No one wants to think about what would happen if you or a loved one unexpectedly dies, however, it is important to be financially prepared just in case. On this week’s episode, Josh and Austin talk about life insurance…what it is, who can get it, and who needs it. They also share about different types of life insurance and whether it should be considered an investment. Listen in now!
Main Talking Points
[1:44] – What is Life Insurance?
[3:41] – Who Is Involved
[5:16] – Who Can Get Insurance?
[11:27] – Who Needs Life Insurance?
[14:12] – Dad Joke of the Week
[14:54] – Types of Insurance
[19:02] – How Much Life Insurance Do You Need?
[22:12] – Is Insurance an Investment?
[26:20] – Final Thoughts
Links & Resources
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to the Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
Hey. Hey. Hey, welcome back to the Invested Dads podcast, the podcast where we take you on a journey to better your financial future today. Josh, we’re going to be talking about life insurance.
Josh Robb:
That’s right, in case my breakfast cereal gets stale, or I lose pieces to my favorite board game Life.
Austin Wilson:
No, not Life cereal insurance or Life board game insurance, but insurance to cover needs should you or a loved one unexpectedly die.
Josh Robb:
Okay. So this is one of those really exciting, like we love talking about, it’s the favorite thing.
Austin Wilson:
Yeah everyone wants to talk about it. No, in fact this is probably the least sexy… Did I just use sexy and life insurance in the same-
Josh Robb:
For podcasting, it’s the topic.
Austin Wilson:
It’s the least attractive exciting topic, but it’s actually very important.
Josh Robb:
And that’s one of the things as a financial planner, it’s one of those subjects when we talk about estate planning in general, we talk about end of life and you force people to think about that situation. It’s hard.
Austin Wilson:
Yeah.
Josh Robb:
They don’t want to do it. People put it off. And so these are some of those things that people will tend to put off when it is really important like you said.
Austin Wilson:
So Josh, let’s stop.
Josh Robb:
Yes.
Austin Wilson:
And not start. No, we’re going to start. We’re not going to stop.
Josh Robb:
We’re going to stop and start.
Austin Wilson:
We’re going to start like we always do, 50000 feet, we’re in a Boeing 777.
Josh Robb:
Yeah, you need life insurance.
Austin Wilson:
You got life insurance because the one engine just went out. That just happened.
Josh Robb:
It did.
[1:44] – What is Life Insurance?
Austin Wilson:
That’s current news. So yes, 50000 feet. What is life insurance Josh?
Josh Robb:
Yes. So, life insurance… Insurance in general is you passing the risk from yourself to someone else, usually a company. And so in this case, life insurance, you’re passing the burden of some sort of monetary-
Austin Wilson:
Yeah.
Josh Robb:
Cost of when you pass to a company and in exchange, they want you to pay them monthly or annually for that risk.
Austin Wilson:
Yep.
Josh Robb:
So it’s the same if you think a car insurance. You could have a big car cost if you crash your car. To replace it, it will cost tens of thousands of dollars probably. That’s a big risk. You pass that risk on to insurance company by getting car insurance. So you pay a monthly premium and the car insurance is betting if they ensure enough people that they’re going to collect more money in any given timeframe than the money they have to pay out.
Austin Wilson:
Right. That’s how insurance companies-
Josh Robb:
That’s insurance-
Austin Wilson:
All insurance companies make money that way.
Josh Robb:
Right.
Austin Wilson:
They receive more in premiums than they pay out.
Josh Robb:
Yep. And they can invest that money while they’re waiting.
Austin Wilson:
Exactly.
Josh Robb:
If you buy, and we’re going to get down to this, but if you buy some sort of whole life insurance product or a continual insurance product, anything that lasts for a given set of time, they’re guaranteed at some point they’re going to have to pay out. So then their table and their bet is on, “Can I collect enough money and earn on that money to offset what I pay out at the end?”
Austin Wilson:
Right.
Josh Robb:
And so life insurance is just saying, “Okay, if something were to happen to me early, I have obligations whether it’s debt, whether its future payments for kids’ ongoing living expenses, whatever it is, there’s money that is going to be needed that I can no longer provide. I’m no longer here. So I will pay monthly this insurance company for the guarantee that they will pay a lump sum if something were to happen to me. So from a high level, that’s what insurance is.
