Insured Accounts Are Established To Protect Assets Against Loss.
Most people have many types of assets which are subject to a variety of losses. Your “health” is a certainly a precious asset! To experience a “loss” of health is both personally difficult and financially challenging. While we cannot “insure” your health from loss, it is possible and important to have “insurance” protecting you from financial loss due to medical bills.
You transfer risks to an insurance company for losses you cannot afford. You retain risks for losses that would not be difficult to handle. Here are some common types of insurance people to protect their assets against loss.
Property & Casualty InsuranceYou could more easily cover the cost of a $450 fender bender than a $4,500,000 lawsuit for a catastrophic injury you accidentally caused. Having a larger deductible lowers your premium, money you could then apply to having higher limits for major losses.
make sure you're coveredPhysical Coverage: Adequately insure the value of your real estate, contents, cars etc.
Liability Coverage: This is critical! Hurting a person costs a lot more then denting a car.
Liability Umbrella: This type of policy increases your liability coverage very inexpensively. It’s important that you have sufficient coverage to at least match your net worth!
Health InsurancePrior to age 65 this is met through a major medical policy. Upon reaching age 65, Medicare and your Medicare supplement policy becomes your primary coverage.
Apply for Medicare at age 65Apply at 65 regardless of when you retire or elect to start Social Security Benefits. Also, secure your Medicare Supplement Policy at this time. Since these supplement policies are now regulated it is tempting to initially elect the cheapest policy. Be very mindful of a company’s history of raising premiums on existing insureds. It may be very difficult to switch companies later if your health declines.
Life InsuranceAs you near retirement the role of life insurance may change for you. No longer is the primary purpose to replace lost earned income from premature death, so you may have “outgrown” its need.
You may still need itIt can protect against loss of social security or a pension income due to a death. In addition, newer life Insurance policies can address multiple risks, such as Long Term Care and estate planning. Due to its tax favored treatment, it can also be a very effective means of passing your estate on to others, often much better than leaving “qualified” retirement accounts.
Long Term Care InsuranceYou should target your premium dollars primarily towards insuring against risks that you cannot otherwise afford. This is a big risk as we age. No one wants to “be put” into a nursing home.
Don’t be in denial about this major issueWe intend to live out our life in the comfort of our own home. Home health care is also very expensive! However, this is a growing issue for the boomer generation. Know your options, in addition to traditional Long Term Care Policies there are now, due to favorable IRS rulings, “hybrid” LTC policies based on annuity or life insurance.
Insurance Protects Us From Losses We Can’t Afford.
Odds of Your Home Having a Major Fire: 1 in 1,200
We cover this risk because it's a loss we likely can't afford to cover. Homeowners Insurance is also affordable because the chance of it happening to us is so low.
Odds of Your Auto Being Totaled: 5 in 1,200
We also cover this risk because it's a loss we likely can't afford to cover. However, auto insurance is slightly more expensive than home owners insurance because the chance of it happening to us is higher.
Odds of Being Hospitalized: 105 in 1,200
Health insurance can be expensive, however, it's important that we all have it to cover unexpected medical bills.
Odds of Needing Assisted Care: 720 in 1,200
Long Term Care is expensive because it is likely that we will need it at some point in our life. Even though it is expensive, it doesn't mean it isn't important. There are creative ways to provide the protection you may need without the 'use it or lose it' problems with traditional Long Term Care.
What About Protecting Your Income?
One of the largest fears in retirement is the fear of running out of money. There is a risk associated with this fear and like most risks, you can transfer that risk with insurance. Asset protection comes in the form or utilizing “conservative” or principal protected accounts. This could be in the form of bank accounts (FDIC = Federal Deposit Insurance Corp) or Insurance Company accounts.
Income “protection” is achieved by utilizing various forms of Annuity (Insurance) Products that have guaranteed payout provisions. These are not meant to be exciting growth accounts, quite the opposite, they are intended to be “sleep at night” accounts that assure some level of income. These accounts provide peace of mind knowing that your income will be steady even as your growth accounts go through normal market fluctuations.
Only 20% Of The Private Workforce Participate In A Pension To Provide Them Secure Income In Retirement
Many people wish they had a pension that would pay them a set amount of money once they retire for the rest of their life. Even though pensions are becoming rarer and rarer, individuals that don’t have one can still create their own pension through an Annuity with an Insurance Company
Some characteristics of annuities that may benefit people:
- One Steady Payment For Life: This takes any the fear of out living your money. Insurance companies will continue to pay you no matter how long you live. Just like a pension or Social Security.
- They’re Safe and Secure: Insurance products protect your principal unlike the stock market.
- You Don’t Give Up You Account Balance: Often, people worry, “What if I die early?” There are new features that allow you to get lifetime payments and not give up your account balance.
- They Can Index The Market: Fixed Indexed Annuities can provide some of the benefits of the market (potential for higher returns), without the fear of losing your money.
We believe for many individuals that don’t have enough secure income from Social Security or Pensions, Insurance can be a great tool to provide secure, lifetime income.
I Have Some More Insurance Questions. What’s Should I Do Next?