6 Key Steps to Ensure Your Financial Future

0:00

[Music]

3:44

Welcome, welcome to today's presentation, everybody. Stephen, can you hear me?

3:50

Okay, I can. Thank you, Angela. Perfect. Okay, so let me introduce myself. I'm Angela Neves, a financial coach with NFP. I've been in the financial industry for the last three decades and mostly focusing on financial wellness and it's going to be a pleasure presenting. I am co-hosting with Steve.

4:08

Steve, introduce yourself. Yes. Again, thank you Angela. My name is Steve Jans. I am a financial adviser and I have been doing this yeah I think three decades as well. I started in 1995 working with families and employees uh just helping them create financial plans and uh looking forward to today's discussion.

4:25

Thank you so much. Well, today's session is understanding risk insurance essentials for every stage of your life. It is such a wonderful topic. We're going to bring Stephen on out in a little bit. Uh he is going to be one of our uh subject matter experts. But let's talk about uh financial education because in this module we're going to focus on protecting and planning. and it's a unique opportunity to learn about insurance, especially from someone who isn't trying to sell you any coverage. So, please feel free to ask any questions along the way. Use the chat. I'm going to stop from time to time and check on those questions. We'll be happy to answer them as we go along through our session today. Now, a solid financial plan has three main stages.

5:11

First, protection. And this is our foundation. things like health insurance, life insurance, disability coverage, and having a will or a power of attorney in place. Without protection, everything else is at risk.

5:26

Next, saving and accumulation. Here, we're going to focus on paying down debt, building an emergency savings, planning for retirement, home ownership, education, funding. Now, this stage is about building financial security, and preparing for the future. And finally, growth and distribution. Once the foundation is set, saving is strong, we move into investments, market-based portfolios, and other strategies to grow wealth and eventually distribute in line with our goals. Now, think about it like a pyramid. First, protect and save.

6:03

Second, grow. And third, the road map to financial success. So, we're going to really take a look at everything that affects our lives. Now, as you see in this slide, it shows that protection is the foundation of financial planning. First, many Americans are underinsured. 59% have life insurance, but half don't have enough coverage. Medical bills are also a big risk. Over 65% of bankruptcies are linked to medical expenses. Disability is another concern. Most families couldn't last a month without a paycheck, and there's a 30% chance of a serious disability during our careers.

6:46

Umbrella insurance is often overlooked. Only about 10% of homeowners have it, but anyone can face a lawsuit. And when it comes to long-term care, half of Americans over 65 will need it with cost averaging about $138,000.

7:03

Now, the takeaway is simple. the right insurance transfers these risks so that your family doesn't have to face them alone and that's the important part.

7:15

Risk management is certainly the practice of identifying and analyzing loss exposures. It takes steps to minimize their financial impact and this might involve managing risks affecting property due to fire, theft or a natural disaster. A person for example purchases insurance to manage these risks. So he or she might install maybe an alarm or a sprinkler system. Now example of ways to manage risks are risk avoidance which is avoiding the situation that could result in loss exposure. Risk retention. Do nothing. The likelihood of occurrence is low. Or risk reduction. take steps to lessen possibilities of loss which might include risk pooling and risk transference. Certain risks may be transferred to an insurance company like major medical expenses, premature death, disability, retirement account market losses, long-term care needs, and unusual liabilities. So, we have to think about what's important to all of us. And we're going to take a look at risk in terms of probability.

