LegacyArmour No Comments

Who is Insuring your Insurance?

You’ve done your due diligence.  You’ve appropriately sized, signed, and sold your client the insurance they need.  If your client is like most people, they now feel secure in the knowledge that they are insured, but what does that mean?

The Consumer-Reports company states that “At least $1 billion in benefits from misplaced or forgotten life-insurance policies are waiting to be claimed by their owners.” (https://www.consumerreports.org/cro/magazine/2013/02/how-to-find-lost-life-insurance-policies/index.htm) The insured in these cases paid years of premiums for nothing.  Their beneficiaries received nothing and eventually the policy will be forfeited.

This isn’t a rare occurrence.  As part of my standard discussion with consumers, I ask them if they are the beneficiary to any insurance policies.  Many of them say “I don’t know.”  If they do know that they are a beneficiary, I ask them what company the policy is with or if they could find out what company the policy is with.  So far, no one has known who a policy was with and only ~30% said they were know where to find out if something happened to the insured.

What is needed is some sort of insurance delivery assurance, or… Insurance Insurance!

Just like we talk about “who is watching the watch dogs,” we should be asking “Who is insuring your insurance!”  If we aren’t talking to our clients about this, then we are doing them a disservice.

Protecting the end game

There are many ways to ensure that a life insurance company is alerted after an insurable event takes place, but most of the methods are flawed in one way or another.

The simplest method is just to tell the beneficiary about the policy and perhaps even give them a copy for their safe keeping.  However, because of the very nature of life insurance, the long period between the date that someone first initiates a policy and the date when an even takes place are frequently decades apart, and most people just don’t remember about the policy or where they put their copy.

People that are a little more proactive might put a copy of the policy in a safe deposit box, but the same original problem is still an issue:  The beneficiaries may not know where the safe deposit box is and may not have access to it in a timely manner even if they did know where it was.

What clients need is a service that not only protects the information but ensures that it is delivered to the beneficiary after an event takes place – a company that insures the insurance – a company like LegacyArmour.

Doing it right

There are many companies today that claim to have some sort of “vault” in which their clients can store information, but every one of these companies has two flaws:  The first flaw is that none of them have a programmatic triggering mechanism and delivery protocol.  The problem that we are trying to solve is people not knowing or forgetting that a policy exists.  Everyone of these companies (except LegacyArmour) requires that the subscriber enlist a number of trustees that will inform the company if anything happens to the subscriber.  Wait a minute…they are fixing the fact that people can’t remember things long term by adding more people that have to remember something?  That doesn’t make sense.

The second flaw is that these companies will release a subscriber’s information if their trustees tell the company that something happened to the subscriber.  But if the company can release the information, that means that it isn’t encrypted and thus open to hacking, a disgruntled employee, etc.  They claim to have “military grade encryption” but that is applied only after they have the unencrypted information, and they can still decrypt it whenever they want.  This is like claiming that you use military grade locks on your front door with the door right next to a window the keys in the lock!

We designed LegacyArmour to detect a person’s demise programmatically, without human intervention, and while we currently have contracts in place to monitor the U.S. Death Index, we are in the process of upgrading our detection system with multiple data inputs and an artificial intelligence engine.  When we detect a subscriber’s demise, we seek out and deliver the contents of the vault to the recipient.  Only the recipient that the subscriber designated can unlock the vault using a series of secret questions and answers set up by the subscriber.

Your clients trust you with one of the most important, and certainly longest lasting, financial decisions of their lives.  Now you have the opportunity to provide them with a true, life-long (and even post life) service that protects those financial investments and ensures that their wishes are fulfilled.  It’s also a differentiator for you that makes your services more valuable.  It’s a Win-Win!

If you want more information about what LegacyArmour can do for you, contact us here.

Sal Sofia LUTCF No Comments

Let Me Tell You A Real Estate Story

Do you know the best Real Estate purchase ever made?

Let me tell you a real estate story…

There’s a piece of vacant land I found that I believe will grow in value and therefore it’s a good investment and I want to buy it.

