Business Innovators Radio - Interview with Rhett Chambers, Founder of Rhett Chambers Financial Services Discussing Business Insurance

Episode Date: March 24, 2024

Rhett Chambers, a 2006 graduate of the University of Alabama, embarked on a dynamic career in financial services in 2007 as an agent for AIG. Over the years, he flourished at AIG, serving roles as a producer, advisor, and manager. In 2017, Rhett transitioned to Transamerica, dedicating five successful years before becoming a fully independent agent and advisor in 2020.Representing top carriers in the financial service industry, Rhett specializes in life insurance, term life, disability insurance, annuities, long-term care, and business succession planning. With a clientele spanning Tuscaloosa and beyond, he extends his services across Alabama and neighboring states like Mississippi, Louisiana, Texas, and Georgia.Rhett, a devoted family man with a wife and three children, considers his career’s essence to be helping individuals make informed decisions for a secure financial future. Proudly involved in various industry organizations and his community, he actively coaches children in sports. Rhett has achieved the Million Dollar Roundtable (MDRT) organization’s achievement multiple years for production and quality of customer service work with clients. Balancing his professional pursuits, Rhett finds joy inshore fishing and reading, looking forward to growing in the industry and leveraging new technologies to better serve his clients’ evolving needs.Learn more: https://www.linkedin.com/in/rhett-chambers-5b669758/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-rhett-chambers-founder-of-rhett-chambers-financial-services-discussing-business-insurance

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us, Rhett Chambers, who's the founder of Ret Chambers Financial Services, and we'll be talking today about business insurance. Brett, welcome to the program.

Thank you, Mike. Yes, I'm excited to talk about this concept, and I'm looking forward to hopefully providing some education for business owners that will give them, you know, maybe some tools that they can use moving into the future to help grow their business. And hopefully it's valuable, and I believe that it will be. You know, I think that when people hear the word insurance, all of a sudden their red flag goes up and it's like, nope, I'm good to go. So I love how your approach to certain things has an element of strategy there. And you just said the words, grow their business. So I'm certain that there's going to be a strategy with business insurance and using it to grow a business. So I'm interested in hearing that.

But let's start off with talking about how business and life insurance can be used by that business owner, just as a whole, because I think that people think of it as just a needed thing. but how do you approach it with your clients to teach them that it can be a strategy to consider? Yes. So in some of our previous conversations, we spoke about the concepts of key person insurance to protect the business in the event of the loss of a key person who's very vital to the performance of the business. And then we also talked about the buy-sell agreement and the buy-sell insurance where business owners are protected or the businesses protected. to give the business the ability to continue if it were to lose one of the owners, and it gives the funding to make sure that the business can, for example, buy out the interest

of the business from the surviving family. But in addition to that, business insurance can be used to help grow the business often because the life insurance plan, for example, that a business owns on whether it's a key person, or an owner can be used as collateral for loans. And oftentimes businesses grow by taking out loans and taking chances with banks. And this offers the life insurance as collateral for a loan offers benefits to both the business owner and for the lending institution, the bank. It gives the bank the peace of mind of knowing that it is protected against the loss of a key person

at the business that is providing a loan for, and banks will actually often require life insurance as collateral to secure a loan. It's one additional way that the bank can protect itself against the inability of the business to make payments or to pay off the balance of the loan. This protects them against potential losses if the borrower, whether it's the individual working at the business or the business faces an unexpected death or even illness. So this is a tool that gives a mutual protection to the bank and to the business moving into the future as both try to accomplish a goal. The bank is looking for solid lending practices while the business is looking for access to cash that it can use. Capital. Yeah. And, you know, I don't know much about the business lending process, but I know on residential borrowing for a house and whatnot, you fit in the box. You have to have this credit score and debt to income ratio. And there's those same kinds of things. But I think that collateral is a huge aspect on both sides of the equation. So for a business loan for that bank, looking at collateral, you know, they look at the business, obviously, but then doesn't this add an extra layer of collateral to