8:29

Medical risk is certainly 100% ongoing. We all need medical care, right? We all have insurances. Auto and home risk usually shows up to three to four times in a lifetime through accidents or damage. Disability has about a 30% chance of happening in your lifetime and is higher than most people expect. Long-term care becomes a big factor as we age with 50% of people over 65 needing it. Liability and life insurance needs vary by age and situation. So when we prioritize, we start with what's most certain like medical and then layer in other depending on whether we need it in every stage of our lives. And that brings me to an emergency fund because an emergency fund is money that we set aside for life's unexpected expenses like car repairs or medical bills. And it's important because it keeps you from having to borrow money or dipping into your retirement savings when an emergency happens. The best place to keep it is in a high yield savings account first because it's safe, it's easy to access, and earning some interest. Now, how much do you need to save in this emergency fund? Well, you aim to uh save 3 to six months worth of living expenses. That's what our experts recommend. And think about it as your financial safety net. It's not about it when you'll need it. It's not about, excuse me, um if you'll need it, but a matter of when. So, that is an important part. Please save as much as you can and when you use your emergency fund, try to continue to build it back up. So, as soon as you use it, you build it back up and you can start little by little by saving a little bit out of your paycheck. Maybe um you do a little garage sale and you have a little extra income and you start putting it into your emergency fund. Now, with that, I am going to bring Steve so we can talk about insurances. Insurance basics as an expert. Steve, talk to us about insurances.

10:36

Awesome, Angela. Thank you. Before I get started, I think I just might set the stage a little bit by just talking about financial planning in general. We spend a tremendous amount of time believing that our clients should all have a financial plan. And when we say that, I think oftentimes people get a little intimidated by what that sounds like and whether they should build one for themselves or not. And uh if you really think about what goes into financial planning, I often remind folks that about 80% of an entire family's financial plan is already provided many times and built through a benefits program at your employer. So, we're going to talk a little bit about risk management today and in insurances. And I promise you this isn't the most exciting topic for most people when we go through financial planning with them, but it's incredibly important to take the time to go through this and understand what's important to you and your family. Um, and recognize that these are the types of tools that you put in place to protect your assets, to protect your 401k balance, and protect the equity in your home. So, it's important to go through this and understand it. And one final thing I'll say is it amazes me how many times I'll sit with clients or I'll sit at a kitchen table and start talking about their insurance coverages and I recognize how much people spend each month on various insurances. So I think the punchline for me today is understand what you need for you and your family. Get what you need and don't overspend on stuff that you don't need. So with that, I'm going to just kind of walk through these. You're certainly welcome to jot questions into the chat and we'll certainly address them as they come in. Um, medical insurance. Let's start here. This is probably the most important insurance that you need in your in your portfolio.

12:23

I say that because it poses the biggest risk. If you don't have this and something s significant or catastrophic happens to you or someone in your family and it costs a tremendous amount of money, your entire portfolio is going to be at risk. So understanding what you have at your fingertips from a from a medical insurance um opportunity is very important. Um I know we have all sorts of different plans in the marketplace. So understand what you have available to you, research them, understand them, and then make the best decision. If you need, and by the way, I'll say this probably multiple times. If you need help with this stuff, reach out to us and we'll certainly walk you through that. But this is very important.

13:04

if you pop ahead or may I don't see the questions if any questions coming otherwise you can pop ahead Angela.

13:10

Yeah. No, go right ahead Steve. No questions yet. A second one is disability insurance.

13:16

And I'm going to spend a few minutes on this. Again, Angela mentioned that you know there's like a 30% chance that you may need this in in your lifetime. This is a tough one. It um it's fairly expensive in the open market. However, many employees have access to this through their employer either via long-term disability benefit or a short-term disability benefit. The key to disability insurance is this. It is designed to replace income. So, when you look at your benefits, often times the benefit might say something like that it will cover up to 60% of your income. I think what's important for people to really take, you know, take 10 minutes to figure this out. Take a look at your monthly expenses, your take a look at your monthly take-home income, and recognize what 60% of that income would look like in the event that you were disabled. Now, if you have if you have a plan where 60% is the benefit, do the calculation. And if you feel as though getting 60% of your paycheck is enough to cover your essential expenses on a month month-to-month basis, you may feel comfortable with the benefit that you have. If you feel as though that's not enough, then you might want to consider going out to the open market and looking for a supplemental policy. I think where I run into trouble or situations where people are confused is they go to the they have it as a benefit through work, but yet when they go talk to an insurance agent, the insurance agent ends up talking them into buying a policy that covers a 100% of their income and they don't necessarily need to a policy in the open market to cover 100% of their income because they have some through work. So, it's not necessarily buying new and more insurance. It might be supplementing it.

