Veterinary Blueprints
The Veterinary Blueprint Podcast is all about taking the blueprint of industry experts and breaking it down in short, digestible episodes you can use to take your practice to the next level. Join host Bill Butler as he interviews experts on client and practice management, financial strategies, human resources, and more. Gain valuable insights and stay ahead in the veterinary field by tuning in to tips from successful experts inside and outside the veterinary industry.
Veterinary Blueprints
# 15 Insuring the Future: A Deep Dive into Veterinary Practice Life & Disability with Chris Steffel
Unlock the secrets to fortifying your veterinary practice against life's uncertainties with our latest podcast episode featuring Chris Steffl from Versatile Insurance. As we stroll down memory lane discussing our ten-year collaboration, we promise to equip you with the knowledge to navigate the insurance maze with confidence. Whether you're acquiring a new practice or planning for the long haul, our dialogue unveils critical insurance products and strategies that can provide a safety net for both your business and personal life.
Imagine securing your financial future while attracting top talent to your veterinary practice. With Chris's expertise, we dissect the intricate world of life and disability insurance, zeroing in on policies that offer strategic benefits for immediate and future planning. We tackle the often-overlooked significance of key person and deferred compensation plans, revealing how these can safeguard your practice's stability and promote employee retention. Our conversation is a treasure trove of insights, geared towards ensuring that veterinarians like you are well-prepared for any eventuality.
Wrapping up, we navigate through the complexities of practical financial planning, income replacement, and the impact of outdated life insurance policies on families. Our stories and personal anecdotes serve as a reminder that staying informed and up-to-date with your insurance coverage isn't just a chore—it's a crucial step in protecting the legacy of your practice and the well-being of your loved ones. Join us and transform the way you think about health and life insurance for a prosperous future in the veterinary field.
Guest Information
Chris Steffl
612-600-7243
cts.visins.com
Christopher Steffl LinkedIn
Versatile Insurance
Host Information
Bill Buter – Contact Information
Direct – 952-208-7220
https://butlervetinsurance.com/
https://www.linkedin.com/in/billbutler-cic/
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Welcome to the Veterinary Blueprint Podcast brought to you by Butler Vet Insurance. Hosted by Bill Butler, the Veterinary Blueprint Podcast is for veterinarians and practice managers who are looking to learn about working on their practice instead of in their practice. Each episode we will bring you successful, proven blueprints from others both inside and outside the veterinary industry. Welcome to today's episode and outside the veterinary industry.
Speaker 2:Welcome to today's episode. Welcome to another episode of the Veterinary Blueprints podcast, where business and entrepreneurship ideas meet the animal health and veterinary industry. I am your host, bill Butler, and I just could not be more excited. I don't know how all of you will feel about how excited I am on this episode, but I'm excited because I've got my good friend, chris Steffel from Versatile Insurance on here. So this is our first podcast with two insurance professionals on the podcast. So I don't know, it might be a little rough but we're going to get through it. I say Chris is a good friend.
Speaker 2:I've known Chris since 2010, roughly 2011. He started his career at RBC Dane Rauscher as a financial advisor and then transitioned after a few years to work at the insurance brokerage that his father had founded and he's now a managing partner there. Chris and I met through the insurance industry back in 2010, through the local state insurance association that I belong to, through the local state insurance association that I belong to. He and another partner were really investing in developing relationships with insurance agencies like mine, and I'll let Chris tell a little bit of his story and what he offers. But Chris and I are roughly the same age. We have a lot of the same ideas and principles behind how we do business, and so we've just had a really good relationship. And now, as I built my practice with veterinarians and products and services for them, chris and his team have been a huge integral part of that in adding to the value that we bring to the practices that we work with. So I'm very excited to have Chris Steffel, managing partner at Versatile Insurance, with us today. Welcome, chris.
Speaker 3:Thanks a lot, Bill. Thanks for having me and, yeah, I've enjoyed the partnership and I think there's a lot of good we still have to do right.
Speaker 2:Absolutely Nothing but open canvas in front of us, clear, sailing ahead, I think so why don't you, for our guests listening today, just a little bit about who Chris Steffel is I gave you a little bit of an introduction there, but you and your business and how you kind of fit into the insurance industry and a little bit about you.
