Insurance Overview & Scenarios
Insurance buying protection your scenario managing risk so there's a couple things about your scenario and I want to talk a little bit about getting those drill down a little bit more so when I'm talking about pulling the levers on money and insurance and what you need to d'oh um let's talk a little bit about what that could what that could mean so if you have no emergency savings at all so you've got, like, two weeks and that's not an uncommon number, so if you have two weeks of money set aside, join the club of the rest of us who have two weeks put aside it's okay, if you don't want to look at that and you have your head in the sand, we're going like this la nothing's going to get better and we're just going to be sitting there being stressed and give ourselves some kind of seizure about it, so no seizures. So if you have two weeks or just a little bit of money and really high expenses, so you're kind of doing that paycheck to paycheck thing depending on your scenario and what might ...
happen, what happens of you or your partner that you live with, have an accident at work or get repetitive use or get sick and can't work all of a sudden some money and some income that you're really, really depending on is gone and you don't have a buffer to cover that if you don't have an emergency fund and so that's this area where disability becomes income protection in this way while you are alive while you're disabled another scenario is some people have lots and lots of savings they've been very, very diligent for a long time they got an inheritance that they put aside and just set away if something happens and you've got a lot of money set aside and your expenses are pretty low, you could probably ride that out for a while and not be worried about it. Two really different scenarios the same thing could happen to two different people and for one person it could mean the difference between losing the house and the other person a nice time to catch up on all of those lost episodes that they hadn't seen before, right? Like it really, really depends so that's this is the way we're going to talk about it if you're a freelancer like I am and a number of you are, there is also an additional um it's not an additional level of risk but there's just one more thing you have to do often disability happens through work many people who have disability purchase it through work but you don't have to there's independent places that you can get it you can buy it on your own and sometimes people will also um supplement the disability that already have at work and get more because disability for example usually covers sixty, seventy percent of your income not all of it so if that isn't enough for doesn't work for you you can you can cover it more if you need tio and in the freelance world we know we have money coming in a different times it's not always constant but do you work in an office and you don't smoke and you're in really good health and your family history of medical issues is really, really low you come from a line of like super athletes it's going to be cheap for you to buy insurance if you work outside and you do it physical job and you have something either a health history or a lifestyle choice like smoking or something it's going to be a lot lot more so again, it depends on who you are and the level of risk that your life has associated with it also I know we have a couple of people here who are newly married young kids coming I know at that time when my husband was killed and I found myself a single mom with a young son six weeks away from entering kindergarten and a stepdaughter who was in middle school and we had life insurance um and we hadn't updated it in five years and we had just bought a really expensive new house that we stretch to live in because this was going to be the house, we're going to be in forever, and we made it come, and then that that was a priority for us, so it would be tight for a few years until you know, the plan is your income steadily grows well, I became a one income family, the housing market crashed and I had life insurance that was outdated, but here's the thing I had some, and that was the difference between making it or probably losing the house and moving back in with my parents. So it's, these air real life scenarios and my situation is mine and it's less likely to happen to everyone statistically, that is an extreme circumstance, disability, divorce and diagnosis are things that touched us all in one way or another at some point, so just thinking about that should have a little cleansing breath, so buying protection so here's a nice thing, yes, we're taking cleansing breath. Yes, a question your way, please, from raid a store and are we talking about we're going to talk about term versus life insurance? We are. I'm really glad you asked that one of the questions um, that people get a lot is what's the difference? What should I get? Why? I don't understand, so we're going to hit actually there's a lot of different kinds of insurance you can buy and so here's a nice thing when when something is missing in your life, you can usually buy something too cover that space, so we'll hit these kinds of insurance and we're not going to talk a lot about auto or home or renter's insurance, we're not going to talk about medical insurance and the health care act there are a lot of things happening that's a whole three day workshop all on its own, so we're not going to go too much into that because there are a lot of other resource is for people to go to, um what we're going to talk about today is disability short, long term, we're going to talk about life insurance, there's whole and there's term there's something called universal that's kind of a little mixture of both when and why and how you might need one or the other, whether it's risk management or an investment and those air those air the hole in the term difference is essentially so in about seven minutes we'll be there. Great. Thank you. Um long term care is something that's out there it's really about covering yourself as you get older um we're living longer we're also strangely not necessarily living healthier um so we have more years where more care is needed and there are some situations where people don't have the savings to cover that and social security and or