Life In The Fast Lane

Life in the Fast Lane By: Pat Wedeking

Life insurance is important…we all know that.  Life insurance rates have gone down significantly over the past 10 years as people live longer…many of us know that. Now life insurance is easier to transact… I know some of us might even challenge that one.  This article seeks to update you on the latest advancements in life insurance underwriting and how Smart Choice® is embracing this change making life insurance easy.

Americans are dangerously underinsured when it comes to life insurance; the opportunity to do the right thing for your clients and earn a significant income doing so has never been greater than it is today.  One of the largest life insurance growth markets in the world is the U.S. middle market and companies across the globe are recognizing this and investing in the effort to deliver life insurance to the masses.  As a result, there is more competition and prices have come down consistently for a decade. Recently, more and more companies are introducing new, better ways to get life insurance in force quickly.

Accelerated Underwriting Programs are hitting the market in a big way right now with different carriers introducing their version of Accelerated Underwriting each month.  These programs rely on data to assess risk as opposed to what used to be invasive bodily fluid draws asking your clients to give blood and urine to a medical professional they’ve never met in order to determine the proper underwriting class.  “What kind of data?” you ask, the list includes driving records, prescription data, credit scores, lifestyle index scores and the life insurance industry’s centralized database they call the medical information bureau (MIB.)  Add it all up and many actuaries are saying this is an equivalent way of assessing risk.

What was a 6, 8 or 10-week process can now be done in a matter of moments. Policies that used to be issued quickly at rates that are 200% to 500% of fully underwritten rates are now being issued at the same lowest rates available.

This is an evolution – or a revolution – so still most policies are underwritten the “old way” but more and more we are seeing products and processes that accelerate the process.

One of the carriers on the Smart Choice Quick Life platform, for example, has eliminated the need for blood and urine for all cases with face amounts of $500,000 and under.   Another carrier on this platform is offering some applicants the chance at the best prices without blood and urine up to $1 million and still another is reviewing all cases that fit a certain profile and giving us pleasant surprises with “Issued as applied for, underwriting requirements waived” messages often within hours of submitting the case to underwriting.

Yet another carrier has gone one-step further… the furthest of any carrier in the market today.  This carrier is instantly issuing policies up to $1 Million in face amount for all applicants who fit a certain profile and where data is available for consideration.  These are policies are issued on the spot, delivered electronically, with electronic payment and at a price that is most competitive.

Smart Choice has embraced this evolution and offers access to instant coverage through the expansion of the Smart Start program that we call Smart Start Life.  This makes Smart Choice among the select few in the country to have access to this product.  In partnership with InsureNOW, part of the largest distributor of life insurance in the United States, this program is available to Smart Choice offices nationwide.

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How to Sell (More) Life Insurance:

  1. Create awareness that you offer this type of insurance. We call this one “State Farm Sells Life Insurance” because this company is one of the top sellers of life insurance in the country simply by letting it be known that life insurance is available to their policy holders. No commercials, no pushing or pressing, just awareness.  Let your clients know that you offer life insurance.  Ask us, we can help you with email signatures, announcement letters and emails and even a customer friendly shopping mechanism you can link from your website.

Life Happens Pro ( https://lifehappenspro.org/ ) offers a simple, cost effective way to leverage best-in-class life insurance marketing resources to drive business to you.

  1. The one sentence that works. “Life insurance rates have gone down. Part of our service is to see if we can save you money so I am going to have our life insurance expert give you a call. Okay?”     When you get a “yes” to that simply enter the name and contact information into the Smart Start Life online form and you will hear from our life insurance expert that will act on your behalf.  Wait for commissions to arrive.
  2. Offer a Policy Review. “When is the last time you reviewed your life insurance progam?”  is another great question to ask.  They either say “Recently” in which case you can ask if you can review to see that they got the best price available – or they say, “It’s been a while” to which you can respond with an offer to do it right away – or they say, “I don’t have life insurance” which is your queue to help that family.
  3. Ask all Business Owners about Life Insurance. What can be an emotional, slow decision for families becomes a simple economic decision for most business owners. Buy Sell agreements and Key Person policies are some of the easiest life insurance sales you will ever make.
  4. Use a Quick Entry Process. Make your life easier with a new breed of processes that take the processing burden off your task list.  Smart Choice Quick Life and Smart Start Life are two of the best available.

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Brief Bio

Pat Wedeking is the Founding President of the Life Insurance Direct Marketing Association (LIDMA.org) and the Chair of the Life Happens. He is the founder of two life insurance distribution companies and now operates Crump’s InsureNOW platform.  Pat lives in

Refinancing Your Existing Debt

Refinancing Your Existing Debt
By: Kelly Drouillard, Live Oak Bank

The goal of any independent insurance agency is to grow and build long-term wealth. To get to a place where an agency can fund growth initiatives and make money, owners often obtain capital via specialty loans, use of liquid investments, seller finance, or funding from friends, family, and other supporters. This financing may be debt on less than ideal terms, including interest rate, loan term or both.

