Jack Driscoll: Welcome back again everyone to another edition of All Things Financial. We’ve done a four part series here, today being the 4th part with Ian George we have as specialized guest with us. He’s an expert at life insurance and is the Brokerage Director in Mass Mutual Life.
Thank you very much for coming Ian.
Ian George: My pleasure to be here.
Jack Driscoll: Well we talked about the last couple weeks. Ian first went over Life Insurance 101 basically – the different forms of life insurance.
Number 2 session that we ran was based on Needs Analysis – How to on an elementary basis evaluate your needs for life insurance; how much you need; maybe even what type of life insurance you need. And we did discuss there a little bit about beneficiary designations and be careful with those.
The 3rd segment we touched on some basics of Whole Life Insurance. How Whole Life Insurance has survived the times; why it has stayed so strong and why we’ve seen some other forms of life insurance come and go where Whole Life has stayed the course.
Today what we’d like to talk about are your own situations; your personal situation in life today as you’re listening to the show or watching our videos. And what I mean by that is – some of you already have some form of life insurance. You bought it for a personal reason or a business reason.
You have Group Term Life; you have your own individual Term Life Insurance you may have bought on the internet. You have Universal Life Insurance let’s say and maybe that was purchased 5 years ago, 1 year ago or 20 years ago.
And we’re going to share with you today a little bit of how to tell if your life insurance company is healthy; if your life insurance policy is healthy. Some of you have Whole Life Insurance that you’ve bought 50 years ago that your parents bought for you 30 years ago.
Maybe you’re looking into more life insurance now and aren’t exactly sure what form of life insurance is available. What we want to go over with you today is how to tell the difference and how to evaluate your own policies and your needs. And how to do tests on your plans right now to make sure they’re healthy.
And also – is what you bought 20 years ago still most appropriate for you or have your lies changed beyond the life insurance policies that you now still have in place ?
So Ian I’ll turn it over to you to talk about a lot of those areas if you will.
Ian George: Those are a lot of areas Jack.
Jack Driscoll: Yes they are.
Ian George: So one of the things you did mention that I think is really valuable is that you know there are a lot of people out there that have smaller policies that were purchased for them by their children.
Jack Driscoll: Right, by their parents
Ian George: Excuse me by their parents for them as children. And I want to take that into 2 different areas just quickly. First and foremost a lot of people are inclined to say, “Well you know I need much bigger plans those policies were only $25,000” or $10,000 or something along those lines. “I need such bigger plans I’m just gonna cancel that policy”.
I would you know encourage you to stop and not do that. The reason is it’s just because some thing’s small doesn’t mean it doesn’t work.
Jack Driscoll: (chuckles).
Ian George: So it could be working very, very well it’s just not a big part of it. But no reason to get rid of that little gem that’s still doing its job day in and day out to replace it with something that’s going to be less efficient. So I encourage people to take a look at those too.
And one of the things that when we were talking you know in the last show about different features – one of the things that you know that comes up in this area are the features about what happens when you buy a life insurance a Whole Life Insurance policy for your child.
There are some great features to this. Many Whole Life Insurance contracts with many different carriers offer the opportunity for when a child buys a policy to give them a lifetime of insurability. And what that means is when the child is given; you know when you buy that policy on a child you’re getting something started.
It’s gonna build some cash value; it’s gonna grow with them and over time it’s gonna increase in value. The other thing too though is when that child becomes of age and depending upon the carriers it’s gonna depend on with when this starts.
But generally speaking between the ages of 21 and 25 that child gets the opportunity to buy more life insurance without any underwriting. That can be very valuable to a child that may have a history of something in their family.
We all know folks who are you know lean and thin and you know very athletic yet their cholesterol always seems to be really high.
Jack Driscoll: Right (chuckles)
Ian George: Well that could sometimes cause them to pay more for their life insurance really than they would want to. Had they had a child’s contract that allowed them to but the additional coverage this can be skipped.
There’re also some people that come in areas where they can’t get insurance for something that just makes insurance companies too nervous to get them and this means that they can’t get any life insurance for the rest of their lives.
With a number of carriers if you get something on your child you can get your child probably up to a million dollars of lifetime insurability. So that’s something that you know people might want to consider as well when they’re doing that.
Not only that but it gives you a nice little college funding nugget for them to; it probably won’t pay for all of college unless you buy a very large Whole Life Insurance contract.
Jack Driscoll: Mm-hmm.
Ian George: But it’s something there that can get started and it has value for them going forward.
Jack Driscoll: And grandparents I’ll share that with you because if you’re looking at providing gifts for grandchildren and you’re putting gifts into either a college fund or you’re just gifting them money, you may want to think about – does it highly leverage your gift by buying a life insurance policy for your grandchildren, where – the parents are struggling to make ends meet which are your children.
But you have the opportunity where maybe you’re retired, have some ancillary funds available to help a gift to a grandchild in that area. Now you know – how old or young can you purchase insurance on a person?
Ian George: On average it’s 15 days.
Jack Driscoll: 15 days.
Ian George: In 15 days they’re eligible to, you know to have insurance.
Jack Driscoll: Okay, okay.