[3:41] – Parties Involved
Austin Wilson:
So let’s talk about the parties that are involved.
Josh Robb:
Yes.
Austin Wilson:
So start with you.
Josh Robb:
Yeah, so a policy holder.
Austin Wilson:
That’s literally you.
Josh Robb:
This is a person who owns and pays the insurance premiums. Now they’re the only person that can make changes to this. So the policy holder is the one that pays to keep this insurance policy intact. All right. They own it. Now they could be the person that it’s insured on. Meaning if something happens to me and I have the policy, then that triggers the event. The insured person is the whose person the death causes the payout to be given.
Austin Wilson:
Right. So you could have an insurance policy on your wife.
Josh Robb:
Yes.
Austin Wilson:
So then you’re the policy holder, but she’s the insured.
Josh Robb:
Right, and we’re going to talk about that in a minute. And then the third person is the beneficiary is who gets the money if something should happen to the insured person. So there’s really three people involved. It could be one person has everything, it could be two of those, it could be three separate people, and we’ll talk about why and how that works, but in general there’s someone who pays the premium to keep it active and they own it, there’s someone whose life it’s being monitored for, for the death to trigger it, and then there’s the person who receives the money at that death.
Austin Wilson:
It does seem unlikely that you would be the beneficiary and the insured.
Josh Robb:
Yes, unless you have it paid to your estate.
Austin Wilson:
That’s true.
Josh Robb:
That would be the only way you would do that. You have your estate receive it.
Austin Wilson:
I’m trying to make a joke.
Josh Robb:
Right. But there are people that do that. The problem with that then is once it’s in your estate, it becomes taxable. Now we’ll get into that down the road, but high level you could be all three. More often than not, you’re two of the three. You’re the policy holder and the insured, and then you name a beneficiary for that.
[5:16] – Who Can Get Insurance?
Austin Wilson:
Right. So kind of go a little bit deeper into who… So you talked about the three categories of people, but who specifically, who can get insurance?
Josh Robb:
Anybody can get life insurance. Now, who can you get it on is the question.
Austin Wilson:
Right.
Josh Robb:
Right? And so you got to be an adult, all right, for one to get the life insurance. Now you can get it on a minor, but-
Austin Wilson:
In fact, that’s not uncommon.
Josh Robb:
Not uncommon, but you can get life insurance on anyone who you’re deemed to have an insurable interest in. Another way of saying that is I have a financial interest in them, or if something were to happen to them, my finances would be affected. So great example that you used is spouses. So if myself and my wife, we have jobs, we both work. If something were to happen to me, our income would be cut in half, between the two of us, whether it’s proportional it doesn’t matter, but we would lose some income within the family. So my wife has an insurable interest in me in that she would be financially impacted by my death, so she could get a policy on me.
Now you can extend it up and down, so parents and grandparents, we’ll talk about those. In order to do that though, if you’re getting an insurance policy on somebody else, you have to have some criteria to fit in. Now, if you’re getting it on yourself, this criteria is automatically kind of enacted, right? You have an insurable interest in yourself, right? If you die, there will be a financial impact. But second, if you’re getting it on someone else, they have to give permission and they do that by a couple of things. One, they actually have to sign the policy. They have to be aware that someone’s getting insurance on them. And second, they have to go through, if required, medical screening. So they have to consent to that. You can’t just like go up and start drawing their blood, right? They have to consent to that. And so signing the policy and going through the screening is them giving that permission to be insured, to be the person that the insurance is on.
And so again, going back to spouses, you’d have a conversation. Usually I would get my own insurance, but make my wife the beneficiary so then you don’t have to worry about that consent because the insurance policy is me and I’m the policy holder. I’ll pay my own premiums and then maybe my wife does the same. You mentioned the kids. So nowadays they have riders on your own insurance policy where you can just add a rider to your own insurance that says if there’s an untimely death of your kid, who’s a minor, they’ll pay. So you’re not really getting your own insurance policy on them. It’s kind of a workaround because more often than not you don’t have a financial interest in your kid. Their untimely death, as tragic as that is, does not impact you financially, but you do get the burden of paying their funeral expenses, so that’s what the rider is for.
