Insurance is Wealth Protection

I recently attended a webinar by the New York Public Library titled Insurance is Wealth Protection. The speaker started out by saying “Insurance is often misunderstood and improperly explained." The purpose of this post is to discuss essential “need to knows.”

Below are six key take-aways:

 

The Purpose of Insurance- Insurance provides financial protection against unexpected losses or risks. It helps individuals and businesses recover from events like accidents, illness, or property damage. Insurance promotes stability, peace of mind, and economic security by transferring risk from the insured to the insurer and helping make policyholders whole after suffering a financial loss.

 

Life Insurance- The purpose of life insurance is to provide financial support to beneficiaries after the policyholder's death. It helps cover expenses like funeral costs, debts, and daily living needs. Life insurance ensures loved ones maintain financial stability. Key factors to consider are age, number of dependents, and dependents’ financial needs. The speaker quoted an orphaned young adult (the child of a client) who told him “thank goodness my parents did this for me.”

 

Life Insurance Types- Term life insurance covers a person’s life for a set period. Usually, you can purchase coverage increments of 10 to 30 years. About 85% of term policies expire and beneficiaries get nothing. Permanent insurance covers your life for life and usually has a cash value component that policyholders can borrow against. The speaker recommended consulting an insurance specialist and doing a life insurance needs analysis.

 

Health Insurance- The speaker noted that 66.5% of bankruptcies involve medical debt. Also, the cost of health care keeps going up every year (as does the cost of medical supplies and medical malpractice insurance) and this is a major challenge of our times. Webinar attendees were advised to be aware of what they are NOT covered for and to shop around and make adjustments to their coverage (if needed) during open enrollment season.

 

Disability and Long-Term Care Insurance- Both policies cover the risk of being unable to maintain our lifestyle or independence. The former is targeted toward working age adults who are incapacitated and unable to work due to illness or injury and the latter toward older adults and others who are frail and need assistance with activities of daily living. For both policy types, coverage is generally more affordable the younger and healthier you are.

 

Property Insurance- The speaker advised asking about the cost of replacing your home to make sure you have adequate coverage. Also, preparing an inventory of personal property and considering umbrella liability coverage if you have wealth that could be seized as a result of a judgement.

The webinar ended with this final thought to consider: "Just because you have insurance does not mean that you are properly insured." When in doubt about your coverage, review your insurance policies carefully and seek professional advice where needed.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Financial Concerns of Older Adults

 Last fall, I participated in a group discussion among personal finance content creators (e.g., authors, speakers, bloggers, and podcasters) attending the FinCon 2021 conference. Our topic: financial concerns of older adults. The consensus was there is no “one size fits all” content. Personal finance messages need to be customized for specific older adult audiences.

 

Below is a description of eight key topics that were discussed:

Adequate Health Insurance- Health issues are a big drain on even the best laid financial plans because “the greatest wealth is health.” Older adults worry about health care costs and how much their health insurance will cover. Managing chronic conditions, such as diabetes, over a lifetime can, especially, be expensive. A local SHIP (called SHINE in some states) State Health Insurance Assistance Program office can help older adults compare Medicare supplement policies. The Extra Help program can help those with limited incomes and resources to pay for prescription drugs.

 

Use of Time- Some older adults miss the daily structure and socialization that work provided and become bored, even depressed. Suddenly, they have about 2,500 hours of free time available when they exit the labor force. The key to avoiding this situation is to identify one or more “big rocks” that take up 6-8 hours each day. As I wrote in my book, Flipping a Switch, examples of “big rocks” include working, volunteering, blogging, care-giving, and socializing.

 

Too Much Togetherness- Some couples decide to retire simultaneously while others leave their jobs at different times. Unfortunately, some spouses feel compelled to retire because their spouse keeps “bugging them.” This can cause resentment and can especially disadvantage women who are often younger and have shorter work histories than male spouses. This Wall Street Journal article has some good insights about assessing retirement readiness.

 

Inadequate Savings- Many older adults are afraid of a big gap between their Social Security benefit and other income versus the amount of money they need to live on monthly to retire comfortably. Others are afraid of running out of money during their remaining lifetime. The best way to address these concerns is to plug some numbers into a retirement savings calculator, such as the Retirement Calculator from the FINRA Investor Education Foundation, and see where they fall. Strategies to close the gap include increasing income, reducing expenses, or doing both.

 

Shame About Savings Shortfalls- Some older adults are experiencing shame and embarrassment about their lack of retirement savings. This is especially true if their adult children are regular savers and the parents fear they may need to “lean” on their family in the future. Many are afraid to look at their numbers and just plan to keep working indefinitely because they know they don’t have enough. Again, calculators or a financial counselor or coach may be able to assist.

 

Skepticism About Social Security- Some of the content creators reported hearing doubts expressed about the long-term sustainability of Social Security and people viewing it as “gravy” that they can’t count on. Indeed there is cause for concern as the Social Security trust fund is projected to be depleted by 2033, with just 76% of benefits able to be paid at that time. This potential “haircut” speaks to the need to have multiple streams of income available in later life.

 

Gray Divorces- Two types of divorces in later life were discussed: 1. the kind where couples have grown apart  and 2. the kind where one spouse with health or long-term care issues and major expenses does not want to drain the finances of the other. Women tend to fare more poorly after divorces than men due to lower average earnings and retirement benefits. This helpful article from Kiplinger encourages readers to treat a gray divorce like what it is: a business deal.

 

Need for Flexibility and Resilience- One content creator noted “There are many things that come up in life and you have to be willing to adapt.” Another advised “Plan for good and bad times because it is going to rain sometimes.” A third participant noted that “present choices affect your future options.” Resiliency resources don’t just include financial assets such as savings and insurance. Relationships (social capital) and skills (human capital) also foster resilience.

 

For more information about older adult finances, review this Consumer Financial Protection Bureau (CFPB) website.

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.