Ep # 94: For God's Sake, Buy Insurance!

Benjamin Haas | Mar 8, 2023

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Benjamin Haas 00:03

Hi everyone and welcome to A/B Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!

Adam Werner 00:27

Time for another rip-roaring podcast.

Benjamin Haas 00:30

Yeah, we are quickly coming up on podcast 100. Countdown to a little milestone there for you and I.

Adam Werner 00:42

Yeah.

Benjamin Haas 00:44

A major prize to anyone that can honestly say they've listened to every single one of them because oh, man, thank you but I'm sorry.

Adam Werner 00:56

100 feels like a lot but then it also doesn't feel like we've done 100. So, it's a weird feeling.

Benjamin Haas 01:04

When you're having this much fun, Adam, is it really work?

Adam Werner 01:09

That's what they say.

Benjamin Haas 01:13

Hard pivot to a not so fun topic. We've kind of called this podcast, for God's sake, get insurance. As planners, I think we want to talk about all the different aspects of planning and insurance is certainly not the fun one. We're talking about morbid things and as you and I kind of pieced together some notes. Maybe this is a little teaser for the magazine coming out in another week or two, our experiences in life will shape the way that we think and feel about money. It's statistically impossible to run into somebody who hasn't lost a loved one, who hasn't had a really sad story to tell, hopefully not a painful story to tell. That's a reason why we talk about the role of life insurance and planning to hopefully not have emotional travesties become a financial one. So, I'll stop because I don't want to take away all the key lines here that we kind of have prepped, but let's be a little raw today and just talk about the importance of life insurance and planning.

Adam Werner 02:24

So, from a planning aspect, I think everybody knows insurance in general, is something that you either are required to have or it's nice to have it in case you need it. Insurance in general. It's why we have homeowners' insurance or you have car insurance, health insurance, it's for these “what If” or “Oh, crap” moments, you'd like to have something. Better to have it and not need it than to need it not have it - that whole saying.

Benjamin Haas 02:55

Yeah, how many times has there been a phone call to us or the message to us, somebody has passed away? Your heart drops but then I can tell you, I've had the experience where my second thought is, thank God they had that life insurance. Nobody's ever called and been like, I'm sorry we did that.

Adam Werner 03:16

Well on that note, when we think from a planning perspective, we would say there's a couple of foundational aspects to planning that, we want to make sure that these boxes are checked first before diving too deep and life insurance in this instance, is what we're going to be talking about. It is one of those four foundational elements. It's making sure you have a cash reserve. Are you living within your means? Saving for a rainy day? Spending less than you're earning? Having the right insurances depending on your situation and making sure you have at least some estate plan documented. That's kind of the foundation.

Benjamin Haas 03:57

Yeah, so said differently, if we're talking about these being foundational elements, you're going to go through different phases of life, but in our opinion, there's really not a scenario at any age where you shouldn't have some sort of insurance and you should not have some sort of estate plan. I think that just comes down to anything can happen at any time, premature death is a thing. I know that you have people in your life that have passed away at our age or younger and I'd have to and it's numbing, but sadly, it's the reality. So, when we say they’re foundational things, it's to get it. It's to take care of it. It's to check those boxes.

Adam Werner 04:42

There are many different ways to go about that, maybe we'll get into not some of those specific details but just give some ideas on trying to put it into perspective. Having life insurance can mean so many different things. There are so many different types of coverage that you can get, associated costs with that vary widely depending on what you're looking for so it really is situational. But we'll kind of go through then at just a bare minimum, having something is better than nothing. That was to give you credit, those were your words before we started to record. We'll throw out some different scenarios that we think it may apply.

Benjamin Haas 05:24

Let's use that as the segue. What is the advice when we think about having people do this and we're saying you need to do this, then we can kind of come at this from two angles. Let's educate a little bit on what that means but let's also recognize as planners like, why people don't do it. And maybe there are some misconceptions there so let's just start at the top. When we say it's a foundational piece, why should it be there? What are those situations where we feel like life insurance needs to be there to cover what?

Adam Werner 05:58

I mean, right off the bat, if somebody else, anybody in the world is relying on you or your income for support, then you probably need some life insurance. Just boom, right off the top because we were talking to a client not that long ago, younger person, isn't married, doesn't have a child. The need for insurance may not necessarily be very strong in that situation. But you can make arguments depending on what else they have going on in their life, that it still may make sense. But just as a baseline, if there's somebody else kind of relying on you and you're not here or your income is not here, then it's worth at least having that conversation to review your situation.