Austin Wilson:
And those riders are often pretty small, $10000-$20000, something like that just to offset those expenses.
Josh Robb:
The average cost is just under $10000 for a funeral and so if you get a $10000 insurance policy, you get that money-
Austin Wilson:
It’s super cheap.
Josh Robb:
You can help cover the expenses and so that’s what it’s there for. But here’s some examples though of where you would get insurance policy on someone else. So again, remember you’re getting a policy, you’re the policy holder. So you’re responsible for paying the premiums, not them. This is why you do that. One, business partners. So if there’s a business and you have a partner, if something were to happen to them, that would probably impact your business. Now you can get cross life insurance and all these different things, but one thing you could do is just take a policy out on them, you pay the premiums yourself, and if something were to happen to them, you would get a lump sum and then you could continue the business on.
Austin Wilson:
Really, it’d probably be the amount of buy them out.
Josh Robb:
Yeah, really to buy them out or you get each other’s insurance, but in general you could do that and you would have an insurable interest.
Austin Wilson:
And they would probably think of doing the same thing for you.
Josh Robb:
You would encourage that.
Austin Wilson:
And then you would be covered no matter what happens.
Josh Robb:
Yep. Another one would be parents. And so if you’re an adult child and maybe you’re the caretaker of the parents, or maybe your sibling is a caretaker of the parents, having an insurable interest would be what if let’s say it’s me and my sibling and I live out of state and my sibling lives in state with my parents and she’s taking care of them, or he. If something were to happen to my sibling, my parents now are in trouble and so the burden would be on me to take care of them. I could get insurance on my sibling to then give a lump sum to help take care of my parents. That’s an example.
Austin Wilson:
Yeah.
Josh Robb:
You’d probably encourage your parents to do that, but if they can’t afford it, because remember the policy owner has to pay the premiums, maybe it falls on me. Another one you see a lot of his former spouses. So if you go through a divorce and there’s kids involved, sometimes the court may actually order one of the spouses to carry insurance.
Austin Wilson:
Got it.
Josh Robb:
If they’re the one that requires to pay alimony or child support. But if they don’t and you’re still worried about that, you could get a policy on them because you do have an insurable interest even though you’re no longer married to them, there is a financial interest in that person to continue to pay alimony or child support that you could pay your own premiums for that insurance policy on your ex-spouse. There’s no burden on them besides consenting to the initial screening, but after that they aren’t responsible for premiums. It’s not out of their pocket. It’s for you in case something happens to them. So you actually do see that quite often. If the court doesn’t order it, a lot of times the spouse will do that on their own.
And then another one would be if you’re a parent and you have an adult child. Again, if they’re moved out of your house, there’s probably no financial interest, except if you co-signed a loan with them, so going through college sometimes you have to get out loans and a lot of times the parents will co-sign that loan.
Austin Wilson:
Yep.
Josh Robb:
If something happens to the kid that loan doesn’t go away.
Austin Wilson:
Oh yeah.
Josh Robb:
The co-sign person is responsible for it.
Austin Wilson:
And this is probably, this brings up a whole other topic for another day, but if at all possible, and I understand educational expenses sometimes take certain priority, but if at all possible it’s generally thought of as best to avoid that if possible. Co-signing loans for your adult children can be risky.
Josh Robb:
Co-signing any loans, whether it’s education or anything, assume you’re paying the full amount. If you’re going to co-sign a loan, just make the assumption I’m responsible for this full amount and just assume that.
Austin Wilson:
So don’t do it.
Josh Robb:
Don’t do it.
Austin Wilson:
Just don’t do it.
Josh Robb:
But you know, overall those are just some examples of where you get an insurance policy on somebody else because a lot of times you might ask why in the world would I do that, but those are some examples. But more often than not, and going forward we’re kind of just talking about generally speaking most people get a life insurance policy on themselves with a beneficiary of either a person or a charity or some sort of entity.