Since I’m still working earning income,  the prospect of capital gains is more appealing than current income from this property  (such as from an income residence or building).  Also, the income  I would get would only be skimmed off by the federal income tax bite.

So this vacant land is the best bet for me provided it grows in value over time to represent a fair return on the investment I will make.

Only thing is, since unimproved land is speculative at best and I’m not anxious to lose my money I need to discuss this purchase with my banker (lender) who will also have skin in the game and advise me of his interests of course.

I strategically plan my proposal, sit with lender and lay out my idea for purchase of this land along with certain assurances I ask the bank to provide me.

I express that the land purchase will be $30,000 but before I purchase I want some assurances to help me with peace of mind on several points so I may make this purchase without much worry or concern, as I feel it’s reasonable to share with the lender in any downside since we’re in it together so to speak.

So I lay out my proposal to the banker my considerations:

First,  I say I would like your contractual assurance that this land will be worth $100,000  35 years from now when I’m 65 years old.  And your guarantee that the bank will buy it back from me for that price at that time.

Second, I’m prepared to accept a reasonable shrinkage in market value should I decide to sell the lot next week, next month or next year as to be expected due to commissions, closing costs and taxes.

Third, regardless of the early  shrinkage however I want your bank to guarantee that every day of every year for the next 35 years the land will have a guaranteed market value which will be properly proportionate to the $100,000 which it will ultimately be worth, and after a year or two upon my request you will buy it back from me at its stipulated value at any time, with no questions asked.

Fourth, I want your guarantee that you will lend to me at any time as much as 100% of that designated market value and should I need to borrow from you that you will not run my credit report, investigate me, or require from me any financial documentation.  I will agree to you charging me an interest rate against said market value at 8% secured by my land, no matter how much you may need to increase this rate going forward with other borrowers and that you will hold the loan for however long I choose not how long you desire without demanding a repayment due or threatening foreclosure.

Fifth, I want you to guarantee that if I don’t live these 35 years that you will  take over the land on my date of death and regardless of what you then consider the market value to be, you will pay my heirs the full $100,000 which the lot will be worth 35 years from now even if my death should occur 35 months, 35 weeks or 35 days from now.

Sixth, I ask that you agree to absorb all federal income taxes chargeable to my heirs or to my estate when that $100,000 is paid out coming to them free and clear of taxable income.

Seventh, then I want this bank to give me the privilege of buying this lot over 20 years in installments.  In that case I will make no down payment, just the first of 20 annual  or 240 level monthly payments and I want the carry charge to be very low at 6.5% so that the 20 installments on that $30,000 property will be about $2,500 to $2,600 each.

Finally and probably most important of all, as part of my right to buy my land from you in installments, I want it agreed in event of my death before I have paid all 20 installments, the bank will at its own expense and out of its own pocket pay in one lump sum all the installments which would otherwise fall due after my death, so  that the $100,000 ultimate value of the land can be and will be delivered to my family immediately, just as though I had bought the land for cash instead of installments.

Q. Can anyone buy property of any kind with real value that can accomplish all of the buyer’s objectives?

Q. Does anything come to mind that can fulfill all of these financial benefits while including all of these guarantees on an investment of any type?

Q. Have you ever been exposed to anything that can offer such a remarkable assurance to cash growth, tax leveraging, collateral use,  purchase of liquid asset using the installment method, and a vehicle for investment return that self-completes?

There is one and its use has been favored by people in the know who have been exposed to it over generations.  It hasn’t changed much over the last 150 years and has stood up to the test of time.  Through all major economic disruptions, recessions, depressions, wars, period of gloom and abundant prosperity.  It has provided families and businesses one of the safest ways to grow assets and security that those holding it would never go broke, nor their family left destitute.

Do you now know what this amazing financial vehicle is that will do all the things this buyer above wants to do to favor them and not the bank?

It’s  life insurance!  Yes, life insurance is endowed by the nature of its design with the most creative, useful and well structured financial concepts created by man.  Given a chance to perform to its many truly unique  benefits you will be awarded with a financial program that is unmatched when compared to anything else.