Speaker 3:No, absolutely. Yeah, Bill, as you mentioned, I'm second generation in this business that my father founded and really we started the business and got it going to help out property casualty shops and then also financial advisors, and what we realized is that, you know, commercial shops such as yourself are really, you know, do a lot of business in the commercial and understand it really well. Really, you know, do a lot of business in the commercial and understand it really well. But when it comes to the life side of the business and all the different carriers out there, we realized that we as a brokerage can help figure out the best products for you guys, kind of put the best situations together.
Speaker 3:And the last four I lean on you pretty heavy. You do, you do no, it's good, it's in, you know, for us it's exciting and fun because you've got the relationships. You're trying to solve a lot of their problems. So we're always excited to come in and kind of bring different solutions to the table. And I honestly, business is changing so much right now. I mean, every industry is going through so many different changes and we're seeing it with some of the clients you have. So it's fun. It's fun to figure out, you know.
Speaker 2:Absolutely so. Versatile Insurance. Your dad started it back when we got together. It had a different name, but now it's known as Versatile Insurance, and you know. So you know we interact in a little bit of a different way. So there's. You know, when a veterinarian buys a life insurance policy or a disability policy out there, maybe they're buying a practice and they need to buy a life policy. There's like a thousand places for people to buy life insurance. You can buy it from your bank, you can buy it from your home and auto agent, you can buy it from wherever. So how does versatile insurance fit into the insurance universe? And then, how does that wind up impacting an agency like Butler Vet Insurance?
Speaker 3:Absolutely. So obviously there's a lot of different factors that come into play. So, first and foremost, what is even the policy to cover a loan? What is the best policy to cover if you've got another partner in the business? There's also some unique policies that can really benefit key individuals in the organization which we utilize for life insurance. So as an organization we'll first of all take those factors into play to kind of find the best policy, but then also health issues and then just what is the long-term planning?
Speaker 3:So, Bill, that's one thing I always appreciate with you when we work together is we're not just trying to solve the problem for the veterinary practice right now. We're looking at, you know, what does it look like in 10 years? What does it look like in 20 years? What can we do with these products in retirement? So it's a little mix of a little bit of everything, so Versatile. The great advantage is we're working with a ton of different brokers all over the country. We get to see a lot of volume and we get to work with a lot of carriers to find kind of the best product that fits for that situation.
Speaker 2:So our relationship, versatile Insurance just to paint a picture for the listeners, you know a veterinarian doesn't call Versatile Insurance to buy an insurance policy. You deal direct. So you're kind of a middleman. You deal with the insurance companies and so when I go to Chris I've got a veterinarian who's going to buy a practice. They say, hey, I need to get a life insurance policy for my collateral life assignment. I go to Versatile Insurance and buy it through Chris's brokerage. So Versal Insurance is a brokerage, or what do you technically call yourself as a business?
Speaker 3:Brokerage is probably the best way to look at Superstamp, but that's usually what we are Our market, yeah yeah.
Speaker 2:So Chris and his company have the relationship directly to the insurance company. So Pacific Life and Banner Life and AIG and all the different life insurance companies and as an insurance agency I access those companies through Chris. So Chris has the relationship with the company I have the relationship with Chris and Chris is that go between. And so in a lot of cases that's what happens. Lot of cases, that's what happens. You know, it's very rare for an agency like mine to have 35 different relationships with all the different disability companies and all the different life companies and so when you're accessing insurance sometimes those you know as the end user for our listeners out there, if you're a veterinarian who owns a practice, you generally aren't buying it directly from the insurance company.
Speaker 2:There's sometimes these multiple layers and so for us at Butler Vet Insurance we've partnered with Chris and his team because it really adds a lot of tools to our toolbox that wouldn't otherwise be there. And that's why I wanted to bring Chris on today to talk about his expertise, because my background, as Chris said, is the commercial insurance side. You know the business insurance and workers' compensation and all those things, and his experience is the life and disability and, as we've grown, that part of our practice. Chris and his team have been an integral part of that, and Chris has so much more experience with how these products and I've learned so much from him over the last three to five years here on how to integrate these products in. So you know, before we hop down here, chris, you mentioned three or four products that are really key in you know to use the word key in a veterinary practice, and why don't you list a few of those off for the listeners?
Speaker 3:Sure, you know, right now what we're seeing and this is something that's really kind of picked up because of just where all industries are at is trying to either attract or retain key people that you've got in place, and so one of the things that we're doing is, I mean, one is just offering benefits to those key individuals. But there's also some pretty unique products that are out there now where the organization can actually put a little extra funding aside for that individual to stay with the organization. So it's an incentive, you know, for that individual to stay and at the same time it puts a little bit of ease on the practice to know that they've got something, that individual to stay, and at the same time, it puts a little bit of ease on the on the practice to know that they've got somebody that wants to stay with the company. So that's probably been the big, the big area.