Austin Wilson:
Yep.
Josh Robb:
All right, so that’s kind of what we’re talking going forward.
[11:27] – Who Needs Life Insurance?
Austin Wilson:
So break it down Josh, who needs life insurance?
Josh Robb:
So it’s one of those, again it depends is what I say a lot of times and it’s true.
Austin Wilson:
Typical Josh answer.
Josh Robb:
Yep. High-level though, again, if someone relies on you for financial support or income then you probably need insurance. If you have obligations… Maybe no one’s relying on you, but you’re going to have debt post your passing, then you probably should have some insurance to not burden someone else with that debt because it’s got to go somewhere. And so those are the main reasons. A third one, and it can get complicated so I don’t want to go too deep from a podcast standpoint, but if you’re in the spot where you’re going to possibly see estate tax, you can use insurance vehicles potentially to reduce your estate tax, move some assets out of your estate and give them to other people. An example that is irrevocable life insurance trust or ILIT.
Austin Wilson:
Fun acronym, yeah.
Josh Robb:
Pretty much it’s an irrevocable trust and if you’ve heard us talk about trusts before, irrevocable means you can not change it. It’s set. Once you do that, it’s done. So what you do is you put a life insurance policy in this irrevocable trust. It’s no longer yours because you do not have control anymore. Whoever you set as beneficiaries is set. You can not change that. Now you sign a trustee there and the trustee’s job is just to make sure that premiums are paid and stuff. You do that you can get that asset out of your estate because life insurance paid to… Any kind of life insurance you own is part of your estate so it can be taxable. So moving some of those things out can help avoid it.
Again, it’s very complicated. There’s rules, such as it has to be in effect for three years or else it doesn’t even count. You have to pay premiums. Well, since you no longer own it you can’t personally pay periods anymore. Your trust has to pay it. So you have to gift money to the trust every year. But then there’s a thing called the crummy letter, which means every beneficiary has the right to grab that money, every gift you make.
Austin Wilson:
Oh my.
Josh Robb:
But you want to encourage them not to because you want to pay the premiums because if they take all the money, you can’t pay premiums, that insurance inside the trust becomes default and then there’s no benefit anymore. So there’s all these fun stuff. Talk to an attorney or a financial professional. But in general, just so people know, there are some life insurance products that can help you move some money out of your estate. You can also gift life insurance to other people that removes it from your estate. There’s certain rules on that with gift tax as well, but in general it’s something that you can do.
[14:12] – Dad Joke of the Week
Austin Wilson:
This is one way that lawyers make their money because the rules are very complicated and they help people navigate these complicated rules. I think we’ll probably have an episode at some point about wills and trusts and all of that in general, but yes, this is a very important part of that. So Josh, let’s take a break.
Josh Robb:
Yes.
Austin Wilson:
This is obviously a little bit sad thinking about death so I’m going to try and lighten up your mood a little bit Josh. This is more of an open-ended question for a dad joke. Would Transformers get life insurance or car insurance?
Josh Robb:
Man, that’s a good question. I don’t know.
Austin Wilson:
Flush that out.
Josh Robb:
Yeah.
Austin Wilson:
What are your thoughts?
Josh Robb:
You know, I would feel like the Decepticons wouldn’t have any insurance and they would just be like walking around like uninsured and causing-
Austin Wilson:
Causing mayhem.
Josh Robb:
-for everybody. Yeah. That’s a good question. I mean, if they have the all spark, they would probably need life insurance because that makes them living entities.
Austin Wilson:
Okay. There you go.
Josh Robb:
Because I’m a dork and I know that stuff.
Austin Wilson:
Yeah you actually know that stuff. Okay.
Josh Robb:
That was funny though, I like it.
[14:54] – Types of Insurance
Austin Wilson:
Let’s get back. Let’s break down a couple of different types of insurance. So what are the most two common types of life insurance specifically?
Josh Robb:
Yep. So there is whole life insurance or what’s called permanent insurance and term insurance. Term being a set amount of time. And so from a high level, that’s two different types. Permanent meaning it’s always there until death. Term meaning we set a timeframe and it’s there in effect until that timeframe ends or you die within that.