Ian George: I will also tell you something that you brought up grandparents and you know being a dad who has kids as you are and also having grandparents on my kids – you know a lot of times as parents we all get – you get sick of tripping over the same plastic toy that gets purchased.
Jack Driscoll: (chuckles)
Ian George: Or God forbid that that at the end of Christmas your biggest detail is to go buy more batteries. Well the grandparents are also probably sick of giving the kids plastic stuff that breaks and people complain about the batteries too.
And that’s where these contracts can become valuable as well. And there’s one other thing that’s become pretty positive for what some grandparents are doing which is – you can designate in a life insurance policy that the policy pays out each and every year. And you can have it be that child’s birthday.
So what a lot of grandparents like the idea of is that they can form a contract that will pay the child or get that child a birthday check every year long after their grandparents are gone.
So that’s something that a lot of grandparents like the idea of – I’m able to give something to this child that long after I’m dead and buried that child’s gonna be getting a birthday check from me. As a reminder of who I am and you know what I built for them that they have to work with today.
So that’s just one other area that some people might think of.
Jack Driscoll: That’s very good
Ian George: Yeah. A lot of people do like that area.
So we were going to talk about some of the other areas and you know kind of you know dialed into what you can do with those juvenile policies in taking a look at what you may or may not already own.
And one of the things that we had talked about in a previous segment was Universal Life Insurance and I do always throw up a very big warning about Universal Life Insurance. And the reason is – is because they can be pretty volatile.
There are a number of people who have unfortunately found out far too late that their Universal Life Insurance policy isn’t in fact permanent at all.
What happens is- is that because the policy has grown so old that or the individual has grown old enough that the internal charges for their life insurance have grown so high that it’s pulled away a lot of the cash value if not all of it.
This can often result in the insured the policy owner getting a premium statement for something that’s very, very costly. So they’ve been paying ‘X’ amount of dollars. It could be 3 or 4 times that and that would be for that year.
The following year could be 3 or 4 times that because as we get older the cost for the life insurance gets very, very expensive. Well the best way to avoid that is to find out long before that day comes. So what I encourage people to do is to contact their advisor and to bring in their policy.
Now on a policy statement from Universal Life Insurance policies if you read carefully enough you will probably find that they will talk to you about a lapsed date. And what it is – is it’s a date that that policy is gonna lapse based on current values and their current interest rates of that year.
What I think should always bring caution to people why you wanted to make sure an advisor has reviewed this is – the fact that you own a policy that under current circumstances if you continue to pay your premiums even has a lapsed date.
That means that all Universal Life Insurance policies for the most part basically say that even if you continue to pay the premiums you agreed upon that one day you probably will not have life insurance nor will you have any cash value.
So this is the; these are the types of contract where you really, really have to get to your advisor and have them take a look at them. Your advisor at that point can then order an In Force Illustration. And basically what that is – is taking into account today’s numbers. The numbers you have in their already and going forward in what that policy looks like it will do.
You can also then talk to that advisor about evaluating the basics. Is this enough life insurance? Am I protected enough? Because the good news is if you catch a Universal Life Insurance policy early enough let’s say you have an individual that does own a Universal Life Insurance policy but cannot get new insurance because of health conditions.
So in other words just cause this one’s broken right now doesn’t mean I can go get another one because in insurance company for whatever reason isn’t going to allow me to buy more life insurance. If you catch it early enough there may be ways to refocus what you’re doing with that policy to get it fixed so it will last.
That may include lowering your death benefit a little bit or maybe increasing the premium payments today for when that policy is supposed to lapse so that it doesn’t lapse.
So it is important because just because you say well I can’t get new insurance so I definitely don’t want to let go of this, that’s probably true but what you want to make sure is – is that you have a professional helping you work with that insurance company to get that policy where you want it. So that it will survive if that’s something that you want to do to make sure it happens.
Jack Driscoll: And I’ve run into cases where it was too late. And when it was brought to me, “Hey can you check this policy?” they had received no adverse notices form their insurance company indicating the policy would lapse at a certain date but they wanted their policy looked at.
They might have been later in years on the policy or they some of them might not have been. Some of them who were in their 50’s had a policy for only 20 years and some of them were in their 70’s.
And what I found in a number of the case were after doing an In Force Policy Illustration by the company that issued the contract they came back with, “Here are the results of your policy looking forward and it is going to run out”.
I have made phone calls to some of those companies and had the response, “It’s gonna run out”. And I’ve said, “How much additional could we do we need to put into it to save it?” they’d say, “You can’t put any amount in that’s enough to save it because we have maximum amounts we can accept and you waited too long. It is too late”.
So my caution to everyone of urgency is – get these evaluations in your personal situations and your business situations done now. While you’re listening to the show, while you’re watching it on video pull together the policy you have.
Give us a call. Let us do the reviews with whatever companies you have. Separate from the good companies that you have and the policies you should keep that are healthy and the ones that might be in jeopardy. So we can begin the analysis of what can be done with the companies you have now to save them. Just like Ian said – maybe reduce the death benefit, increase the premiums. Maybe there’s still time.