15:00

Um, another question that comes up often, and Angela alluded to this earlier, is your emergency fund. So, I'm going to kind of correlate these two together. Oftentimes, people will say to me, "How much money do we have to have in our emergency fund?" And statistics usually say to have somewhere between three and six months of your income or your expenses in in a savings account. I don't necessarily disagree with that. One thing that I'll do with my clients often is I'll tie their emergency fund needs to when their disability insurance kicks in. So in my example, you know, if you get 60% of your income paid to you and you have to wait, you know, 30 days or 60 days or 90 days and before that benefit pays out, once you understand the time uh that you have to wait or call that elimination period, that tells me how many months you should have set aside in your emergency fund. So an example, if someone has a benefit that that their long-term disability kicks in in 30 days, well then maybe they need 30 days of money in an emergency fund versus six months. So that just gives you a little bit of a parameter to work with as you start to build your planning. Um if you pop ahead to the next slide, uh from disability, I believe the next slide is going to talk a little bit about life insurance. Let me spend a few minutes on this. Um this gets to be very confusing and there are a lot of people in the marketplace that are agents that sell this stuff. So I wanted to kind of give you the things to be thinking about um as you as you think about life insurance. First and foremost, I will always say this. If you have anybody in your life that depends on the fact that you go to work and earn an income, you probably need some life insurance.

16:33

If you are in a situation where you have nobody that relies on your income or relies on the fact that you go to work, then maybe you don't need life insurance. So, first and foremost, it's kind of determining do you need it or do you not need it or do you not don't need it. Once you determine if you do need it, the next thing that I want you to start thinking about is how much insurance should you have? And there's a quick calculation that we do with our clients. It's usually done it in two tranches. One is how much money would your surviving, you know, family need immediately upon your death. So what are kind of some immediate cashing? I'm going to pick on myself as an example because it's always easy to pick on me in front of a group of people. If I passed away today, I I'm married. I have three children and we have a home and we have, you know, normal stuff. We have a car, things like that. If I passed away today, I would want to make sure that my family had enough money immediately to be able to pay for a funeral, pay the mortgage on the house, put money set aside for the kids' college, and pay off some debts. Right? So, that's the first thing I do is like I could I can quantify that and say, "Here's how much money I would need immediately for my family to kind of get us in a in a good spot." The second calculation that I would do is I would recognize how much my income impacts my family. So, how much money am I making and how much do I need to replace so my family can continue to pay the bills and live the lifestyle that we're accustomed to living? And some people might look at that and say, "Hey, I want to replace my income for a few years. I might want to replace my income until, you know, my youngest child is, you know, 18 or out of the house."

18:13

So, there's some  considerations that you need to take into play as you do that calculation. When you take those two numbers and add them together, that's the amount of insurance you should be carrying in your life insurance policy. This slide right here that Andrew is showing here, the income replacement framework, this is just a guideline. It's just simply a guideline that says, hey, if you're, you know, as an example, if you're between 41 and 45 years old, you should have 14 times your income. That may or may not be the right number for you. Um, I like to go to through the exercise of immediate cash needs and income replacement. Putting those together gives me a really good um framework around how much insurance I want to have. I'm going to stay on life insurance for a quick second here. Maybe if you go back a slide, it talks a little bit about the different types of insurances in the marketplace. I'm not going to spend a tremendous amount of time on this. We could spend hours on it because I think it's very confusing, but essentially I want to focus on term insurance versus permanent insurance.

19:07

So, let me stay here for a second. What term insurance is, it's the most efficient way of buying a lot of life insurance for the least amount of money. Um, you probably have some insurance provided to you through your employer, through the group benefits. Very important for you to understand what that is. Um, make sure you understand to document what you have and put it in a safe place with your financial plan so your family knows what you have. If you need more insurance than what your employer is providing for you, here's where you have to start to think about term versus permanent. So, back to term.

