THOUGHT FOR THE WEEK – February 21, 2014

retirementMy Comments: This comes to me from a trusted source in California, a man who for many years has run an insurance agency with a focus on providing clients with good and effective Long Term Care insurance.

As my clients age, and those who seek me out tend to be older, questions about long term care and how to pay for it are more and more among the first topics we discuss these days.

For many people, the way to solve this problem is to effectively re-classify existing assets so they solve two problems instead of one. Unlike car insurance, where if you don’t wreck your car, you’ve lost the premium. These policies provide guarantees that mean either benefits to you or benefits to your heirs, regardless of how life plays out. I encourage you to explore these options with your advisory team.

From Gene Pastula at Westland Financial Services

I received two calls last week from clients and advisors regarding life insurance policies that are “crashing”. One client is a 92 year old lady whose advisor died a while back so she gets me. Her policy is about to lapse and after spending many $thousands in premiums over many years, she must now make a decision about spending more premiums to keep it in force until she dies or needs long-term care.

I explained to her that if she pays the required premiums (even though they are quite steep) she can guarantee that someone will get the benefit, which will be measurably greater. When we looked at the numbers she said, “That’s a lot of money to pay, but the return to my sons, or to me if I go into a nursing home, is quite good. This is more like an investment than just higher insurance premiums.” She says she can’t afford the premiums from cash flow, but she can move some money from some sucky bank accounts and will end up with a better return. I was really excited because she totally gets it.

The other call was from an 83 year old insured who has been ignoring notices from the insurance company for several years and now has a lapse pending notice. He wants the insurance but it is very costly. He hasn’t had the epiphany yet; so it remains to be seen if he will see it as a guaranteed investment or just “too much to pay for the insurance”.

The point here is that in neither of these cases did anyone in the past 20 years suggest, encourage, demand, cajole or in any way motivate these folks to have a life insurance review. If they had, they could have foreseen this situation well in advance and made some adjustments that would have made it much easier now to keep the insurance in force which they both want to do. Because everyone wants to keep their life insurance when they know they are terminal. And the older we get, the more “terminal” we get.