. His on the job training involved writing a policy on himself (encouraged by me). 

I’ll never forget the call I received from my mother one beautiful April spring morning. She uttered, “Are you sitting down?” As I sipped my morning coffee at my kitchen table, I replied an affirmative yes. “I have some news. Your friend Randy woke up yesterday, and was going to read the morning paper, but he couldn’t. He was diagnosed with an inoperable brain tumor, and has about 6 months to live.” The words shook me to my core.

I took Randy shopping for his groceries one day. That was the last time I saw him. Six months from the date of the initial diagnosis, Randy was gone. He left behind two children, ages 5 and 7, and his wife Michelle who was a nurse. Michelle cried when she got the check for the life insurance. She was able to purchase a home for the family, continue her career in the medical field, and eventually put both boys through college.

Are You Aware?

Heaven forbid anything happens to you or your loved ones. But, wishing is not a plan. If you would like to explore and discover the very best possible options to fit your needs, I am always available. Please contact me with any questions or concerns you may have.

Tom Strangstalien

Insurance Advisor

WisMed Assure

Direct:  608-442-3730

Cell:  608-304-1579

tom.strangstalien@wismedassure.org

Financial Success Requires Offense and Defense

…and, defense may not be what you think it is

By Tom Strangstalien, Financial Protection Advisor

Offense, financially speaking, is focused on growth. Defense is focused on keeping what you have. Pretty simple concepts all-in-all. However, each has nuances that vary depending on your tolerance for risk, age, retirement goals, current and future lifestyle goals, and of course, income.

Income itself is one of your offensive tools. This includes the income you earn from working and passive income earned by investments. The other form of offense shows up in investment portfolio design and is generally about choosing assets or combinations of assets that have a high probability for growth… and generally, a greater degree of risk. And, of course, you can also play defense in your portfolio by choosing assets that are slower growing and less risky. The proportion of offense and defense in your portfolio is dependent on the variables mentioned above. This is where the advice of a professional investment advisor who understands your current situation, along with your goals and desires, is essential to your success.

As to other forms of defense, well that’s where I have spent my life helping people figure out. For example, during your earning years, your salary and other earned income is your most formidable offensive asset. But what happens to your plans if due to illness, injury or – God forbid – death, reduces or eliminates your income? How will you and your family maintain your standard of living? How will you be able to continue pursuing your retirement plans?

A substantial market for income replacement insurance has steadily developed for decades. (I include life insurance in this definition as it provides income for your family if you die.) There are as many options as there are individuals who need this type of defense, which means you have the opportunity to choose the type of insurance that exactly fits your current situation (including budget), and future goals.

A general feeling within the insurance industry, is that once a couple reaches the age of 55, there is substantial probability that one of them will need a form of long term care during their lifetime.   I have personally witnessed this within couples that I have worked with throughout my career.  That’s where another form of defense plays an exceptionally important role in protecting your immediate financial security and the integrity of your estate.

Now, like income protection insurance, there are many long-term care insurance options. To choose the option that’s right for you, you have to take into consideration how much tax you are paying and will pay. Again, the nuances can be quite subtle, but generally speaking, an experienced advisor will be able to show you all the ins and outs of the insurance products available.

One thing is for certain; the best time to do this type of planning and make your decisions is now. The sooner the better because, as you age, your options may become more limited, and for certain, the cost will increase.

If you would like a personalized tour of all the options that are right for where you are today and where you want to be in the future, contact me. I look forward to being your defensive coach.

Tom Strangstalien 

Direct:  608-442-3730

Cell:  608-304-1579

tom.strangstalien@wismedassure.org

Term Life Insurance

How much can I get for how little?”

This is the usual question from a potential buyer of “Term” Life insurance.

But for our Residents, Fellows, and young Physicians who want to protect their life and their family, it’s an incomplete question.

The better question is, “How can I inexpensively protect my family from bad consequences while we buy time for our assets to grow to a point where we won’t need Life Insurance anymore?”

Thinking through potential bad things that can happen is no fun, especially with the understanding that the probability of something catastrophic happening (other than death) is highly unlikely to happen to you.

And you’re right. It is not going to happen to you. That’s right … it is statistically NOT going to happen to you.

But it does happen to some … and when it does, the consequences are either tolerable or devastating, leaving one either emotionally comfortable or severely distressed.

Keeping in mind that insurance, by nature, is intended to cover “low probability/highly severe financial consequences”, there is a difference between “inexpensive” Life Insurance (the goal) and “cheap” Life Insurance (the mistake).

So, what makes term life insurance “cheap”?

After 24 years of working exclusively with Physicians, I’ve experienced a lot. The issues that follow are very real … (We’ll just leave it at that … but I can tell you that I am much more “mindful” of structuring Term Life Insurance now than I was 24 years ago …).

So, let’s look at an example of this low probability circumstance happening to someone like you…

A Physician, age 30, buys a $1,000,000, 20-year Level Term Life Insurance policy. She is delighted because, after a comprehensive search, she found the least expensive contract. She got the best rating class possible: only $25.73 a month. Such a deal!