medicaid may or may not cover all of those as well. So there's another and long term care insurance lever to pull and there's something called an umbrella, which is a a kind of an extra backup that many people will get her business owners will get, and that is specific to some circumstances. So let's talk a little bit about disability because I know that people get scared that they can't work, and they get scared that all of a sudden they're going to not, um, have income, and they don't know how long that's gonna last. So many times you buy it through work on dh. If you do happen to work for a company, they may or may not offer it, but ask your hr person, ask whoever it is who who handles that stuff, your office manager, what your options are, and if perhaps you don't have one already set up, maybe you could get one. Maybe other people would want to go in on it, too. You can also get it through groups or associations you can sign up for maybe even a chamber of commerce, the aarp there's, lots of other groups that can get big. Bulk rates and offer it to you through that so there's perhaps a eight art group or a production group or some kind of I know that there's a few musicians groups where people can band together and cover the areas where where they don't really have anything and you combine on your own if you do a quick search online you will you know, type in independent disability insurance and within about five or ten minutes it's you can pretty easily get a few different comparisons and we'll talk about the different kinds that you want so why would you buy it it's essentially a safety net we're talking a lot about safety net so if something falls you want something to catch it um to retain your financial independence there's two different kinds short term and long term short term disability covers up to two years generally and it's basically if something happens and you would assume that either your life circumstance would change if you didn't get better or that you would and then everything would go backto normal or a different version of normal it's supplement your income essentially if you can't work there is some definitions that you have to meet you can't just say you know I'm having a feeling to hormonal today and I need a me day and then that that's you know mental health is a disability being tired or hung over is not you know just being inflammatory about that but you have to be able to prove that you're actually disabled and that there's different requirements for what that means. And so we're going to talk a little bit about the the different kinds and the the terms and some ways to check to make sure you're getting one that's good and getting one that's going to work for you on down the rates of course very wildly according tio who you are and your health and how likely you are to be disabled then again it's math there's somebody behind the curtain making these magical calculations we may or may not ever know what or why it's not necessarily that important for us this for this moment but but it's math so here is an example of that I was just getting some background just in the last couple of days from what they call a personal disability kocian and it's a web site where they measure your p d q this is just one of many this one was specifically referenced in the new york times money column, so I'm using this as an example only so for a female person who's thirty five five six, one hundred forty pounds um mostly an office worker not a heavy lifting not physically not working outside. No tobacco use average health and no health conditions here is the likelihood that this this person according to the math of this website is going to be disabled, it's about eighteen percent likelihood, and if you're disabled for more than three months, the likelihood that you'd stay disabled for that long for longer is about thirty eight percent and the average length of disability. I think this is more a general across the board is about eighty two so there's that so eighty eighteen percent of being disabled that's pretty high that's not nothing but it's, not ninety percent chance, either. So that's a that's a risk, you know, based on this first, this little bit of information, how likely you are, and then if you have this money for your financial priorities that we're going to talk about later, do you? You know, how are you wanting to take that money? Are you paying for disability? Are you paying for an emergency fund and what's going to make more sense for you? Another scenario is a male who is thirty five years old, six feet tall, one hundred eighty five pounds, mostly physical labor, so perhaps an outside worker or somebody who carrey's big, heavy things around it's a physically challenging job? Um, yes, they're smoker average health also with no health conditions and the likelihood that this person, according to the math on this website, is fifty six percent um and so it's really mean smoking is a big one that generally doesn't that ups your risk whenever you're doing any kind of matthew's situation but fifty six percent versus eighteen percent so if you go and try to figure out how much that's going to cost, what do we think who do you think is going to have to pay more? Right? Right boy well, I'm not just cause he's a boy, but he works outside he's a smoker but there's also um one of the things that I do every now and then for fun, you know, don't I look at, like, dig through like, the white papers for, you know, the cdc and insurance and protection gap and reading all of these things? And so there are I mean, it is down to a science, right? And they there are all of these risks scenarios, and so males generally have a higher likelihood of doing risky behaviors until they reach a certain age and then congratulations as soon as you hit about forty three forty four, you're much more likely to die of ah heart disease so or or cancer. So there you go something look forward to but but there's certain things that you that you can weigh and the insurance is by is selling you a product and they're selling you a product they're not non profits right? They're selling you something that they believe that they can continue to sell you over the course of time I have a quick question so is the disability then it doesn't have to be work related or is it any disability like say you