Benjamin Haas 06:44

Yeah, and so being a little bit more specific, you're talking about income replacement. I need this person's income but usually that's because I'm supporting a mortgage. We've got children, those children, I want to have education paid for at some point, right? They’re specifics, that somebody's life that we could talk about specific goals and what those amount to, but at its most basic form, I'm now imagining the most and I know you know what I'm talking about, the most recent scenario, okay, well, they weren't even married yet. But there's a house, there's a mortgage and therefore, now, the income isn't there for one person to support that. That's just heartbreaking. I think I'm going to use that example, as kind of a segue into sometimes why people don't think about doing it. I think at a younger age and I mean, feel like I'm still young, I don't know about you. That's a lie. I feel really old most days but I think I'm still young. I think there is an element of like, I've got this. They call it the Superman complex, like, it won't happen to me so I don't need to worry about it.

Adam Werner 08:00

I think that in general is just, that is a human thing and it doesn't necessarily just apply to life insurance. That's a lot of things in life that, yeah, that happens to other people. That doesn't happen to me, it's not going to happen to me, so I don't have to worry about it. That's a big one. I think the other part or another part is just, it's so easy to just put off and procrastinate. I think we've talked about that in other podcasts and talking about estate planning, in general, which is a tie in here. But it's just one of those things. It's not a pleasant thought exercise to go through. They're not fun conversations to have and for many of us, it's just way easier to avoid than actually kind of face head on and tackle.

Benjamin Haas 08:02

Well, I wonder if there's misconceptions too, especially if we're talking about different, let's go through the different phases of life. We're just talking about the situation where you're young, you're just getting started, maybe it's a mortgage, it's kids. Somebody else is really dependent on that income. You may need a lot of insurance, but a lot of insurance, that cost of insurance is really relative to your age and your health. So I think there's probably a misconception if we're just talking about a simple term policy, meaning it may run out at some point and you hope that you outlive that. I know we just did a podcast that said, what less than 3% of the times those things pay out but to a 25-year-old, what are we talking about here? $250,000 worth of insurance is going to cost what?

Adam Werner 09:43

Yeah, depending on what that term is 10 or 20 years, you're looking at $10 to $20 a month, depending on their health.

Benjamin Haas 09:51

So, it's certainly not like cost prohibitive. Your point of is it Superman complex, is it procrastination? This is why the title should be for God's sake, just get the insurance, like, put something in place and think about the things in your life that you spend more than $20 a month on and just get it done.

Adam Werner 10:16

Yeah. So where are you going to go from there?

Benjamin Haas 10:20

You go through this phase of life where, okay, now you get a little bit older. Maybe you're not having kids at a younger age or you haven't taken the leap into a mortgage earlier. I know we did this prep. So stay in that vein, a 40-year-old couple, has the cost gone up dramatically from a 25-year-old to a 40-year-old?

Adam Werner 10:41

Yeah, surprisingly, not that much which was interesting. For everybody listening, we are licensed to sell insurance. It's not a huge component of our business but we do have access to kind of run these quotes through a third party that we work with. So again, we don't do a ton of insurance but it was surprising to me to see how close it really was the difference between a 25-year-old and in our example, now a 40-year-old. So again, depending on health, depending on that term, but you're talking $15 to $30 a month, for that same $250,000 of coverage. So even there again, it shouldn't be cost prohibitive, there are other types of insurance that do have much higher price tags associated with them. But I think it does illustrate the point, that from a cost standpoint, that shouldn't be too big of a hurdle in approaching it.

Benjamin Haas 11:39

Depending on who you work for, life insurance may be a group benefit and you may have the option to take more than just what they may be provided as a benefit home $50,000 and start to add multiples on that, your choice, and you're paying into that. But it may be a very easy way to go and get more insurance for a period of time if you feel like there's a greater need. The point is it needs to be a conversation and even if you're getting into the middle age period of life where alright now, maybe the kids are a little bit older. Maybe they're out of the house, getting closer to retirement, life insurance may still play a role, right?

Adam Werner 12:18

I'm glad you said that because as you were talking earlier, we've often kind of framed it as there's a curve, that's the insurance curve of life. When you are maybe younger or if you have the mortgage, you have the kids, you have a family that you're supporting, or kind of that is relying on you for income and assets. That's when you need probably the most amount of insurance that you may need your entire life.

Benjamin Haas 12:47

And that should be the cheapest time of your life too.