help out the loan approval process? Absolutely. I've never been a banker. I've never been in the banking business, but like you mentioned, for example, in the mortgage business or in business lending, whether it's equipment that's used as collateral buildings, etc. I'm not necessarily sure in each instance what is used as collateral, but I will be reached out to by clients who indicate to me, they'll say, look, Rhett, you know, I'm looking at securing some financing, and my banker is asking that I take out a life insurance plan. And I respond by telling them, well, you know, we have a couple of options. We can either begin a new life insurance plan for this purpose, or we can use one of your existing life insurance plans. And if it's, you know, if it's more

insurance than you need, and we can use that, ask a lateral temporary. So this is a way for a bank, particularly I've seen local banks, to sort of double protect themselves against loss. And I believe that when I indicate to clients, hey, look, you know, if we take out a new policy to use for this purpose, once you pay the loan off, you can use this insurance plan for another future loan, or you can use it for different purposes because, it's not permanent. The collateral, the life insurance plan as a collateral is something which can be for temporary use, but that does not make the actual insurance plan temporary. The insurance plan could quite possibly be used for, in a redundant capacity, be used for another loan, or it could be used for a different business purpose moving forward.

So, yes, it does provide a tool. that the business can use moving forward or the or the individual can use and another component of of this strategy is that none of us are guaranteed the ability to be able to purchase life insurance for example moving forward because at any time obviously we could lose our health we can lose our ability to secure insurance and once an insurance plan is put in force the the usage of the plan can change, but the putting the insurance in force is the key, is the beginning, and then we can use it for how the business owner wants to use it moving forward. You know, you mentioned insurance, and we don't want to get into a 14 and a half hour conversation about that,

but there's many types of insurance. What is the type of business insurance that you're using in this example for collateralizing a loan? term permanent? What are some of the options that way? Most commonly it's term life. Term life is extremely affordable relative to the volume of insurance that you do actually put in force. And so from a from a business standpoint, oftentimes businesses are looking for the most rock bottom cost that they can achieve to accomplish the goal and to, acquire the tool that they need to move forward with growing their business. So oftentimes it is term,

but also this term insurance can be used or can be converted to a permanent plan moving forward. So a lot of the term plans have guaranteed provisions within them to give the business owner the ability to make the term plan permanent. Also, the insurance plan is, in this, example, being a term plan, is set up where the beneficiary can change, and also we can place the life insurance benefit to the bank on a temporary basis, and we can actually remove the pledge. And this is accomplished through a collateral assignment form. This form is one which the bank will want a copy of, and obviously the owner of the policy will want a copy of as well. And this document grants the bank access to the policy's benefits over a

period of time in the event that the borrower's death occurs and the term life pays out. The life insurance company actually is the provider of the form and this this form, you know, it ensures a secure arrangement between the borrower and the bank and is a very simple, a very simple process. And And that's the binding tool between the bank and the borrower. You know, what are some of the things that a business owner should keep in mind when thinking of using life insurance as collateral? Because yes, we're all familiar with the concept of term insurance, but is there special ways to set it up? Do you just click a button online and go, I've got term insurance here it is bank, or there's some special considerations that need to be put into place to make sure that it fits with a lot. what the bank would be looking for. Yes. So one of the big components of the decision-making process for

the business owner is cost. So if we're looking at a very short loan, you know, a five-year loan or a 10-year loan, there's really no reason to do a very long term, you know, for example, of 20 years or 30 years, because that's going to generate a higher cost. So we can craft the plan to match up with the terms of the loan. And in doing that, keep the cost as low as possible, which is oftentimes, as I mentioned before, very important for the business owner. So with that being said,

if we're doing a new insurance plan, a new term life, for example, as collateral for a loan, we'll provide an overview of the life insurance plan to the bank. And then the bank will obviously want to know the value and want to know, you know, do we want to do a collateral assignment form for the full policy or a percentage of the policy. And this can all be adjusted and amended moving forward. So as the loan balance is paid down, for example, let's say nine years into a 10-year, into a 10-year loan, then we can adjust the policy moving forward, which can sort of free up