19:41

We use term insurance a lot for clients that need a lot of insurance. Let's just say for the sake of discussion today. Let's say somebody wants a million-doll term policy. Let's pick on me. Let's say I want a million-doll term policy and my youngest child is eight years old. I may say, I need a million dollars of life insurance to cover my mortgage, cover my kids' college, cover, you know, things that my family needs money for, and I want to make sure that my wife has enough money to replace my income all the way until my youngest child is 18 years old. So, that's just kind of an example of one way that you start to calculate this stuff. You can buy term policies for term. So the term means how long. You can buy them for one year, five years or 10 years or 15 or 20 or 30 years. And when you buy a term, essentially what you're doing is you're buying a stated death benefit for a stated annualized premium that stays level for that entire term. So if you go back to my scenario, let's say I buy a million dollar term policy for a 20-year term. That means I'm have I'm going to have a million dollars of death benefit as long as I make my annual payment each year for the same amount of money each year for 20 years. The benefit to these type of policies is they're usually very cheap and you can get a lot of coverage. So, it's not it doesn't break your monthly budget to buy the insurance to have the proper coverage for your family. I think the downside to term policies is statistics show that most people will live longer than their term.

21:14

Now, that's probably good news, right? Right? If I buy a 20-year policy and I live 20 years, that means my family's all grown up and they're out of the house and I'm still alive and things are good. What's going to happen is that term policy is going to expire. So, it's a little bit like auto insurance. If you don't use it, if you don't pass away, it kind of expires and you never really get a benefit out of it. That's why they're cheaper. On the flip side, and I won't spend a lot of time here, but somebody might want to buy permanent insurance. I think the key to understand here is if you buy a permanent policy, it's going to be more expensive for a couple reasons. One, the insurance company now knows that there's going to be a day where they're going to pay out that death benefit. So, they're going to be on the hook for that death benefit to be paid out to your family someday because it's permanent coverage. As long as you're making payments and your premium payments, that coverage stays in effect. So, it's forever, right? Inside those policies come some more bells and whistles. So, other than term, term is death benefit. use it or lose it.

22:09

Permanent policy is death benefit plus some additional bells and whistles. And there's a lot of different things that go on, but essentially when you pay your premiums, you build up a cash value inside of those policies. And that cash value can be used by you or your family later in life if you choose to do so. So that's kind of a an overview of the two different types of coverages to have. I think there two main things. Number one, do you need insurance? And number two, if so, how much do you need? Okay, we'll keep moving along.

22:40

Alrighty, we have one question, Steve, but I want to leave it to the end once we do all the uh items and we'll answer the question that has popped up. Okay, sounds good. Uh the next few I'll go through a little quicker. Homeowners insurance, of course, if you own a home, it's very important to have coverage. I think this is also an area where people have an opportunity to maybe re-evaluate what type of costs they have with their homeowners insurance and coverages. Here's where I'm going with this.

23:11

Let's just pick on me. Let's say I have a house that's worth, it doesn't matter, $300,000. I'm going to have a homeowner's policy that's designed to cover $300,000. And the reason I have homeowners insurance is to help me rebuild my home in case something terrible happens. So the truth of the matter is with homeowners insurance, I am always looking to cover a catastrophic event. I'm not really concerned about my homeowner in homeowners insurance covering if I need a new gutter or I need a new window. But what I'm really concerned about with my homeowners insurance is if I need to rebuild the house because the thing burns down or a tornado knocks it off its foundation. So with that said, I think an area where people need to focus on is their deductible. Now think about your savings account and your checking account and your emergency fund and the money that you have set aside for emergencies, right? If you have enough money in your portfolio or in your emergency fund to take on some risk, you might want to revisit the deductible you have on your homeowners insurance. It amazes me how many times I'll sit down with someone and they'll have a $600,000 or a million dollar homeowners policy and their deductible is $250. And I'll say to them, you know, if you have a $500 claim or $1,000 claim, are you really going to submit that claim, pay $250 in your deductible to get, you know, a few hundred of benefit for the insurance company to cover your claim? And usually the answer is no. I wouldn't even submit the claim. I'll just pay for it myself. And my point here is if that client would move that deductible from 250 to 500 or 500 to a,000 or I even have some clients that move their deductible to 5,000 or $10,000 because they know that if something happens, they can cover a $5,000 expense or a $10,000 expense, but they would don't they don't want to cover a million dollar claim if the house burns down. So, by increasing their deductible, they're saving quite a bit of money on their annual premium. So, I think it's just an area where I think people need to look at their homeowners, re-evaluate the coverage of it, their deductible, how their portfolio looks, and kind of get that in alignment about how much risk they're willing to take on.