Adam Werner 12:50

Right, yes, that you are younger and hopefully healthy. The cost associated with that shouldn't be crazy and as you age, hopefully, say someone's in their 50s and 60s, took out a mortgage, had kids, hopefully the kids are out of school, out of the house, off mom and dad's payroll. Hopefully the mortgage is all but paid off or already gone. Those kinds of inputs to the process may now lead to well, maybe you don't need as much insurance now later in life. But like what you just said, there are other reasons to have life insurance later in life that may not necessarily be to replace income or to pay off a mortgage or to pay off some debt. It can now go to an estate and a legacy planning conversation because life insurance more often than not, is a tax-free asset to whoever is going to inherit that, whoever is going to be the beneficiary.

Benjamin Haas 13:50

Yeah, my mind goes so many places. So, the good part about getting it earlier in life, again, is cost. As you have more income and less need, I think we've said this in other places but the point is to get the coverage you need, pay as little as possible and then get rid of it when you don't need it anymore. But when do people get sick, when is the time to worry about that? God forbid it's a cancer diagnosis. It's anything of that nature. As long as you have that term policy in place, you can convert that into something permanent. You can have a policy if cash flow works for you that you are building some equity in it, that it is going to last your whole lifetime. There's just so many different ways to go about it. The point is in my world to this podcast, start it young, get that coverage you need and to your point, there's so many different ways that you can then try to leverage that strategy into something new. Something that fits the new need later in life all because you started it earlier.

Adam Werner 14:50

Yeah, and so that's a great point. It is that future flexibility or the just the future options that you have once you have coverage, you do give yourself some other pivot points in the future that horrible health diagnosis now you can kind of decide, is this still the right fit? Do I have other options? Again, just having it upfront is kind of the key because once you get on the other side of maybe your health is declining, or you just have one of those pop-up surprise diagnosis that then is removed from the table as an option. Life insurance more often than not, in the face of something significant like that. So having it early to your point, while you're young, while you're healthy, just gives you other flexibility and other options, potentially later too.

Benjamin Haas 15:50

I feel like we come across that a lot where, you know, we meet with the client, sometimes the client we've known for a little while and they're like, so I had this little policy, my parents started for me or whatever, you know, was enough to bury me as a kid. It was $10,000-$25,000 worth of a death benefit. But now, here I am at 60-65 years old and there's $20,000 of cash value in it. Great. Now let's talk about leveraging that maybe into your long-term care concerns or let's talk about leveraging that into a different policy that may serve a different purpose for your legacy. It's not all lost, but I'm going back to the beginning here, it all starts with the fact that maybe they were way better about it the generation before us because it was door to door insurance salesman and make that sound like it was a horrible thing but people took care of it. I don't want our generation and the generation below us to just live in the Superman complex where I don't have to address that. The generation before us was probably better about doing it.

Adam Werner 16:48

Yeah, and I think on top of that potential Superman complex it is, while you were younger, you have other bills, you have other expenses. This being another one just doesn't feel like it's high priority on the list. But the fear there or the potential outcome is okay, well, when later in life, when you feel like you can afford it, by the way, you said this earlier, the cost also increased. So, by forgoing that you may end up being a wash in the end or it may end up costing you more by waiting. Maybe you're not as healthy as you were in your in your 20s or 30s so I don't know, that just popped into my head as another kind of way to look at it.

Benjamin Haas 17:29

And fair point, I'll just make the joke here because we did some of this too. That, to me is a question of priorities, because you're going to spend $15 to $20 a month on your Netflix subscription. You're paying $25-$30 for a case of beer or $20 for a pizza pie on a Friday night. It's not cost prohibitive and if you really do buy into the fact that life is going to throw you curveballs. We don't know what's coming. Lean on the fact that you've probably heard and seen experiences around you of other people, God forbid it with somebody close to you. The stuff can happen so just get it done.

Adam Werner 18:13

Yeah, I have nothing to add to that. Get it done.

Benjamin Haas 18:15

Then we'll leave it there. It's much like we talked about, uh, we'll, let's put life insurance in that camp. These are things you just have to do.

Adam Werner 18:24

Yeah, if you don't have insurance or you have insurance and just kind of want to talk through your options, want to review what you have to fit your situation. Let us know. That's why we're here.

Benjamin Haas 18:35

Thank you, sir. We'll move to something a little more upbeat next time.

Adam Werner 18:41

I promise.

Benjamin Haas 18:44

All right. Have a great rest of the day.

Adam Werner 18:46

All right, bye.

Benjamin Haas 19:00

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant or financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.

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Ep # 94: For God's Sake, Buy Insurance!