Then, at age 42, with three young children, she is diagnosed with MS and is partially disabled and can practice only part time.

By age 45, she is totally disabled and not working at all.

So here’s the situation …

Typically, if one is disabled early in one’s career, one has not enough time to attain enough assets for retirement (and other objectives, such as a child’s college tuition).  This is because the monthly benefits being received from one’s disability insurance benefits leaves little to save. There simply is not enough money.

This was the reason for purchasing the Term Life Insurance 15 years ago.

Now the life insurance takes on greater value … It’s there to do what was intended … to make sure there are assets there for the family …

But does it?

Here is what her Life Insurance policy can and cannot do for her and her family …

This was the lowest premium … and it is, indeed, a cheap policy …

  1. She has 5 years left on her 20-year level term. Then you know what happens at the end of the level term? It becomes very expensive … onerously expensive … and increases in premium every year. So, with a tight budget, it quickly becomes unaffordable … at just the wrong time …
  2. She is now uninsurable and cannot get a new policy.
  3. Her policy could have been convertible to a longer term, but only during the first 10 years …

Talk about stress … At a time when one is emotionally vulnerable, now there is additional stress.

So, how could this have been avoided?

There could have been a longer “conversion” period put on the original policy. This would have allowed for the policy to be stretched to a longer term.

A conversion to a “permanent” policy is no bargain at this point; it has a much higher premium; it is around $1,000 per month; $12,000 per year … year after year. But, at least one would have had the option.

Please Note: longer conversion periods cost pennies more per month … but need to be applied for and put on the original policy at inception.

Could a better decision have been made back when the policy was originally purchased?

The answer is “yes”. There could have been a “Waiver Of Premium” Rider on the policy.

Waivers differ with each Insurer, but “strong” waivers waive premiums when one is totally disabled … and continue to waive them past the “level” term period … Many will waive it all the way until one passes … no matter how long one lives.

Disability waivers typically cost about $12 – $15 per million per month.

If this had been part of the policy, the contract would have stayed in force free of charge.

So, the result could have been less stress, knowing that one’s family would be getting that $1,000,000 no matter how long or how short one’s life would have been.

Could decisions have been made that would have been even better than this?

The answer is “Yes”. This could have been a contract with the ability to both “waive” the premium and then convert it to a permanent contract, which, if one is totally disabled, not only waives premiums, but it funds itself, that is, the Insurer pays the premium.

Now that same $1,000 per month is deposited into the contract by the Insurer and would have been building a cash reserve for the insured that could have been accessed later in life.  

At age 65, the cash would have probably been in excess of $500,000 … and, of course, there’s the Life Insurance …

Now, instead of stress, there is the emotional comfort of knowing that one’s family is financially sound no matter if one lives a long time or dies prematurely.

There’s a little bit more to this story …

A “20” year level term is, by far, the most common “term” chosen by young Physicians … and, with me having been around for 24 years, many of those 20-year terms are coming to an end.

As mentioned before, once the “level” term ends, these contracts get incredibly expensive … No one ever keeps them …

The thing is … Many, now at age fifty-something, still want some life Insurance. “The kids are still in college” … Not quite enough yet in the Retirement plan … Just want the extra million for another 10 – 15 years of so …” are commonly heard reasons.

Well, back at age 30, that 20-year term for $25 per month could have been a 30-year term for $44, but it was decided back then that was just a little too “pricey”.

Now, at age 50, if one is healthy, a new 10-year level term is $75 per month and a new 20 year term is $119 per month.

And again, that is assuming one is still in good health …

In closing, if you want the cheapest Life Insurance, anyone can shop for you.

But, as a young Physician, if you want “inexpensive” insurance with the appropriate protections for you and your loved ones, our promise is to watch out for you and provide the right kind of guidance.


Dave Serena

Dave Serena is in his 25th year as an Agent with the Wisconsin Medical Society’s Insurance Group: Wismed Assure. He has Physician clients in 36 states and continues to provide them with  life-long counsel and guidance. His position is that Physicians are free to practice high quality medicine and enjoy their families when they are confident about their personal financial security. He can be contacted at dave.serena@wismedassure.org  (414) 238-6105

It’s Time to Jump Start Your 2020 Employee Benefits Process

Open enrollment season is upon us. Here is a list you can use to ensure your employee benefit program for 2020 is implemented without a hitch.

Has your advisor: 

  1. Requested a census?
  2. Reviewed alternative carrier market options?
  3. Presented a plan level review of your benefits (i.e. deductibles)?
  4. Discussed Open Enrollment and your employee forms?
  5. Provided a Benefit Booklet for your employees?
  6. Updated your Summary Plan Description (SPD)?
  7. Reviewed the legally required group health plan notices for employees? *

If any item on this list causes you concern, or you have any questions about how to make your 2020 employee benefits plan the best ever, we can help.

Contact our director of group benefits, Chris Noffke, GBDS.

608.442.3734 direct

Chris.Noffke@wismedassure.org