Speaker 2:So that's those are we. We will call them deferred compensation plans, and so you know, we, chris and I had actually in another one of our agents here at Butler Vet Insurance, we're actually having some, some meetings with with our clients about deferred compensation plans to put some things in place, and we'll dive into that a little bit more. So deferred comps one and then what are a couple others that we're dealing with a lot right now.
Speaker 3:You know, one of the things is is we'll see when somebody takes out an SBA loan or if they're buying a practice or expanding a practice, the bank a lot of times will require a life policy and a disability policy to offset that loan. So for us we'll shop that out to find the best price. If there's any health issues or problems that they've got, we're able to find a carrier that will actually usually fit into that space. So that's when we're seeing a lot right now.
Speaker 2:Yeah, and so for our veterinarians out there who are looking to acquire a practice, be prepared. Yes, because the life insurance and what we've been running into is the lenders out there and I know a lot of them is that the lenders and the underwriting team at the lending department are requiring very high limits of life insurance. That you know you got to cover the full value of the loan. But then also what we're finding is a couple of lenders are putting some big requirements in on the disability insurance and it's actually eye-opening for Chris and us. We're going holy cow. They need a $20,000 disability policy to cover the loan payment. So be prepared on that. So you know, the collateral assignment of disability not collateral assignment of disability, but having a disability policy in place and making sure that that's compliant and then collateral assignment of life insurance and we're going to circle back to just the general life insurance to the veterinarian. But what are? I think there's probably two other policies that are kind of key for a practice to have in place.
Speaker 3:Well, one of the things we just see is if there are partners within an organization having insurance in place if something was to happen, both on the disability or on the life side, to buy the other partner out.
Speaker 3:And then, in addition to that, is even the personal insurance is another space, you know.
Speaker 3:We want to make sure that, if something was to happen, that the spouse has enough insurance in place to allow time for that practice to sell. You know, oftentimes, bill we've seen it so many times over the last decade where they don't have the proper personal insurance in place, something happens and then they have to sell a business very quickly and so they require the right individual, you know, in place on it. Um, so those are definitely the spaces and the disability, you know I I think the thing is is, uh, the one thing we see in the veterinary space and in the medical field is that early on in their college career, the disability gets talked about a lot, and the reason why that gets brought up is that you know, if it's a hand injury or a leg injury, the ability to not stand, it really makes it difficult to do, to actually practice in both spaces, and so we want to make sure that they have the right policy in place. That's one of the biggest things we want to make sure the language is right.
Speaker 2:And so, yeah, talking about that for a second and diving in on the disability piece. So disability insurance, in layman's terms, is income protection. What you're, what you're protecting is you're protecting your personal income in case of a disability, and there's short-term policies and long-term policies and we won't really get in the weeds on that. But really, whatever kind of disability policy you're buying, you're protecting your income. And because veterinarians are higher wage earners and they're specialized, you can't transfer that skill to something else. If you can't practice veterinary medicine, that income's potentially gone. You want to protect it.
Speaker 3:And the other thing, too is we were talking about the loans before too and even the expenses of the organization. There are policies that you can buy that, if you do become disabled, not only does it cover your income but it also can cover the expenses of the business itself. And so, ultimately, if you've built a great practice up and you've got a number of different veterinarians that are involved with that and staff, the idea would be is, can you offset some of that cost to incentivize somebody to come in to take over that practice? Or you know where you're still maybe even involved with it? So that's some of the conversations we can have, depending on how big the practice is and what their long-term you know goals are with it.
Speaker 2:We were just actually working on a case together and it was, you know, kind of shocking where you looked at the income for the veterinarian at 35 and they said, you know, said the earning potential between now and even with the lower income that they had was like $2.8 million of just personal income, W-2. And they own the practice. So obviously they're having some tax advantages there as well and probably having some pass through, but just on their W-2 income, you know you're talking about $2.8 million and if they couldn't practice anymore and they didn't have that disability policy in place, that was just lost money to them.
Speaker 3:That's right. Yeah, it's a big number to try to make up.
Speaker 2:Yeah, so having having those policies structured properly, and, and then, um, you can also take out a key person policy. So why don't you just talk briefly about key person life and disability and what you're seeing in the space on those?