It can be said holding cash equity life insurance is better than a portfolio of stocks, real estate, business ownership.  With this form of asset in your portfolio you are assured you will never be let down.

For questions on cash equity insurance policies, whole life or other examples, or for a review of your current insurance plans please contact us by clicking here.

Steven Maione No Comments

Should you use a Mortgage Broker or a Bank for a Mortgage?

Mortgage Broker vs. Bank when it comes to borrowing for a real estate purchase?

Q. WHY SHOULD I USE A MORTGAGE BROKER OVER A BANK?

A. This is a very common question…  When you work with a Bank you are typically dealing with one product line. When you deal with a mortgage broker, you get the benefit of options and loan programs from many different banks and mortgage lenders all with only one credit pull. Additionally,  mortgage brokers close faster, save you money and often say yes when the BANK SAYS NO!

Q. HOW MUCH OF A INFLUENCE DOES CREDIT SCORING HAVE ON INTEREST RATES

A. Unlike years ago, mortgage rates are now credit risk based, so credit scores can influence rates by more than 1.00%!

Q. HOW CAN A MORTGAGE BROKER HELP ME WITH WAYS TO IMPROVE MY FICO SCORE?  

A. This is more a matter of the individual loan officer you are working with, rather than just being a mortgage broker benefit vs non-broker. Finding a mortgage broker with many decades of credit experience allows them to share with you how to improve your score which allows them to seek the best loan for your circumstances…

Q. HOW ASSURED CAN I BE THAT I’M USING A BROKER THAT IS KNOWLEDGEABLE AND TRUSTWORTHY, WHAT CREDENTIALS SHOULD I BE ASKING FOR?

A. Beside the common one, that people can call references or check out reviews, Brokers are required to be INDIVIDUALLY LICENSED whereas bank loan officers work off the banks license.  Therefore, mortgage brokers must, pass a state and Federal Exam, Keep up with ANNUAL Continuing Education, have background checks, and even credit report and financial stability requirements.

I’m happy to help you answer any questions you may have or if you’re down the path of purchasing and need immediate assistance please contact me HERE.

Gigi Huguet No Comments

Flood Insurance – The Basics

Have you checked if your community participates in the National Flood Insurance Program (NFIP)?  The Federal Emergency Management Agency, better known as FEMA, offers insurance coverage to those in participating communities to help reduce the burdens caused by flooding through the NFIP.  The goal of the NFIP is to help restore the community as quick as possible after the effects of flooding.

What policy is right for you?

Dwelling Policy

Primarily for:

  • Residential Buildings with 1 to 4 Units
  • Residential Condominium Unit
  • Residential Tenants
General Property Policy

Primarily for:

  • Non-Residential Buildings and Units
Residential Condominium Building Association Policy (RCBAP)

Primarily for:

  • Residential Condominium Buildings

How much does flood insurance cost?

The cost of flood insurance is based on a couple of factors.  Some of those factors are the flood zone the property is located in, the coverage limits selected and the year the structure is built.  Another factor that affects the cost is the elevation of the building’s lowest floor in comparison to the base flood elevation.  In some cases, an Elevation Certificate is recommended or required to confirm elevation information for proper rating.

FEMA also offers a lower cost coverage called Preferred Risk Policy (PRP) under the Dwelling and General Property Policy.  The program is primarily available to properties located in low to moderate flood hazard areas.  Per FEMA, the average annual cost of a PRP is $395.00. 

Flood Zones.

You can view your community’s flood map by visiting the FEMA Flood Map Service Center.

DesignationZone
Special Flood Hazard AreaA, AO, AH, A1-A30, AE, A99, AR, AR/AE, AR/AO, AR/A1-A30, AR/A, V, VE, V1-V30
Moderate Flood Hazard AreaB, X (shaded)
Low Flood Hazard AreaC, X (unshaded)
Undetermined Flood Hazard Area D

What are some questions you should be asking?

What is considered a flood?

The NFIP has a legal definition for flood that reads as follows, “A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow.

What is covered?