If you are an agency owner, with an expensive or steep repayment plan on your business debt, you may be feeling like you’re never going to generate the kind of cash flow to meet the needs of your agency, extinguish debt and experience the growth and achievement you dreamed of when starting your company.

The backbone of an agency is the cash flow.  It may have been prudent and necessary to take out loans, seek investments, or otherwise bring outside money into the company to get off the ground; you don’t want to let repaying those debts prevent you from actually taking off. When looking at the obligations you need to pay back, consider how much extra money you will have after making your monthly payments.

Can you afford to hire the producers you need? Are you meeting the demands of your customers? Are you ready for an acquisition? Or are the payments holding your agency back from really being what it could be? If so, you may need to consider restructuring debt to reduce your monthly payments.

Here are a few ways you can refinance your debt, significantly decrease your current monthly payments, and begin seeing your agency grow.

  1. Live Oak Bank’s SBA 7(a) Loan Program

With the SBA 7(a) loan program, you can restructure your debt into a more manageable repayment plan. While not all debts are eligible for this program, if you meet the requirements of the policy, it is an easy way to reduce pressure from your lenders and start seeing more money going into your business.  Typical insurance agency loan terms are 10 years with interest rates from 5.5% to 6.25%.   There are no prepayment penalties for loans with terms less than 15 years.

To be eligible for the SBA 7(a) loan program, you will need to meet the following qualifications:

  • Money secured from loans, borrowing, or investments must have been used for eligible business purposes.
  • The debt must be current.
  • The monthly loan payment for the proposed plan must give at least 10% cash flow savings or the existing note must include a balloon payment.

If you meet the requirements of the SBA 7(a) loan program, you can create a plan that is much more manageable for you and your agency. With a lower loan payment, you can focus on growing your business, put the money into things like agency development, and see your company reach the levels of success enabled by improved cash flow.

  1. Refinance to avoid “Balloon Payments”

When you take out a small business loan for your insurance agency, it is not uncommon for a loan to have what is called a “balloon payment.” A balloon payment occurs when the terms of the loan state that one large payment will be made at the end of the loan’s term. While this can give you years with a smaller payment, it also means you will be faced with a significant payment once that time is up.   A typical structure would be a loan with a 10 year amortization / five year balloon.   Thus, your monthly payments are based on a 10 year loan; however, the remaining balance is due all at once at the end of Year Five.  Balloon payments create a looming financial obligation.

If you do not properly plan for a balloon payment, you will be left to drain the extra cash from your business, reducing any cushion you may have created. You may also face high interest rates, meaning you’ll pay much more for the loan than the initial amount of money you received.

If you are trapped in a loan that ends in a balloon payment, you will probably want to consider refinancing. Refinancing your debt allows you to spread that balloon payment out over more time, preventing you from paying one large sum. With a refinanced repayment plan, you make small payments on your loan while ensuring that the cash flow to your business is not disrupted.

  1. Refinance for Longer Loans

For most agency owners, the typical loan acquisition may have seller financing with a term of five years. While a shorter loan term can be paid off more quickly, it also means you will be making higher payments on the loan each month. For a growing business, this can take away cash needed for operational growth and marketing.   A refinance solution under the SBA 7(a) program may be a 10 year loan.   Plus, there is the bonus of paying off the seller note and finally cutting ties with the seller.

SBA 7(a) loans (under 15 year terms) do not have prepayment penalties.   This gives you the cash flow flexibility to pay off your note early if you desire.

Before taking out a loan, be sure that you understand the details of the repayment and if it is a realistic situation for you and your agency. If you find that you are unable to meet the needs of your loan, don’t hesitate to restructure.

Restructuring your debt opens up doors to allow that money to be used elsewhere. With the money you will save each month by restructuring your debt, you can hire new producers or other staff to take your agency to the next level.  You could also buy equipment to be more efficient in the workplace or relocate to a new area with better customer access.

Thinking about your cash flow is the most important aspect of running a business. When it comes to your success, it is mostly determined by how smoothly you run your business and if you make enough money to keep moving forward. Don’t allow the loans, investments, or financial support that got you off the ground be the reason your company didn’t reach your desired levels of success.

For a refinancing proposal, gather tax returns for the past three years (agency and personal), the details of your current agency debt, and give us a call.  We can quickly analyze your situation to determine if a refinance make sense.

Kelly Drouillard is the General Manager of the Insurance lending division at Live Oak Bank. Reach her at 913.980.7773 or kelly.drouillard@liveoakbank.com