KEEPING YOUR FINANCIAL ADVISOR OR INSURANCE AGENT HONEST

Article #2 in the series:  How to evaluate and compare an insurance company for financial strength.
Ask your advisor for a "Vital Signs Report" for any insurance company you are considering.

A "Vital Signs" report is an objective spreadsheet that summarizes and compares up to 8 insurance companies on 1 page; for several important financial safety criteria. This can help protect you from a biased or commission driven advisor from offering a company to you that is considered less than acceptable by honest and client focused advisors. You can even specify which companies you would like to compare.

What kind of information is on a Vital Signs Report?
First of all, 5 different and qualified rating agencies analyze key criteria such as the relative risk inherent in any insurance companies investment portfolios, asset growth, bonds in default and what types of investments the carriers are holding.

How can a layman interpret the results?  This is made easy for you.
Each of the 5 rating services assigns a percentile rating to each carrier on the report.
The 5 ratings are then averaged and assigned a composite rating known as a "Comdex percentile"  The higher the number, the safer the company is considered to be. My opinion is that an insurance company should have at least an 80% Comdex rating.

Aren't all insurance carriers about equal?
Not really.  The example attached shows for example, that Transamerica Life has a strong Comdex rating of 93%; an elite number;while the well known AAA has only a 60% rating.


Are there safeguards for doing business with companies licensed in California?
Yes, there is a California Guarantee Association that protects the consumer up to certain limits for life insurance and annuity claims; but an agent is not allowed to discuss that with you prior to a sale since it is considered unfair marketing.
In summary, you should not only expect your advisors to make product recommendations from companies that are competitive; you should also ask for a financial safety comparison of the specific company recommended versus other companies that your advisor has researched. The vital signs report is an industry standard that is recognized and used by the more diligent advisors.
This article is not offered as investment advice; but is offered as a tool to help the layman compare insurance companies for financial strength. 
A sample report is available by calling the phone number below and leaving your email address.
Randy Taylor
1(916) 601-5270

Mayo Clinic Reports on Several Cold Remedies

The Mayo Clinic has published a very detailed and interesting summary of which over the counter and natural cold may work or be over hyped.  You will find it informative to see their findings on remedies like chicken soup, antihistamines, and over the counter treatments from tylenol to Zinc; like Zicam. Read this summary which includes expert blogs:  " Cold remedies, What works, What doesn't"   http://tinyurl.com/2fhn4c

Social Security Information nicknamed Social "Insecurity"

The governments obligation to pay out social security benefits to a rapidly growing number of baby boomers seeking retirement may result in higher taxes or reduced benefits. It is important that Americans set aside money for retirement and also protect current supplements to company pensions, IRA savings, and other savings.
Please review the Time Magazine summary taken from my website library below for key factors affecting your potential retirement payment.:
Important Facts about Social Security Benefits.

KEEPING YOUR FINANCIAL ADVISOR OR INSURANCE AGENT HONEST

Article #1:  Funding your child’s college education:  Scam or Savior ? :  Tax-free policy loans from life insurance policies as a savings or income producing vehicle for your child may not provide enough income.  Read this blog to see the pros and cons.

Pros:  A properly designed life insurance plan can provide a death benefit to provide for college or other expenses as well as a tax-deferred savings vehicle with tax free policy loans. This only works though if the policy is designed with the client’s interest first.

Buyer Beware:   First:  It is illegal for an insurance agent or advisor to refer to a life insurance premium as an investment or a contribution.  It must be designated as a premium,.           Second: An improperly designed life insurance policy that uses a normal premium schedule will pay your agent handsomely but not provide you with enough savings. Using life insurance as an investment vehicle for the sole purpose of paying for your child’s college education may not work unless you pay attention to careful principles outlined below:

How to design your policy properly if at all:

            “Overfund” your policy with cash but follow the IRS Guideline Premium Tests:  In general, a single deposit is the best way to do this since the savings element of the policy has the potential to grow more quickly.  Important , If you exceed the Single Premium guideline premium rules; all policy loans may be taxable; not tax –free.

You can also use a premium schedule of  7 years or even an ongoing guideline level premium . To make sure that your agent is not designing the policy to have a higher commission and consequently; a smaller savings element; ask him to show you on the required computer printout what the single, 7 payment, and guildeline level premiums are. You are best suited to pay the maximum under these guidelines without exceeding them.  They are disclosed on all insurance company  official printouts.           

Allow 15 years or longer for the savings to accumulate:  The policies work on compounded tax-deferred interest. If a child is already 10 years old for example, and enters college at age 18; there would only be 8 years or so before the first loan is taken out.  Therefore there usually would not be enough time to accumulate interest.

Ignore computer projections that are illustrating 10% ;to 12 % returns. Even indexed universal life insurance plans that have some built in safety factors; often over estimate the yearly expected returns.  If an insurance company were to actually deliver these high interest rates routinely; they would have to increase the internal charges for the insurance.  Increasing the insurance costs; reduce your yearly yields.

Plan on keeping the life insurance in force until death.   If the policy is surrendered loans in excess of your cost basis may be partially or completely taxable.

This is important.  You  cannot defer taxes on life insurance , tax income and then cancel an insurance policy without having a potential for taxes to be due.

In summary while most advisors are honest; you should protect yourself  somewhat by working with a broker that will compare several companies for cash values and company financial stability.  Ask also for a “ Vital  Signs” comparative report which shows the different companies financial ratings from 5 different 3^rd party sources. A single A.M. Best report is usually not enough. This article is not meant to given tax or investment advice. Always consult your accountant, attorney,  for more specific advice.