25:20

The next one, that's homeowners insurance. Similar uh similar conversation with auto insurance. Now, this is a little bit there's a little bit more complexity here because auto insurance covers a lot of stuff. it covers liability and uninsured motors and underinsured motors and collision and everything you can imagine, right? I think the key here is understanding how your coverages work. So, let me kind of walk through this. I know we're virtual here, but I'm going kind of walk through it a little bit. Um hopefully I don't get too confusing. When you look at your homeowner or excuse me, your auto insurance coverages, there's going to be liability limits. And if you look at it, it might say 15,000 30,000 or 50,000 100,000 or 100,000 300,000. Those limits are the amount of money the insurance company's willing to pay on a claim. So if you have $15,000 of coverage and you go out and get in a car accident and you cause $100,000 worth of damage, the insurance company's going to cover 15,000, you're responsible for the other 85,000. It's really important to align these coverages with your portfolio. If you have a portfolio, if you have a portfolio that has you've just started, you have no money. You have no money in your 401k plan, you've got no money in savings, you rent an apartment, you don't have much of a portfolio, you may not need a tremendous amount of coverage because if something happens to you, there's nothing for them to get from you, right? On the flip side, if you start building a portfolio and you've got, you know, 100 grand in your 401k plan or you're getting close to retirement, you got $3 million in your portfolio, you're going to want to have a sincere conversation with your insurance agent about having the proper coverages in the event that something bad happens with auto insurance.

26:58

I'm  going to I'm going to digress for just a second. I'm going to share a this is a real life story, and I'm not going to go into a ton of details because it get long, but here's a here's a quick auto story for you uh just to give you some perspective on how important this is. I had a 22-year-old niece come and visit me. She lives in Tennessee. I live in Minneapolis. She came and visited us in the winter. She borrowed my car to drive into Minneapolis. It was wintertime. She's from Tennessee. She got in the car, got on the freeway. It was a little bit of snow out there, a little ice. She swerved over, hit somebody, caused an accident. Long story short, she was fine. total my car, total the other car, and uh we owe we were we were sued uh because uh the other car was totaled.

27:42

Six months after this happened, I was served papers from the court, the local county court, that I was sued for $600,000 in personal damages, uh bodily injury. And uh I panicked, right? $600,000. I didn't have that much coverage. my insurance coverage is between my auto insurance and my umbrella policy, which I'll talk about in a second, had enough coverage to cover that lawsuit. Now, long story short, the lawsuit was essentially uh what do you call it? Dismissed uh because it was it wasn't accurate. But it scared me and it made me really think about how important insurance is, coverages are, and how devastating that could have been to a portfolio had I not had the right insurances. So, make sure you have these conversations. One last thing I'll say in auto insurance, you want to make sure you have the right coverages. And then again, go back to the deductible conversation. A lot of my clients carry $250 deductibles or $500 deductibles and they can afford to raise that deductible because they've got enough money in their portfolio and in their emergency funds to cover that deductible. And if they're able to increase that deductible, it reduces the annual premiums that are due on the auto insurance. So, these are just areas of I think it's important to make sure you have the right coverages with homeowners and auto and life insurance, but you also want to manage the risk of how much deductible you're willing to take on to manage the costs of these insurances. Steve, we have a couple questions and I wanted to get your expertise in answering some of them. Y uh one question that was uh holding on here uh for an answer is can I open a trust to protect assets?