Speaker 3:Yeah, especially, you know, and it could be what we always kind of think about from key people too. It can't. It can be the ones that are actually practicing. It could be an office manager. There's a lot of key people that can be part of an organization. So what these policies do is, if they become disabled or if they pass away, the insurance will actually pay to the organization to help replace that individual. So usually what we're doing is we're working with the practice organization to make sure, first of all, that that individual, for their family or as an individual, they have options to be able to make sure insurance goes back to them.
Speaker 3:But the problem, and probably the big miss thing, is the replacement, to be able to replace that person. And honestly, bill, the thing that I've seen be just so detrimental is the disability, because it can go on. It could go on for a year or two. You don't want to let that key person that's helped you build your business just have to deal with that with their family, and so it really becomes a win-win on both sides of it if something was to come up, just because that way you've got now money to be able to go out and try to recruit, and it's not just the salary, I mean. I think everybody knows they're having trouble recruit people.
Speaker 2:Yeah, absolutely.
Speaker 3:I mean, imagine if you can have double their income to do an incentive bonus to bring them over. And that's the stuff I think that is. You know, we see can make such a big difference to keep that practice going.
Speaker 2:So it's not necessarily cost prohibitive either. I mean, you know, we're working on some of these cases together and you know, for the veterans out there who say it sounds kind of morbid that if you know, if I own the practice and Chris works for me, he's an associate and he dies, I get paid, that's kind of a morbid thought. But at the end of the day, chris, chris is my top vet at my practice. He's generating, you know, six or $700,000 in revenue, or a million dollars in revenue to the practice, and he died in a car accident or he had a heart attack and passed away in revenue to the practice and he died in a car accident or he had a heart attack and passed away. I have to now figure out how I'm going to replace that $600,000 to a million dollars in revenue and I've got to try and hire an associate.
Speaker 2:But he was my top producer and so we're doing quotes for a $500,000 term policy and these premiums on a 35-year-old are 200 bucks a year for 20 years and so it's strategically having these conversations to protect the investment in that individual as an earner for the practice, because they're key people. I mean, that's why they're called key persons. So what you're saying, chris, is there's policies out there if a key individual, whether that's a practice manager or associate veterinarian, if they died or were disabled, there's insurance in place that would actually pay the practice back.
Speaker 3:Yep, that's exactly it, and I think overall in the industry there's not a lot of knowledge on that. I mean, I think it's something that we usually get really good response back from businesses and I think I like the fact that you brought up the cost of it. I think that there is a conception that it's very expensive and it's really not because we're solving for more of a catastrophic type situation.
Speaker 2:Now this isn't somebody who's out for two weeks because they got COVID over Christmas. This is, you know veterinarian got into a car accident. It's your associate. They broke their arm and now they're. You know, they're your top surgeon in the practice and now they're not practicing surgery for six months while they recover. So so key person life. Let's dig into the deferred comp a little bit, because this is the conversations we're having with some of the veterinarians we're speaking with. It's very interesting of especially one veterinarian in particular that we're dealing with, very knowledgeable on the topic. So what does deferred compensation mean and how do those plans work?
Speaker 3:Yep, so what it is is it's both the individual or the employee and the employer actually.
Speaker 2:So let's say it's an associate veterinarian at the practice. You just hire a brand new associate and you say are you going to bring a new associate on board and you would say I want to defer some compensation and I can do this with life insurance. How does that work?
Speaker 3:Yep. So both individuals actually own the policy, but the actual dollar amounts sit with the business. And so the idea is is that we're building up a cash value in the plan that sits on the cash on the books for the business. If that individual was to leave within that period of time let's say you said the goal was to do 10 years that individual left in the fifth year the money would actually stay with the company. So that's the incentive to actually stay with the company. So that's the incentive to actually stay.
Speaker 3:And so what we're usually seeing happen is they'll take, let's say, a base salary and they'll put this over and above it. So, let's say the base salary is $100,000 and that's kind of market range. They'll do, let's say, another $10,000 into a plan like this to keep, retain that individual and really reward them at the end of the 10 years to actually stay. And what's kind of unique about it, bill, is, once it moves over to the individual, there is that needs to be paid when it moves over. But what's unique about the insurance plan is that money can be taken out of that plan later on, is that money can be taken out of that plan later on.