Austin Wilson:
So break down… Let’s start with whole life.
Josh Robb:
Okay. So whole life insurance gives you a premium that you pay and every time you pay the premium, a portion goes to cover the insurance costs, a portion goes into what they call a cash value bucket, which is for if you have whole life it’s usually a set fixed interest rate that it grows by. You can borrow against and withdrawal that amount in the future as it grows. They have kind of thresholds that you can do with it, but it’s kind of an additional piece to insurance. And so you have your death benefit. Let’s say it’s $100000 and then on top of the $100000, every premium you would then get a portion that would go into this cash value bucket. And then over time you may have $5000 in this cash value that’s yours to use for whatever. And it grows at a set interest rate.
Then there is, within this whole life, things like universal life and variable, where instead of a fixed interest rate you have it tied to maybe the SP500 and it tracts the movement that way, or some sort of variation there. And universal also has the caveat that you can adjust your death benefit up and down as well. So you could get to the point in a whole life policy where your cash value is big enough where you can use that money to pay your premiums and you no longer have to pay into it for a set amount of time. The premiums or the cash value cover it and you still have your death benefit.
Now, historically speaking, you pay more for that type of insurance policy for a couple of reasons. One, it accrues cash value, and two, it’s not a set time period so they’re on the hook a lot longer to pay out, meaning they have a higher probability they’re paying out and so they charge more for it.
Austin Wilson:
So I think, historically speaking however, the returns that… If you view that as a growing vehicle because of your cash value bucket, the returns are typically not stock market quality.
Josh Robb:
No, it’s tied to it and so you may get a percentage or something-
Austin Wilson:
But it’s not going to be… Yeah, you’re not going to get-
Josh Robb:
There’s costs associated with it. Now, I will say a lot of fee-only advisors, which is what we are, we’re not big proponents of whole life or universal life because of the added costs on the investment side of things. But it does force people to save. So the one side of it is if you struggle with putting some money aside, knowing you need insurance and you’re going to pay those premiums, it can force people to save and accrue some cash value for emergencies and stuff. Now I’m not a huge fan of it. I think you should do insurance for insurance and investing for investing, but for some people, especially if they don’t have an advisor helping them, it does force savings in a bucket.
Now the flip side, term insurance is a set premium for a set amount of time with a guaranteed death benefit. So you could get a 20-year term, meaning for 20 years, as long as you pay the premium, if you die within that 20-year period, they will pay that death benefit. It does not accrue any value. Your total premium goes towards that insurance company’s risk they’re taking. Its cheaper. It’s the cheapest way of getting insurance. In my opinion, it’s the best way to go, especially for young people because a lot of times you don’t have a lot of money.
Austin Wilson:
And healthy people.
Josh Robb:
Young healthy people because you’re just covering the risk of what if.
Austin Wilson:
Exactly.
Josh Robb:
That’s really what it’s there for. So again, shop around, but you’ll find more than likely term insurance is the cheapest, most affordable way to get the highest amount of coverage.
Austin Wilson:
Yeah, so that is term versus whole life. So I guess the bigger question probably is, I guess let’s maybe specifically focus on the term side of things.
Josh Robb:
Yes.
[19:02] – How Much Life Insurance Do You Need?
Austin Wilson:
I think it makes a little bit more sense to head the discussion that way, but how much life insurance do you need?
Josh Robb:
Yeah, $10000… No, there’s not a dollar amount.
Austin Wilson:
Or a million, or 10 million, or who knows.
Josh Robb:
The dollar amount is not as important as what are my obligations and what are my future goals that I’ll no longer be able to contribute towards. So if I’m a family with kids and we had anticipated both of us working until we’re 60 years old and then retiring and then helping to pay for college in between time, those are some goals that will be drastically disrupted if one of us were to die early.