have a heart attack it knocks you out of work is that it down or no often often it means that you can't work yeah and I think depending on who you buy it from and what their terms are it would depend in the general description of things yes if you have a heart attack and you can't work and it's even you have disability insurance I don't I don't believe that I'm like does it have to be work related why you're just saying right I believe the answer is no but I think that's something that you need to check like if you have a heart attack yeah you're screwed but if you haven't worked then you're good way to pick me up and bring me to the office yeah yeah ok it doesn't depend on who your coverage is through exactly is a work policy you might have been my parrot happened at work but if he has a personal policy I mean it's tricky because like I work freelance so it's right? Yeah there there is a list of questions in the one book and that there's there's a few questions that we're going to get to um in a couple of just a few clicks away okay, that has a list of the questions that you should ask okay? And so just skipping ahead a little bit um it's always good to compare three just generally you can always compare more but three will give you a good sense and you want to ask a lot of questions about the different levels of what the terms and the options and what qualifies you for this and what qualifies you for that and it is really, really different um in a way they're all the same, but but they're really, really different, right? Like if by it's like getting three models of the vacuum cleaner, you can get there really cheap one you could get a pretty good one get like eight hundred dollars vacuum cleaner and so they're all vacuum cleaners, but how good they are and how long they're going to last really really depends s so here's a little bit more about disability components there are non cancel bull ones and guaranteed renewable one so these are the types of things that you want to spend a few minutes looking at but I want to just quickly dio kind of a lay of the land we're not going to go too much into it into all the peaks and valleys, but this is a this is a a lay of the land so non cancel so the policies premium can't be raised above the amount shown and the benefits won't be reduced as long as you're paying your stuff on time, so you can't you can't they can't cancel as long as you pay what you buy, the policy that you buy will stay the policy that you buy, so as you get older, they won't raise the price. I'm guaranteed renewable, you have the right to renew the policy with the same benefits, but the insurer can increase the premiums as long as they're increase for everybody else in the same class, having kind of the same characters. So before we start getting into too much detail, these air, the two kinds of things you want you want to figure out there, some are non cancel, summer guaranteed renewable the's air, the questions you want to ask, and these are the things that are on the worksheet. When you compare, you can also get writers on them, so riders are little tagalongs these may or may not be really important, teo and different companies may or may not offer them, they may offer some and not others. So, um, what you can do is add on a cost of living adjustment writer so let's say you're concerned that over time, your financial needs air going, tio grow, and so you can have the amount grow with you over time based on you know, regular cost of living adjustment and I'm sure that there's a there would be a explanation of what those terms are you there they're based on something or it's just a gradual percentage rise over time there's also future purchase option so you khun add additional disability as your income increases so basically if even if the cost of living goes up and you're worried about that or if you want to add disability is you as you grow older that's that's a possibility as well so if you buy a policy you're essentially saying I want to replace this much of my income let's say that that number just for simplicity sake is five thousand dollars I have five thousand dollars I'm responsible for paying out um every month and so when you're on disability often what they do is they take that five thousand dollars they turn it into a math number and assume that if you're disabled their sums ah expenses that you're not going toe use anymore and so you know whatever sixty to seventy percent is of that five thousand dollars is what you get and what you'd live on ten years from now when you buy your joy enormous house you know sixty to seventy percent of your five thousand dollars isn't going to cover you so that would be you would be able to increase it over time which means buying more paying more to get additional coverage you can always buy more usually, but you later if you get if you buy more as you get older, it's more expensive unless you kind of lock in a price earlier on essentially two more riders insurance writers um it's a residual benefit, so it pays you a portion of your monthly disability benefit if you have a drop in income due to disability, so if something happens essentially and you have to work part time, um, it can pay part of that. You have to prove you're disabled and, you know, go through the mouth, but essentially you don't have to be one hundred percent disabled. If you do this, you can have partial coverage for a partial income the last one in social security, disability and social security. Social security also has a disability, probably city of people working on disability, your disability and how social security work together. You can get a little extra coverage, teo cushion that piece so these air additional benefits if you're disabled and not able to get social security benefits because for some reason you don't meet their definition or it pays you during the wait period that you're waiting for your social security to kick in which, according tio, a few different websites can take a number of months. And sometimes people don't have a number of months in between. So these air the different kinds of things that you should ask about when you do a comparison, okay, should take a little, uh, nothing like insurance writers in the morning. Yes, we're doing. We're powering through it. This is like the wind sprints before we go for our job.