some of the benefits to be used for other purposes. So it's a very flexible concept. And I also want to touch on the fact that for the borrower, it enhances their credit worthiness. You know, the bank knows that there's an additional level of protection. This potentially secures a larger loan amount or maybe even more favorable terms. I'm not a banker, so I can't really allow elaborate on the flexibility that the banker has on the on the terms, but in the unfortunate event of a of a borrower's death or severe illness, the benefits can pay off the loan immediately. This protects not only the bank, but it also protects the borrower's business, protects the borrower's estate, protects their family. And then, of course, for the bank, it provides

that assurance and means of recurring, excuse me, recovering the loan amount, if if non-perseen circumstance were to occur and there were to be an inability of the of the borrower to repay the loan. There's also the ability within some of these term life plans to have additional benefits where if the borrower were to become sick, then there would be access to some of the benefits while living with some of the plans in the market. it. But for the most part, the design of the insurance plan is to protect in the event of the unfortunate premature death of the borrower. Yep. 100%. Well, let's kind of wrap up with this thought. If you put into place this type of life insurance, term life for collateral for a loan, Can you think of an example where that really was the linchpin critical point to help that business owner get the loan?

And if they hadn't done it, then they wouldn't have gotten it. And then that opens up all worlds of opportunity for them using that loan. Can you think of a time that that is you've worked with the client that way? Absolutely. Yeah. I have a business owner who also does real estate investing. And he works with a few of the local banks here in town. and he'll oftentimes call me and he'll say,

Brett, you know, I need to get a 10-year term for X, Y, Z amount because I'm going to purchase this piece of real estate and the bank wants me to put this insurance in forth. So it's really important for his bankers to know, excuse me, especially as they're exposure to this particular business owner grows to understand that, you know, this collateral assignment is here to make sure that the bank is protected. And he does a terrific job while he is constantly communicating with me. And he also constantly communicates with the banks. And actually, the banks and the bankers will reach out to me directly and email me and I've had them call me

asking for copies of the collateral assignment form or that I give them some options on, you know, on on the term life. So communication is really key. There's a there's many moving parts here. There's the paying down with the loan. There's additional loan exposure that the bank wants to have with a particular client. And it's very important to have a clear understanding of how the insurance benefits will be used by the business owner. So this goes on with this particular client. As he buys more and more real estate, he is growing his life insurance portfolio. And the banks, I can see the banks growing their trust in this business.

owner slash investor. His portfolio of real estate has grown dramatically over the past seven or eight years, and so has his life insurance portfolio. And the strong majority of his life insurance portfolio is set up currently as collateral on loans. So it's a mutual benefit. And it gives, I believe, the business owner slash investor, it gives him a lot of, uh, a, uh, a, uh, a lot of comfort in knowing that his family will not have to deal with all of these loans in the event of his death because every single loan that I'm aware of that he uses here locally in town is backed up by, or excuse me, is collateralized. Collateralized, yeah.

So it's worked out really well. And it's exciting and it provides a lot of self-gratification for me having multiple professionals communicate with me. because you feel like you're a part of a team. You are a part of a team. And so that's, that's, that's fun. I enjoy it. Awesome. Well, Rhett, um, if someone is listening to this thinking, maybe I need to collateralize my business loans with this approach, what's the best way they can reach out and connect with you? Yes, my email, Rhett, t, at ret chambers.com. Again, that's R-H-E-T-T-T at retchambers.com. Or they can reach out to me on my phone.

at my direct number at 205-737-5-2-2-0. Again, it's 205-7-3-7-3-5-2-0. Those are the two best ways to contact me. And again, Mike, I've really enjoyed the conversations. And I feel like there are business owners who will listen to this and see a lot of value in knowing about this tool because it is an insurance plan, but at the same time, I feel more, it could be accurately described as a tool to grow their business. Yes, I love it. Well, Red, thank you so much for coming back on again. It's a pleasure talking with you.

You as well. Thanks so much. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.w.w.com. Thank you.