The founder of a new insurance group, Ken Bloch, discusses the benefits of insuring spousal and child support against disability.
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Ken Bloch Sr., CLU, is the founder of The Bloch Agency, and also one of the founding partners of The Plus Group, the nation’s premier disability marketing organization. Ken has over 40 years of experience in the insurance industry, 35 of which were in the IDI market. He is regarded as an industry leader and participates on several field advisory committees for major disability income companies. He has been published in Benefits Selling, Life Insurance Selling, Broker World, and The Charlotte Observer; he was also a keynote speaker at Disability Income Officers Roundtable, served on the NAIFA 2012/2013 Board of Directors, and was named 2007 Financial Advisor of the Year.
What is Family ValueGuard (FVG)?
The Bloch Agency developed the FVG product because there is a need to protect alimony, child support, and future educational expenses due to a disability. In the cases of a special needs child, future maintenance needs are protected. Typically, life insurance has been used in the case of a premature death, but protection has never been available to protect support payments against a disability until FVG was developed. The risk of a disability is actually 3 times greater than death at any one age, so this protection is actually more important. Today, the probability of a white-collar worker becoming disabled between the ages of 35 and 65 is 27% for men and 31% for women. A 35-year-old white-collar male who suffers a disability lasting 90 days or longer will be out of work for an average of about 6 years.
How does Family ValueGuard work?
Once the financial terms and obligations have been determined, a FVG policy is designed to protect these payments. In case of a disability that would curtail or eliminate these payments due to financial stress, the FVG policy would pay these benefits directly to the spouse after a 90-day elimination period. These benefits would be payable in addition to any other disability protection the ex-spouse may have. The FVG policy can also provide additional benefits for daycare, private school, and provide a lump sum up to 500k for future education needs. The lump-sum payment would be paid into an Educational and Maintenance Irrevocable Trust. We have also created this trust to be given to your attorney so it can be tailor-made for each individual situation.
How much does it Family ValueGuard cost?
It depends. The proposal is based on several factors—the occupation, age, and health of the insured are the starting points. Then we factor in the alimony payments and duration, child support payments and schedule, and any other obligations, such as private school and college expenses, to calculate a premium. Due to the changing nature of some of these obligations, the FVG policy is adjusted to reflect these changes. If these obligations no longer exist, the FVG policy is null and void. The final cost is similar to traditional individual disability insurance.
Who is the insurer?
The Bloch Agency partnered with International Specialty Insurance (ISI) and Certain Underwriters at Lloyd’s of London to underwrite this coverage. The traditional disability insurance carrier’s policies do not have the flexibility to provide this coverage. Lloyd’s of London has a worldwide presence.
What are the typical causes of a disability?
When we are young, approximately 80% of disabilities are caused by accidents, but as we age, the percentage of disabilities caused by accident decreases and the percentage of disabilities caused by a sickness increases. Sickness eventually causes close to 80% of all disabilities. The FVG policy provides own occupation coverage—this means that if you cannot do the important duties of your occupation due to an accident or sickness, then benefits would be payable after the waiting period. Examples of a sickness that typically causes a disability are heart attacks, stroke, cancer, MS, debilitating back issues, and, of course, the automobile accident. There is nothing more devastating to financial wellness than the loss of income to pay bills. The typical group or individual disability income policy does not consider the additional needs in a divorce.
How are the amounts of coverage determined?
The divorce decree or other settlement agreement provides the amount of alimony, child support, or other financial obligations that can be insured. These obligations can change over time and the FVG policy can be adjusted as well to reflect these changes.
Which party pays the premiums?
It depends. Either party can pay the premiums. We have seen situations where the supporting spouse wants the coverage to protect finances and the dependent spouse wants the guarantee that payments will continue in case of a disability. In either case, the benefits can be structured to be received on a tax-free basis. It is wise to seek financial and/or legal council to structure the receipt of the benefits in the most advantageous manner.
Can Family ValueGuard be added after an attorney settles their client’s case?
Yes. There is every reason to include FVG in any new divorce settlement and revisit existing situations to determine if FVG makes sense.
Who can purchase the policy?
Often the dependent spouse receiving alimony and child support wants to make sure that benefits continue in case of a disability, and since the policy premium is paid with “after-tax dollars”, policy benefits should be received on a tax-free basis. Contact your tax advisor for exact details. We have also seen the supporting spouse purchase a policy as well. The reason? In case of a disability, the need to go to court and reduce or eliminate payments is removed.
Can a disability provision be added to a divorce decree?
Yes. This has not been done before since there was no product available to provide this benefit.
If a family lawyer is interested in finding out more about your service, what should they do?
The family lawyer can visit our website—www.FamilyValueGuard.com—to learn more about our service as well as to request a proposal for their client. Our contact information is listed on our website. They can also call us directly at 1-800-696-1791.
Do you have a brochure to send to Family Lawyers that explains your service?
Yes, we have 2 brochures available: Family ValueGuard and Family ValueGuard Education.
Why should a family lawyer advise their clients to insure their alimony and child support payments against disability?
Every individual should protect his or her income in case of a disability. If the financially responsible spouse and payor of alimony or child support payments becomes disabled, the payments may be reduced or terminated. Given the fact that a disability is more likely to occur than a premature death, these support payments need to be protected. An unexpected disability doesn’t have to leave your client without alimony and child support payments.
To learn more about FamilyValueGuard, please visit www.FamilyValueGuard.com.