Do CRE Brokers even need Life Insurance?

I sat down with my buddy Chase Clack to talk about the protection real estate brokers actually need. If you are 1099, commission based, and light on employer benefits, this one is for you.

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Why You Should Keep Reading

Most real estate brokers are self-employed and have no built-in safety net.
If you get hurt or sick, your income stops. If something happens to you, your family may have to sell assets fast to stay afloat.

This Q&A walks through the five biggest mistakes brokers make about life and disability insurance and how to fix them.

You will learn:

• Why “60 percent coverage” probably is not what you think.

• How to set your own benefits like a W2 employee.

• When permanent life insurance actually makes sense.

• And how to avoid getting sold products you do not need.

If you are serious about building wealth and protecting it, this is worth five minutes of your time.

Q: Why should real estate brokers care about life and disability insurance?

Chase: Most brokers are 1099 and commission based. No employer benefits, no guaranteed paycheck, and income that moves with the market. If something happens, income can stop. A large employer might provide 1 to 5x salary in life insurance and long term disability that replaces about 60 percent of income. Brokers have to build that safety net on their own.

Q: Disability insurance feels optional. Is it really that important?

Chase: It is, and it’s one of the most overlooked parts of financial planning for high earners. Most people don’t realize that if something happens to you and you can’t work, your income stops immediately. For W2 employees, a company might cover 60 percent of your income through a group disability plan, but those benefits often come with big caveats.

First, that 60 percent is usually “up to” a monthly cap — often $5,000 to $15,000. So if you make $400,000 a year, you’re not getting 60 percent of that. You might only receive $5,000 or $10,000 a month.

Second, if your employer pays the premium, the benefit you receive is taxable as ordinary income, which cuts it down even more.

That’s why private disability coverage is so valuable. When you buy your own policy and pay for it with after-tax dollars, the benefit is tax-free, and you can design it around your actual monthly expenses instead of a one-size-fits-all number from a corporate plan.

For brokers and 1099 professionals, that flexibility matters — you only earn when you can work, and if you can’t work, the income disappears.

Common Mistakes Brokers Make

1. Thinking employer-style coverage is enough.
Many assume that if they had coverage when they were W2, it worked well enough. But those plans are tied to your salary, not your commissions, and they often stop when you leave the firm.

2. Underestimating caps and taxes.
Brokers see “60 percent coverage” and expect 60 percent of total income. In reality, the fine print usually says “up to $5,000 or $10,000 per month,” and the payout is taxable if the employer paid the premiums.

3. Treating health and income as permanent.
Many think, “I’ll just self-insure.” But one in four professionals in their 30s and 40s experiences a disability lasting longer than 90 days. The most common causes are illness and injury, not accidents.

4. Buying insurance from friends instead of through planning.
Chase put it plainly: a lot of young high earners are sold products that don’t fit their situation.

Jake Here: A friend pitching whole life to a 25-year-old single broker making $200K is not acting as an advisor OR as a friend!

5. Avoiding review and updates.
Policies set up early in a career often never get revisited. As income, family size, and assets grow, coverage should evolve.

Q: How much disability coverage should someone get?

Chase: Carriers usually average your last three years of income to set a maximum. But I’d start with your monthly expenses. If your family needs 25,000 per month, build coverage around that number. You can add more, but cover the core first.

Q: How do you keep premiums reasonable?

Chase: Extend the elimination period. Instead of benefits starting after 90 days, consider 180 or even 365 days if you have strong savings. That can lower cost a lot.

Q: Life insurance often feels salesy. What should a young high earner do?

Chase: Do not buy something you cannot explain to your spouse. For most families, term life is the cleanest way to cover income replacement, debts, and education goals. The need often declines over time as assets grow and kids leave the house.

Permanent life can fit, but only when it solves a clear problem and you understand how it works.

Q: When does permanent life insurance make sense for brokers and developers?

Chase: A few cases:

• Liquidity at death. Many investors are asset rich and cash poor. A tax free death benefit prevents a fire sale.

• Collateral. Banks may accept cash value as collateral.

• Partnerships. Buy/sell or key person coverage can protect the business if a partner dies.

Q: What about premium financing strategies?

Chase: They can work, but only with careful design and yearly reviews. These are large, six figure annual premiums. They are often pitched as free. Nothing is free. At minimum, expect to pay the loan interest. Get an independent fiduciary review before you proceed.

Jake: If it is complex, pay a fee only advisor to sanity check it, even if you do not hire them long term.

Q: Any quick rules of thumb?

Chase:

• Protect income first with disability.

• Protect the family next with term life.

• If you cannot explain a policy at the dinner table, pause. (Jake says runaway!)

• Partners should think about insuring each other, even with a simple 10 year term policy.

• Under age 50, many carriers will consider up to about 10,000 per month of disability benefit without an exam, and term life up to several million without an exam, subject to underwriting.

Insurance is one of the most unselfish purchases you can make. It does not help you. It helps the people you love.

If you are a broker, you need to talk someone like Chase. Chase doesn’t call on individuals. He only works with clients of Financial Advisors.

Connect with him on Linkedin!