Speaker 2:Yeah, so Bill owns a veterinary practice. Chris is just out of school and I want to bring him on board and he's got student loans and he wants to keep his student loan payments as low as possible. So he wants to keep his income as low as possible. So this is a way for Chris to defer some compensation away. So instead of having to pay student loans on $110,000, he's only going to pay student loans on $110,000, he's only going to pay student loans on 100. As a new vet coming in, we'll just use the 100,000 number. And so I would put $10,000 a year into a life insurance plan that would accrue interest and have all the benefits of a whole life or a permanent life product. And Chris and I signed a contract that at the end of 10 years Chris gets control of this policy with all the cash value and all the interest that's accrued after 10 years. Is that what you're saying?
Speaker 3:That's exactly right. Yep 100%.
Speaker 2:And at the end of 10 years you would have to pay the tax on the money that's there. But you could use the life insurance policy to pay the taxes. So you didn't have to pay FICA, social security, 401k, all that tax as part of this deferred comp plan. It would get paid as part of the benefit at the end.
Speaker 3:Yep, when the benefit moves over, you can utilize the cash value in there then to offset that the tax that would have to be paid then at that point.
Speaker 2:But year five, you say you know Bill's an idiot and I don't want to work for him anymore. I'm going to go over to you know, I'm going to start my own vet practice and you leave. I get to keep all the money that I put in.
Speaker 3:That's right. Yeah, that's where the yeah, where the basically the benefit for the company is to try to retain that individual.
Speaker 2:And there's obviously some tax advantages for the business in there because they're not paying table taxes and this sort of thing. And so the interest has been the conversations that you know we've been having with some of our clients and practices is, you know, they have younger veterinarians that wanted to defer this compensation, right, yep, and the business wants to be able to incentivize their people to stick around. So you're putting essentially you know I don't like to use the term golden handcuffs, but really you're saying at the end of 10 years. You know, so if I put $10,000 a year into these things, where does that wind up going? I mean, what kind of dollars are we talking about, chris?
Speaker 3:You know, usually the products that we're going into are going to get somewhere between a 5% to 6% rate of return.
Speaker 3:Is what we're going to shoot for on it. Now there is some cost and expense to the insurance plan and having it from there, but you will get some growth on it. So obviously the longer period of time, the more interest will actually grow on it. But it does grow and we usually like to use index products because they do have a little bit of downside protection on them. So it's not like if we go through a major market downturn that they're going to lose a lot. So you're getting a little bit of return on it.
Speaker 2:Plus, it's a life insurance policy where, if you do wind up passing away, the spouse would actually potentially have a life insurance product there and at the end of 10 years you could say you know what? I'm just going to leave this here and let it keep accruing interest all the way to retirement as a retirement plan and keep that policy in place and not cash it out.
Speaker 3:Absolutely yeah.
Speaker 2:So these are again with the key person life and the deferred compensation. It's interesting because every practice that we've mentioned this to they go I didn't even know that existed, holy cow. That's very interesting, and especially in the tight job market in the veterinary world right now for associates and this doesn't have to be just veterinarians right, you could put one of these deferred compensation plans in for a practice manager who's been with you for 10 years and you say, look, I want to give you a raise, but we're going to put 10,000 a year into this deferred comp plan to keep them around for 10 years.
Speaker 3:Absolutely, and that's what we're seeing, I mean across all industries. A lot of times that key person is that office manager or somebody that's managing some kind of type of business. So, bill, one thing I want to bring up because this came up in a meeting that we were in is I remember the vet was saying you know, we really are seeing people go two different paths. We're seeing where a young vet's coming in and they eventually want to buy or own their own practice.
Speaker 3:We have other vets that come in that are like just want to do the job. They went into the industry not to be a business owner but to just to be a veterinarian be a business owner but to just to be a veterinarian. And what I think is really neat about the plans that we're talking about is when that lump sum comes out at the end of 10 years, it can be used for retirement planning. It can be used with the idea that they can take cash out or leave in the death benefit. But you could also utilize the cash value to be a way to fund a loan to buy a practice.
Speaker 2:Sure.
Speaker 3:Getting assets to be able to buy it. So that was something that we picked up in one of the meetings that I thought was just a really great idea, because that is the issue. We have veterinarians that want to buy these practices out after 10 or 15 years, but they don't necessarily have the dollars set aside to make that down payment.
Speaker 2:So you can be putting money away as a practice into a deferred compensation plan that that veterinarian could eventually use as their buy-in to be a partner at your practice.