29:17

The quick answer to that is yes. There are different kinds of trusts. Uh so the answer is yes. And um I don't want to go into a lot of detail because it'll get kind of confusing, but essentially look at this. A trust is another entity. So pick on me as an example. I am married. I have a wife. We are both individuals. And we could set up a trust. If we set up a trust like right now, we own our house. We own our 401k plan. We own you know all the stuff that we have. we own that there. There will be a day where we make a decision to take some of the stuff that we own and put into a trust. So, a third entity will own some of this stuff and it will start to protect there's some protections that are involved with that and there's also some tax benefits of doing that. Uh the next question is um insurance once I am collecting social security and 401k distributions. What are your thoughts on that as far as life insurance? Yeah. But as far as life insurance, yeah, so I think it goes back to this.

30:20

Once you're in retirement, you're collecting social security, you're collecting pension, you're collecting benefits. Do you need it? Is anyone in your life still dependent on the fact that you are supporting them financially? If you need it, then there's probably a discussion around how much then. So, do you need it? And then how much? If no one around you needs it, pick on my parents. My parents are retired. They're in they're collecting social security. They're living on their own. And as us kids, none of us kids are dependent on the fact that our parents are retired and getting their social security.

30:48

So there's really no need for them to have any insurance anymore u from a from a from a supporting your family perspective. Yeah. And I I guess at the same token too for the question uh that this person asked, what do I get after my 20-year term policy is up? It would be the same thing, right? If what do I need? What do my family need if they need it?

31:08

Yep. It's a great question. Oftentimes people will get to their end of their 20 and they'll say, you know what, we probably still need some. The question would be then, do you still need some? Maybe the answer is yes. And then, do you still need the same amount? Pick on me as an example. Again, this is just an example, but let's say I have a million dollar 20-year term policy. I get to the end of the 20 years, and I go, hey, well, I'm still relatively young. My kids are probably self-sufficient. Um, I still think I want to carry some insurance, but I don't know that I need a million bucks anymore. Maybe I'll take a $200,000 policy out and maybe I'll do a new term for like another 10 or 20 years. So, you can do a new policy. Do you think that it'll be more costly at a certain age after a certain age to get term policies? It certainly will be more expensive because you're older. However, with that said, in my example, I'm probably going to reduce the amount of insurance I'm carrying. So, it might be a very cost neutral decision. Fantastic. Well, that covered all those questions. Now, let's talk about the umbrella policy. Awesome. So, umbrella. This is another one that's significantly important. I alluded to this a moment ago, but essentially when you have when you own things, you own you own anything and if you do something that causes some sort of liability against you or your family and you become uh a victim of a lawsuit, you're going to want to make sure you have liability insurance to help cover those uh claims. When you have liability insurance, you have liability insurance on your homeowner's insurance. It comes with it. It's going to cover things that happen at your home. You have some liability insurance on your auto insurance. It's going to cover liability that's caused by you and your vehicle. What an umbrella policy is, it's another layer of liability insurance that goes over your entire family and it goes with you wherever you go. I'll give you a really silly example. This didn't actually happen, but this is what I say. Let's just pretend that you're at a golf course and your kid decides to hit a driver and it goes through someone's home's window. What? Right? Or it hits somebody or breaks some expensive art or something. That's you're liable for that. And that's where this umbrella policy will come into play. Um, in my example earlier with my niece's auto uh auto accident, she the lawsuit that we had exceeded our auto limits, but our umbrella liability.

33:28

We have a $2 million umbrella liability policy over everything that we have. So, that would come into play to offset the difference between our auto coverage and what we were sued for. So, it's very important to have an umbrella policy if your portfolio starts to warrant the fact that you're it's getting bigger than the limits of your insurance policies. Um, and it's usually very cost efficient to add an umbrella policy to your portfolio. Um, one thing I'll say to this is you have to carry certain amounts of limits. I can't carry a $15,000 auto policy and a million-doll liability policy. They're going to make you carry a bigger auto policy in order to have access to the umbrella policy.

34:12

But very important to have this if your portfolio warrants it.