The other thing I’ll point out is your needs have changed. Your lives have changed since some of those policies you’ve bought. You may have Term Life Insurance that’s come and due to run out you may still have the need. Or you may have new needs.
You know when you first bought policies when you were in your 40’s and your 50’s you thought by the time you retired you’d no longer need life insurance so you bought Term Insurance.
Now that you’re getting near retirement you realize your retirement needs are based on both your social security checks and pensions. And if one of you should pass away the other spouse will have an income reduction.
We don’t want you buying new insurance at age 65 when we could have helped you identify that need at age 45 and bought a more permanent form of insurance as your needs transition.
Ian George: That’s great advice. And the idea there is to make sure that you’ve taken an inventory of what you’ve got going on there. What I do a lot of individuals. When I’m helping people out is what I will find is what we can often do is, you know as a part of the planning process, is start from scratch.
Let’s take a look at everything you want to have happen that you want to have in place. Once we figure that out we can then plug in what you already have to see what is taken care of.
Jack Driscoll: That’s excellent advice.
Ian George: So that way we’re starting with, “I’m here today. I’m at this age this is what I see that I want and or need and I’m going to get that taken care of”. Then I can reach back here and my advisor can work with me to say, “Well you’ve got this and that’ll fit there; and you’ve got this and that’ll fit there”.
You might have something that doesn’t fit; it doesn’t have a place in your plan. We see this a lot with some things.
Jack Driscoll: Yeah.
Ian George: Things that don’t work and things that aren’t functioning. You may have something that is working great for you that you weren’t aware of how it was working for you. So with some reviews and plugging that into your plan the next thing you know, you’re like “Wow its really taking; it’s really doing its job for me”.
So that’s one of the planning ways that that can do. And again that has to do with reviewing everything that’s going on. We have people too who will take a look at old Whole Life Insurance policies. Again they don’t have to be smaller ones. They can be ones they’ve bought years ago.
And again they’ve suddenly heard from somebody talking about, “Well you should have known that. And you should do this with it and you should do that with it”. Before you do anything to it, to any life insurance policy you really want to have a professional review it. And here’s why.
When you bought that policy you were younger than you are today. The one thing about any life insurance policy is that they are extremely heavily based on the age of when you purchased it. The thing you can’t do with anything today is become younger.
Jack Driscoll: (chuckles)
Ian George: So you can’t get those years back.
Jack Driscoll: That’s not what the ads on TV are telling us.
Ian George: (laughs) very true. Although yes you may look younger but the insurance company knows that ticker is not getting any younger. Now as much as we want to make sure you have the right thing but that is again we talked about even Universal Life Insurance, Term Life Insurance, Whole Life Insurance.
A lot of people have different opinions about how these products can work and fit. What I ask everybody to do is be thorough. It’s your money and it’s your protection so don’t let anybody tell you that it’s something is the way that it should be or it shouldn’t be without you thoroughly understanding it.
A lot of the stuff can be confusing at first but with professionals what you will find is that the good professionals do a wonderful job of making things easy to understand. Our job in our industry is to take things that can be very complicated and get them down to a personal level for the individual so that they understand their circumstances.
What I say to a lot of individuals I work with is, “You may not be able to go and help all your friends with how this should work but you will absolutely know what you own, why you own it and what it does for you”. And that’s the really big goal with any of this stuff.
Jack Driscoll: You know the other thing that I want to point out is – when I had mentioned the evolving needs and changes over your life it’s become; I think I’ve become more and more aware of why Whole Life Insurance has lasted all these years through some of the other products coming and going.
Whole Life Insurance, and we might get into this in another show but Whole Life Insurance seems to be able to have flexibility as your circumstances change beyond where you expect it because of the unique features of the living benefits inside Whole Life Insurance beyond the obvious death benefit.
So we’re running into situation where Whole Life policies have an ability in some cases to evolve ahead of you, ahead of where you’re going. That they’re ready for you by the time you get there to do a totally different benefit than you even anticipated you might have needed.
So we don’t have enough time to get into it in today’s show but Whole Life Insurance through the living benefits; through the cash value accumulations; through different needs that can be really addressed that we didn’t even anticipate. Whole Life Insurance seems to be a very transient type of policy because of its living benefits; and it also ability to outlast some of the others.
So I know we’re pretty much out of time today but again I’d like to share with all of you. Please call us. Let us help you evaluate your needs. Do the In Force Policy Illustrations; do the health insurance tests on your life insurance policies that you have now.
And the life insurance companies
- Is the company healthy?
- Is the policy healthy?
- Do they still meet your needs?
- Are you able to still have time?
- Is there still tie to help you transition?
And Ian your point of reprogramming your needs; starting from scratch. Program your needs now as if you had nothing. Build a house of coverage that you would need and then look at the policies you now have. Are they what you would buy again if you didn’t have anything now? And help you through that process.
So again we’re pretty much out of time for today. I wanted to thank you Ian
Ian George: My pleasure.
Jack Driscoll: Again the Brokerage Director with Mass Mutual Life of Pittsburgh. I thank you very much for coming and help shed some light on this area.
Ian George: My pleasure.
Jack Driscoll: Thanks again everyone for tuning into another edition of All Things Financial. We’ll be back again next week.