Once a loss has been determined to be caused by what NFIP defines as a flood, a flood policy would typically cover losses to the building and/or the contents of the building, up to a set limit.  It is also important to understand how a building and/or the contents of the building are defined.   Additional coverage may be available, however many are specific to details like the usage, occupancy and policy forms.  For instance, a detached garage may have some coverage depending on factors like the usage and occupancy of the detached garage.

A great site to visit for these answers is www.floodsmart.gov.  I highly recommend homeowners take the time to go through the site and become familiar with the flood insurance coverage that FEMA offers.

On a side note:  some private insurers are now offering flood coverage.  It is advisable that homeowners understand if and what the differences are in the coverage that may exist between the NFIP and  flood coverage offered by a private insurer.

For more information or if you would like me to review the policy you have, contact Gigi Huguet here

 

 

 

Sal Sofia LUTCF No Comments

Beware Lender Provided Mortgage Insurance

I’m sure you know the expression “buyer beware” 

Many millions of people everyday put themsleves into financial debt by borrowing money to buy property from a bank or other lender.  For many, the mortgage is properly designed and paid on a timely basis.  But for the unfortunate countless others a many financial and emotional burdens await.

Do you have a mortgage?  Have you ever wondered what would happen if you couldn’t make the payments?

There are a number of reasons people fall behind on payments, affecting their credit score, inability to borrow again, and even not be able to get property insurance.  This is something that can and does happen to millions of people each year.

Could this happen to you?

If you are conscientious of the realities of life, then you are aware many things can happen to you that will affect your ability to meet your financial obligations.  The most obvious is death, however any major physically disabling event or loss of income will do it.

People have been managing these risks by obtaining Mortgage Protection Insurance being assured their outstanding financial obligations (mortgage) are satisfied by having the loan paid off or continuing to make monthly payments by using the insurance money to help them keep current.

But did you know that some lenders offer mortgage insurance (not PMI, that is a different subject) that puts their needs ahead of yours?  

So how does mortgage protection insurance offered by the lender work, and why should I explore other insurance options?   

Here are just a few reasons to stay away from lender provided mortgage insurance:

1. Lender will usually require being the beneficiary of all proceeds, lump sum death benefit payment and any monthly income checks if paid for a disability of insured.

This is not in your best interest as it takes control away from you being able to utilize the policy you have paid for to be used toward other loan payoffs or new mortgages you may need in the future.  In other words the policy will terminate if you decide you need that coverage applied toward other indebtedness.

2. Lender’s offer of insurance is usually far more expensive than other varieties because it uses a group underwriting model which takes into consideration adverse health of all their insureds including tobacco users, obesity, current heart conditions, cancer or other medical and occupational risks.  The one good benefit here is that people who are uninsurable can find a way to cover their note because it is guaranteed to be issued.  However this comes with a high price tag on the amount covered.

3. The insurance is a decreasing value plan.  The amount of insurance you pay for at inception reduces as your loan balance is reduced.  Pay special attention here as YOUR PAYMENT IS NOT REDUCED.  The policy is designed for lenders insurance to capitalize on profiting extra premiums while providing less benefit over time.  Eventually the policy will terminate at the end of the mortgage period.

This is equivalent to renting a 2,000 square foot home for $2,000 month and each year the landlord tells you that your SF is being reduced by 100 SF but your rent will not go down.

4. There have been cases cited where lenders sold off their mortgage to other banks, investors, but failed to move the insurance along with it.  Some lenders don’t participate in this using or adopting this program.  

These are just 4 reasons to consider when shopping for insurance meant to help pay off your note.

There are much better options and alternatives to choose from when you want to protect yourself from late payments, keep your home with your family and not risk your credit being ruined by foreclosure, short sale, or inability to take out new loans for personal use.

Next, we’ll explore some of the better methods including today’s living benefit policies that not only keep you in total control of the usage of your insurance but is designed for efficient and low cost coverage that never reduces in value until you decide to exit your policy.  

To learn more about today’s best choices for covering your mortgage or other loan indebtedness, please contact us.