34:20

Here you go. Oh, this actually this is important. Um these are things of things that people don't think about. Again, I pick on myself. I was on I was on our local youth sports basketball board for several years. Um, as I was doing that, I made sure that I had coverage for my activities on the board. If you can imagine, you know, you're on a board and you're overseeing volunteers that are volunteering to coach youth kids and basketball courts all around town and they're doing things with kids. Something inevitably is potentially going to happen that's going to raise someone's eyebrows. So, if you participate in things like volunteering in your activities or at your church or you're a landlord or any of this stuff, you're going to want to make sure that either your liability insurance covers you during those activities or that association that you're working with has insurance to cover your activities. You do not want to be on a board that gets sued and then you personally are liable for that. All right. I did want to ask a couple of questions. Can you There we go. We're going to talk about long-term care because I know that's a hot question.

35:31

Yeah, I'll talk about that in a second. Um, here it is. So, I think maybe I hate to act like I'm old. I' I've been doing this for 30 years, but I've been in the business a long time and I've dealt with a lot of situations. Long-term care without hesitation is becoming probably the number one topic of discussion with people that are getting closer to retirement. It doesn't always mean that they're buying long-term care insurance, but they're certainly educating themselves and understanding what it means, why it's important, how does it play a role in our life. Here's what long-term care insurance is. Essentially, it's an insurance policy that will help you pay for services that you need in the event that you need them. There's a list, you can see it on the slide here, that the IRS has put out. They're called um ADLs, activities of daily living. So, eating, bathing, dressing, transferring continents, cognitive impairment. If someone cannot do two of those activities on a daily basis, they would be eligible to put a claim in for long-term care insurance. And the long-term care company would then start to work with them and help them pay for the services they're getting in a facility or at home. When I first started this business 30 years ago, it was you could buy this stuff relatively cheap and it was designed for people that were going into nursing homes. Fast forward 30 years, um the landscape has changed a lot. And what I mean by that is the policies that were sold 20, 30 years ago, they were sold. Insurance companies are collecting premiums all these years. And now the people that bought those policies are now getting in their 70s and 80s and they're starting to claim make claims on them. And the insurance companies are recognizing that these claims are incredibly expensive. So the pricing of these things have changed dramatically over time and the way that they're delivered has changed. Um, I think it's really important again to tie out the risks that are associated with if you or your parent or loved one was going to go into a facility where they need some long-term care services or if they're going to have long-term care services performed for them at their home. What are the costs of those services? And then the question is are you as a individual or you as a family willing to take on the risk of paying for those services out of your portfolio? For some people they would just assume take the risk and pay for them. Others want to buy an insurance policy to offset that risk, transfer the risk to the insurance company, knowing that if this happens, the insurance company will help pay for this stuff. So that's what's that's what long-term care is. Um it's a it's a complicated insurance. Um, but it's becoming, like I said, very, very, very much more top of- mind to people. I think my cautionary tale to long-term care insurance would be this. Be careful of if you want to buy some, buy what you need. Don't just go out and buy the Cadillac plan. And what I mean by that, I'm just going to give you an example. Let's say, for an example, I'm work I'm working with a family. Let's say I've got a husband and wife.

38:46

And just for the sake of discussion, let's say they're both in retirement and they're both getting social security or they plan to get social security and they both have, you know, money coming out of their IAS or a pension or whatever it may be. And let's say their cash flow is, you know, seven or $8,000 a month out of their portfolio. So let's say they're getting $78,000 a month out of their portfolio and out of social security. If they needed to go to a long-term care facility and the cost, I'm just really making this simple. Let's say the cost is, you know, $8,000 a month to go there, right? Well, that would be one of them going in. Let's say the other one stays home. Well, they have $8,000 a month of income coming in. So, can they use some of that money to pay for the spouse that stays home? And can they use some of that money to pay for the spouse that goes into a care facility? This is where you have to start thinking about it. A bad insurance agent is going to come out and say, "Hey, you need to buy a policy that pays $8,000 a month in benefit." and that'll cover 100% of the long-term care. Well, the reality is that's going to be very expensive. And I think if the family looks at it, they might say, "Well, we have $8,000 a month coming in income.