And so you would then say, “Okay let’s say I have two kids and I want to pay for college for both of them and it’s going to be $20000 a year for college.” So then you see okay, you could run a calculation. Your financial advisor could help you with that, but you’d then say, “If I had a lump sum of money, how much would I need to cover all those college goals?” So then that would be a piece. You say, “Okay, what if I died when I was 30, but we didn’t think we’d be able to retire until 60? That timeframe from 30 to 60, that 30-year difference, I’m going to need some sort of money to get us there, and so what’s that lump sum?”
So you really just say what are my future needs and bring it to today and say how much, if I had a lump sum, would I be able to take care of all that, and that’s where you get your how much from. And so, let’s say you have a couple and one is working one staying home. Well, the working person you need to offset that income you’d lose. The stay at home person, you need to offset all the things that they do that allow the other person to work. So if you have kids at home and they’re the primary provider of that, I’m going to have to hire someone to take care of the kids or find daycare or something, which is not cheap, and so either spouse would need insurance on them, not just a working spouse because there is intangible benefits that the stay-at-home spouse provides that cost a lot of money if needed to be fulfilled elsewhere.
And so the answer to how much is how much do I need to make sure that those remaining can still reach the goals we were trying to do together.
Austin Wilson:
So I want to put a couple of morbid notes out there. So this is sad. This is morbid, but these are things that probably should be discussed. First of all, it occasionally has happened through history where a beneficiary, so typically a spouse, will kill the person with the policy to get the life insurance policy. This is a real thing that happens. And usually it gets caught and no one gets paid out and it’s very bad for everyone.
Josh Robb:
Yeah. The insurance policy will not pay out if you cause the untimely death of the person that you were the beneficiary of.
Austin Wilson:
Yes, and secondary, it is also generally speaking in most policies that suicide does not pay out a policy.
Josh Robb:
Yeah. Yep. If you caused your own death through suicide most of the time they won’t pay out. The other side too, if you get an insurance policy on someone without their knowledge or you fraudulently… That’s fraud and you could be prosecuted and you won’t receive any benefits. So yeah, just make sure you’re on the up and up with all this.
[22:12] – Is Insurance an Investment?
Austin Wilson:
Use it for what it’s there for. Exactly. And don’t… There’s no forcing life insurance to occur. We don’t want that. Okay. So here’s the discussion and we’ve kind of hit on it before, but I think we should delve into it a little bit more. Should insurance be considered an investment? Should, not is, should?
Josh Robb:
Now, from a cost standpoint what you get out of a universal or whole life minus the fees, minus all that, minus their kind of top end cut off points and all the stuff that they do, usually you do not get good bang for your buck. And so insurance is there to cover the what if and to remove the risk from you to someone else. So I don’t think you should use insurance for an investment.
Austin Wilson:
Generally speaking, if you want to have investments that grow do that separately for investments to grow. They work together, insurance and investments, for your total financial picture, but let your insurance be exactly what you said. It’s insurance. Let your investments be set up to be investments. So I’ve heard of the term, and I think Dave Ramsey is kind of a proponent of this, self-insured.
Josh Robb:
Yeah. So, that’s where you start your own company. You call it myflac-
Austin Wilson:
Josh Insurance.
Josh Robb:
Myflac instead of Aflac. Self-insured is where you have enough assets saved where you can fulfill all your goals and needs. So in a sense, at retirement you are self-insured from a life insurance standpoint in that you’ve already had enough assets lined out to last the rest of your life and so insurance becomes less of a need. Now, I do know people that carry insurance in retirement and a lot of times it is that type of $10000 policy, $20000, where they say, you know what I don’t want whoever, maybe my kids or whoever, the funeral expenses. I just want them to have quick… because that’s the other thing about life insurance, it pays out pretty quick when you have the beneficiary. They’re pretty timely in that payout. You could get your insurance money and help cover the expenses. So it doesn’t mean you can’t carry insurance, but at that point insurance is no longer needed as a replacement for anything because you had everything you need.
