We used a lot of terms in this lesson that can be confusing. If your confused your not the only one! I encourage you to listen to the audio CD included in your membership kit to re-enforce the material we covered last night. There is no denying the power of the video story of Steve Maness, Life Insurance is a key part of proper financial planning. Based on a show of hands many of us need to update / create our "Legacy Drawers". I know firsthand what a blessing this can be if done correctly and what a challenge if not.
Here are a few of my notes and comments that I hope are helpful.
Long Term Care Insurance - Dave recommends not to purchase until your 60. My personal experience is that by the age of 60 1 of 2 of my parents were not insurable due to medical issues. Know your family medical history and make an informed decision on when to purchase. I am firmly planted in the "Sandwich Generation". Kids at home still but parents that need help too. In my situation my parents were in their mid to late 60's. Mom very healthy, Dad very sick. Dad did not have long term care insurance. The reality was the nest egg, that they worked their life to create, was in serious jeopardy to pay for Dad's care both in the hospital and in care centers. Dave talked a lot about Welfare and Fraud last night. Moving assets to protect wealth and pass it to the next generation is consistent with what he discussed last night. His answer to protecting the healthy spouse was Long Term care. The gap in the discussion is what to do in a situation like we experienced, where a sick spouse threatens the long term financial health of the surviving spouse. My advice is to connect with a reputable Elder Care Attorney. One certified by the National Elder Law Foundation is a good place to start. There are legal options that are recognized by the State of Michigan to project the surviving spouse.
Auto Insurance Coverage Limits - Case Study 3 last night illustrated what could happen in the event of a serious car accident. Liability Insurance is relatively in-expense and people are often under-insured. Cheap car insurance often equates to bad coverage. When you review your coverage ask questions about your limits. I recommend you don't have below $250,000 (Bodily Injury Per Person) / $500,000 (Bodily Injury Per Accident) / $250,000 (Property Damage) in coverage. I'm NOT an insurance agent and this is a recommendation to discuss with your Insurance Agent. Ultimately you have to decide what risk your willing to take. Uninsured Motorist coverage is often overlooked. This is VERY inexpensive. This protects you if your in an accident involving and uninsured/under-insured motorist. Don't go below $250,000 or $500,000 here either.
HSA (Health Savings Accounts) / High Deductible Medical Plans - There are many changes coming with the Affordable Care Act. My hope is to give you some talking points for when you engage with your HR departments or Insurance Agent at open enrollment. Health Savings Accounts (HSA) are always coupled with a High Deductible Insurance plan. Your ability to cover medical expenses from your budget will greatly impact your haplessness with this type of plan. These plans are good for wealth participants that want to save tax free for future medical needs and can pay up to the plan deductible limit from cash flow. (Like Dave Ramsey can) When considering these type of plans ask about "first dollar coverage". This is often not a part of these plans. Sometimes they will have preventative first dollar coverage or none at all. If your currently in a HMO or PPO a HSA based plan will "feel" very different as you use your medical services. Young and healthy participants are usually good candidates for HSA plans. If your a young married couple and children are in the near term future become very familiar with the policy out of pocket limits. You will most likely hit them in conjunction with a baby delivery. One feature of the affordable care act is the ability to stay on a parents medical plan till age 26. This is often a cost effective strategy for people under 26.
Life Insurance - Dave was very clear on the need for this and the preference for Term vs a form of Cash Value insurance. I agree completely here. This is a day one need, not a when we get out of debt we will add this item. I suggest you review your Term Policy every 5 years to make sure it is still the right amount of coverage and consider any health condition changes. At the review you can determine if it makes sense to take out a new policy to replace the existing policy. Never cancel a policy until the new policy is in full force and effect.
Dave Smith is part of the KCC finance staff and a Dave Ramsey Certified Coach.