Speaker 3:Yep, yeah, I love the concept. It's just a great concept overall.
Speaker 2:Yeah, he brought that up to us. We were sitting at the meeting at lunch and he brought that up and I was like, holy, that's a great idea.
Speaker 3:Great idea. You know I mean it's a big issue right now, because you know what a practice cost 15 years ago and what it costs now.
Speaker 2:It's a big deal, Holy cow yeah.
Speaker 3:You know it's a very big number between the building and the practice as a whole.
Speaker 2:Yeah, very big number between the building and the practice as a whole. So yeah, so you know those are some products available to protect the practice for the employees or the. You know the, the associate that you've got a key person life, key person disability. You know we touched on the deferred compensation and and you know, disability on the veterinarian. Whether you know, I can't overstate that if you're a one or two vet practice, that having a disability policy in place on yourself, I mean you know for $80,000 in benefit annually. So if you just say you know we're going to get 60% of my W-2 income covered and I'm paying myself, you know let's say $100,000 a year, you get $60,000 of benefit, just again with our 100,000 number. You're relatively young, you're under age 45. I mean these are three grand a year to protect $60,000 of income. And I think there's a lot of misconception about cost of insurance and investment but it's really about protecting your personal income.
Speaker 3:Absolutely yeah, and, like you said, the cost is not that much and some of the plans even have the ability where you can get all your money back after you return a premium. By the time you hit 65. So there's, they definitely are making it much, much, much more easier now to be able to get it and have benefits to be able to have.
Speaker 2:So yeah, I was meeting with a veterinarian. They were they were doing acquisition and they looked at the premium and said you know the return of premium. So basically I pay an extra $150 a month but at the end of paying all this in, I get 100% of my money back At the end of when I turn 65, well, why don't I just pay the extra $150? Otherwise, I'm just throwing all the rest of the money away if I never use the policy.
Speaker 3:Exactly.
Speaker 2:So you look at it and go, ah, it's kind of some money but it's not too bad.
Speaker 2:You've got a couple of interesting stories and I think kind of the last thing is just general life insurance overall and some misconceptions. And this has been one of the greatest things that I really appreciate about our relationship is, you know, I think from a life insurance perspective and you've probably seen this a lot more over your career there's been a lot of old school thinking about how to sell life insurance and the amount of life insurance individuals need, and you take a much different approach to, and you really opened our eyes to how to look at life insurance as a product to protect your family. Why don't you talk a little bit about how that came about at your practice and how you know your conversations with agents like me changed over the years, talking about life insurance and protecting your family and you know this is just a general plug out there. I don't care if you buy a policy from me or not or anywhere else when you buy a life insurance policy. This is the mindset to have and I got this from Chris.
Speaker 3:Yeah, no, it's a story I share. A lot, you know, we've probably, as an organization, have paid out, you know, several hundred death claims over the years and we had one where I had two individuals that one was a broker, one was a financial advisor and one of their good friends passed away in his forties heart attack and very successful individual.
Speaker 3:And what happened was they did not have much life insurance on the individual. And after that happened, bill, I really kind of looked at it and said I think the problem is is we've made it too complicated. And you know we were looking at trying to figure out what's the debt, what's the expenses. We've got to figure out what the business.
Speaker 2:You know all these If you've ever sat down with a financial advisor. You fill out a risk assessment and all the things and you figure out what the need is and then you know it's a complicated math formula to figure out. Well, how much death benefit do I need to cover all the numbers and it's a moving target and just it gets complicated.
Speaker 3:And so we, just we kind of came up with the idea that, you know, after I saw all these death claims paid out, we really came up with the idea that we're trying to replace income and we would just and how did you come up with that?
Speaker 2:So when you talk about replacing income versus death benefit and the actual you know, you say, okay, well, this is how much life insurance I need. How did you know? And the individual passed away that you were talking about in the story, what was the you know? You don't have to give exact numbers, but, like, how did that epiphany happen?
Speaker 3:You know, once we did that in the little month that came out I really thought about it and said you know really what happens at death. It's a lot like retirement and the fact of what bill in the financial advisor realm for a client is. You should never take any more than four to 5% of your portfolio per year. So I would use simple math. A million dollars is 40 to $50,000 a year. That's it. So a million dollars looks like a big number, but when you say 40 or $50,000, it's not. It's not a big number. And so for us, what we always look at is if we're looking for the right amount of insurance and we've got an individual that makes $100,000 a year. The math is real simple. You just need to have $2 million of assets. So if you don't have any assets, we use the death benefit which would give us that $100,000 of income back a year.