Austin Wilson:
An alternative that some retirees may hold insurance for is if they have a mortgage still in retirement and they want to leave as much of their nest egg untouched if they were to pass. So then they could take out a policy to offset whatever debt they’ve got. Say they have $100000 left on their mortgage, covered, no problem, then the whole nest egg then goes to the beneficiaries from there. But yeah, so the goal is to get to the self-insured status. We should all be working towards the point where we don’t need life insurance, where we have enough saved up so that if something were to happen our families would be fine either way. It’s a process to get there and that’s why life insurance is there to cover you in the middle. So yeah, that should be the goal. So Josh, a new term that I-
Josh Robb:
Well, along with that.
Austin Wilson:
Yeah.
Josh Robb:
So to get to self-insured, and we talked about term insurance, sometimes you can layer it. And so when you’re young, you’re going to need more insurance but as you work towards retirement, you need less and less. So you can layer policies. You can have more than one insurance policy and you may get a 30-year and then a 20-year and a 10-year, but they may overlap. So at the beginning you have the 30, the 20, the 10 paying out if something would happen to you the first 10 years. When that 10-year goes away, you don’t renew it, you don’t get a new one, now you have the 30 and the 20 left. And then after the 20 years, then you have just the 30 left. And over that 30-year timeframe you went from a lot of insurance to less insurance and you’ve got your premiums less as you needed less insurance.
Josh Robb:
So you can in a sense layer insurance on top of each other to provide the amount you need at any point in time in your life.
Austin Wilson:
And that’s a really good point because as you work and as you save and as you become more mature in your financial situation, typically your assets are going to grow. So you’ll have more of that already saved up and you’re going to need… So like if you have a million dollar policy and you get it in your 20s and so then for 30 years, it’s going to expire in your 50s. Okay great. Well, at the end of that, you’re going to be probably way over insured potentially. It depends on your lifestyle, but you could be way over insured. You’re locking in that rate in your 20s, so it’s pretty low but still if you do the hybrid life insurance where you kind of layer it on top and you can work that down, you can only have what you need when you need it.
Josh Robb:
Yep.
[26:20] – Final Thoughts
Austin Wilson:
Yeah that’s a great discussion. Josh, any final thoughts on life insurance?
Josh Robb:
Yeah. So with today’s everything going on, long-term care is another type of insurance for long-term care facilities. They have new things for hybrid life insurance where they may say here’s a life insurance policy with a rider attached that’s long-term care insurance, and then you can borrow from your death benefit to pay for nursing home care before you die and it’s a way of kind of covering both, but not having much out of pocket for that long-term care. So again, if you had a $100000 life insurance policy but before you pass away you’re in the nursing home for a year, you could borrow against that using this hybrid policy and say okay at my death now I only get $75000 because I used $25000 or whatever it is. But the idea is you could kind of cover both because there’s the two different types of insurance, but the insurance companies that are writing these understand that they kind of go hand in hand and if you can get a premium for both, they’re spreading their risk out because maybe you don’t use the one, but you have the other, that type of thing.
Josh Robb:
It’s out there, just something to pay attention to.
Austin Wilson:
And I think it’s probably worth noting that we’ve barely scratched the surface on life insurance. This is very high level in general. So if you have any questions, don’t hesitate to reach out, we’d be happy to talk to you, but mostly talk to someone who is an expert in specific that field. They’ll have some really good answers for you on that. And as always, check out our free gift to you. It’s a brief list of eight principles of timeless investing. They’re overarching investment themes and to keep you on track to meet your long-term goals. We don’t specifically mention life insurance in that, but we do note that it should probably be a part of your financial picture. So check that out. It’s free on our website. Josh, how can people help us grow this podcast?
Josh Robb:
Make sure you subscribe. Every Thursday you’ll get an alert or the download automatically into your podcast app, whatever you use. If you’re on Apple podcast, make sure you like us and review us that way more people can find us. Send us any emails if you have a question about life insurance or you have another topic you want us to talk about. Send us an email at hello@theinvesteddads.com and also check on our website, theinvesteddads.com. That’s where you can get the free gift and there’s more cool stuff on there, more podcasts. And then also, if you know somebody to talk about insurance, share this episode.
Austin Wilson:
All right, well until next Thursday, have a good week. All right, talk to you later.
Josh Robb:
Bye.
Outro:
Thank you for listening to the Invested Dads podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review. Click subscribe and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