Speaker 3:And let's say they had, you know, $500,000 of liquid cash. Well, now we only need $1.5 million $1.5, yep, Pretty simple. So the scenario that happened Bill, the family. He was making about $350,000 a year. They had a beautiful home, they had nice property they lived in a small town in Wisconsin so they were living very, very well and they only had about $600,000 of insurance. So they ended up having to sell the house. The wife had to sell the house.
Speaker 2:So if you think about the math right and you're talking about income replacement, you so a remaining spouse got a check for $600,000 in death benefit. So when you talk about death benefit check, somebody passes away and the insurance, life insurance company writes a check for whatever the death benefit was, and in this case it was $600,000. The surviving spouse takes that check and what do they do with it? They put it in the bank.
Speaker 3:Yep, they usually go to the bank or go to an advisor, you know, and the advisor, if they go to the advisor, the advisor is going to say how long do you want it to last for? Well, if her expenses are 200 grand a year for everything, it's going to last three years three. I mean you can't get enough time to build up any investment on it and it's gone.
Speaker 2:And so when you, when you're, you know if you're a $200,000 a year household income. You know you got two spouses each making a hundred thousand and one spouse passes away, but you're used to spending $200,000 a year. It's really hard to cut a hundred thousand expenses out of your lifestyle. Once that's gone, and if the death benefit that you receive is only $300,000, all that money's gone in three years. And I think, historically, as insurance professionals, what we've done is we say, okay, you've got a $300,000 mortgage and you got $50,000 in credit card debt and car debt and whatever. So we're at $350,000 and you got some student loans and some other debt. So we're going to buy a $400,000 life insurance policy and we're going to buy a $400,000 30-year term and then you pass away $400,000 30-year term and then you pass away and at the end of four years your spouse is out of money and they have to sell the house and move back in with mom and dad, with the kids, because they continued to spend like you were alive, because they got the $400,000 death benefit.
Speaker 3:And it worked when you looked at the 70s and 80s.
Speaker 2:Yeah.
Speaker 3:Taxes weren't high, cost of living was a lot lower. So if you paid your debt off, we haven't.
Speaker 2:We haven't started selling more life insurance, like we're still selling four hundred thousand dollars in life insurance. Like it's 1982. Four hundred thousand dollars in 1982 would get you to retirement yes, it was a big number. Yeah, not anymore it's, but we're still selling four hundred thousand dollars in life insurance, thinking that it's enough money to get you to retirement, and it's just not yeah, it's probably one of the biggest things.
Speaker 3:I just see it, the industry and I, you know, the thing is is 10 years ago, when I was 10 years into the business, you know I've saw a couple of death claims. But boy you really. You know, now I'm hitting my 20th year and we paid so many out and I've seen it on both sides. I've seen it where they've had the proper coverage, They've been allowed to mourn for the loss, They've been able to keep kids in activities.
Speaker 3:They've been able to keep their home and keep lifestyle going. And then I've seen it on the other side and it's just. The problem is is, if you don't have the right amount in place, you don't get time to mourn, you just don't Because it's like it's go time right.
Speaker 2:Like $. It's like it's go time, right. $200,000 sounds like a lot of money when you're buying the insurance policy in the front end. Yes, you say, oh yeah, $250,000. Our house is $250,000. Like that's a big number.
Speaker 2:But when you say I'm 40 and I have to make this $250,000 now last to age 65, because my spouse is gone and I don't have that money anymore, that's a different conversation. So the conversation that we have with our veterinary partners is how long do you want your income to last for if you're not here anymore? Do you want it to last for 10 years? Do you want it to last for 20 years? Do you want it to last for the rest of your life? Because those are different numbers.
Speaker 2:If you say I'm making $100,000 a year and I want to last 10 years, you need to buy like $850,000 worth of insurance, because you know you're going to put the money in the bank or you're going to work with your financial advisor and there'll be a rate of return. So you don't have to buy a full million. But if you want that money to last a number of years and it's your income number you need to make it a bigger number. What's surprising and I think this is. You know. We'll kind of start wrapping up with this. They actually changed the actuarial tables a number of years ago, didn't they?
Speaker 3:They did. Yeah, people are living longer, so the cost has actually went down on insurance over the years.
Speaker 2:So if you say I need a life insurance, you know for the majority of it we're talking about term life products. So we're saying I'm going to buy a life policy until age 65, until age 70, or for the life of my business loan. And so if you say you're 40 and you need a 25-year term policy and it's $1.7 million, I mean what are the premiums on those, chris? If you're young and relatively healthy, it's like $1,500 or $1,700 a year.
Speaker 3:Yeah, it's not a lot.
Speaker 2:So I think that the mindset and conception overall across consumers on life and disability products is they're cost prohibitive and that the bigger the number. And, what was surprising, we were working on another case together. He said, well, just quote 1.9. Don't quote 2 because the numbers change. And we changed the number. I was like holy cow. That was a big savings and at the end of the day that 100,000 isn't really going to make a big difference. But going from 400,000 in coverage to 1.9 million, that's generational change for the family. And again you talked about giving time to mourn.
Speaker 3:Yeah, that's the key, after you see these and what it means. And then, especially with businesses, I I mean we probably have seen 30 or 40 businesses where they didn't have the proper insurance and I mean it's it's really sad to see a business that really should be worth 3 million having to sell for a million and a half because they have to get rid of it. You know, and that's the other thing too is I mean, if you've got enough death benefit or disability, it really slows down the process to be able to take the time to keep that business operating and then move to the next set of hands.
Speaker 2:Yeah. So if you had one piece of advice for the our listeners out there today, as somebody who's been in the life world, financial advising world, your entire career, all the way back to when you're a young baby financial advisor intern at RBC Dane Rauscher in 1999. What would it be, chris?
Speaker 3:I think the big thing is is there's actually two parts for me. One is it's not usually as expensive as you think, so don't let that scare you away. Well, actually, I'm going to do three parts for you. If you got health issues, don't worry about it. That's what we're behind the scenes doing. We'll shop it out. Surprisingly, they'll take a lot of health issues these days. And second thing is review every time you have a life change If it's a new child, a divorce, upgrading your job, you know, retirement, whatever that's the best thing I think always is look at your insurance when there's a change in life. That's all you've got to remember. And with that you can usually figure out what you need to. You know to have?
Speaker 2:What do you, what does what does done look like, or what is the end in mind?
Speaker 3:Retirement and death and legacy. I mean for me, when we're doing the planning with any organization, I'm actually already thinking about the next generation.
Speaker 2:Yeah.
Speaker 3:You know, I mean, I think that if it's buying a term policy bill, or if it's buying permanent or whatever, let's not just think about what we're doing today. Let's think about what retirement looks like. What does it look like to leave a legacy, you know either, to your family?
Speaker 2:It's so hard though, because these conversations right and I'm sure you you know you've done so much more of this than we have at Butler Vet Insurance but just generally, overall, I think the problem with the human condition is we don't want to face our own mortality, we don't want to talk about death, we don't want to think that someday we're all going to die. I got news for everyone on this podcast the Grim Reaper is a thousand and oh and. So it's really, as Chris said, talking about legacy and talking about making sure that what you had intended for your family, whatever that looks like, your family unit, whatever that looks like is there and in place and find a professional wherever you are out there in the world. Obviously, chris and I love working with veterinarians, but wherever you are in the world there's, there's resources available to to talk to these people. If, if there's anyone out there that does want to reach out to you, how do they get a hold of Chris Steffel?
Speaker 3:Absolutely, yep, you can my email address and Bill, I can give that right now if you want. It's CTS at VISINScom or my phone number is 612-600-7243.
Speaker 2:And you're also on LinkedIn pretty heavy out there as well, Very involved with LinkedIn.
Speaker 3:Yep, we're doing a lot of different posts and information.
Speaker 2:So we'll have some of that information in the show notes for anyone else that wants to reach out. But you know again, don't let the numbers scare you. If. If you get some health hiccups, don't let that scare you off. There's lots of products and availability out there and just if you've got a life change, make sure to review your insurance and make sure it is up to snuff, based on what you need and what you want it to do for your family.
Speaker 3:Yep, absolutely Thanks, Bill.
Speaker 2:Well, thanks so much for joining us today on this podcast, chris. We try, you know it's the health and life insurance part. Just disability. It's not always fun to talk about, but I'm glad you shared some of your insights today, chris. And, as always for our podcast listeners, make sure to like, follow and review the podcast, share it with your friends out there on social media and we look forward to joining you, having you join us on the next episode of the Veterinary Blueprints Podcast.