39:50

We're going to need some to take care of spouse A at home, but we're going to need some for spouse B, but we don't need a $8,000 a month life or long-term care policy. We might need $2,000 a month to help us out. So understanding what your cash flow is, what your portfolio looks like, and then understanding what is the risk of one or both going into a facility. If in my case here, let's take it one step further, which very rarely happens, but say both people end up in a care facility. And let's say for both of them to be in there, it's, you know, $10,000 a month because they let's say they can share an apartment. Let's say it's $10,000 a month and they still have $8,000 a month coming in income between social security and, you know, IRA or whatever. They don't need a $10,000 a month benefit from a long-term care policy. They need something smaller. So, buy what you need. Don't buy the Cadillac. And again, I would encourage everyone not to go out and buy it. Go and research it, understand it, really become, you know, kind of an expert understanding what you're getting prior to making a big decision. So, let's say let's pause. I think there's some questions coming in. I do. I just wanted to ask you, well, who determines uh if I'm not able to do a couple of those daily living activities? Yeah, good question. I have firsthand experience because my dad is in a long-term care facility. So, each year there's an assessment that's done by an independent group that they go out to the they go out to the facilities or if you're going to if you're going to stay home, there will be an assessment done uh by an independent uh organization that that determines your ability to perform the daily activities. Excellent. And getting back to the umbrella policies, what if I have um lawyer fees that my homeowners is not paying? Do you think that an umbrella policy would cover that? That was one of the questions. Um you'd have to check with your policy. Check with your provider.

41:41

Typically, the liability is not going to cover that. Um but you should just check with your provider. Excellent. And I don't see any other questions coming in uh as of yet. Okay. But I wanted to post up so that folks can reach out to us and schedule time with us, right? Because I know it's so important for us to be able to help everyone understand what insurances capabilities they may need, any financial wellness questions. Of course, reach out to us at NFP, financial education at nfp.com.

42:12

I think it goes without saying that we love to be able to speak to all of you and so reach out. We'll be happy to help. Um, I also wanted to talk a little bit about um our next show which is going to be Wednesday, October 8th at 100 p.m. Please join us. We will love to have you uh as we share all our financial wellness topics. Also, another housekeeping item is that um if you are seeking well wellness points, please do the survey and at the end of the survey, it'll ask you for the code. The code for wellness points will be fall fever. Um, I thought I mentioned that and I think there are a couple of other questions coming in. Let's see. I can see them popping in here. I I'll go. So, Mark asked, "Does Medicare or Medicaid pick up long-term care?" Um, no. They don't pick up the cost of long-term care. I know that. Bernie asks, "Who chooses the independent agent that makes a determination, the person in need or the insurance company?" The insurance company will make sure that they work reach out to the independent uh agencies to make sure it's set up. Yeah, best age to buy long-term care insurance, Steve. Yeah, that's a really good question. I think it's a hard one to answer.

43:26

 I think where we where we start to see people starting to have these conversations are I think at the earliest probably mid4s. I think most people that are really getting serious about this conversation are mid-50s into their 60s. What I've what I've learned in my experiences is the premiums are not re. So oftentimes you can buy a policy that has a term to it like a 10-year term as an example. And what I mean by that is if an employ or excuse me if a person can buy a policy and have a premium set for 10 years and after 10 years know that they don't have to pay into it anymore but the policy stays in effect forever. People like to do that knowing that they can get it paid off before they get into retirement. So they don't they people don't like to go into retirement and have large premium payments. So I would say probably starting to educate in the 50s and maybe mid-50s or so is probably the right time to really start digging into those. And here's a question. We are in the financial world, but um someone uh asked and it's Tiffany uh adding a new spouse to the deed of my home. Uh would that be something that they can go ahead and ask their mortgage holder?

44:35

Yep. The title company. got to talk to them and help. Perfect. All right, great questions. Great questions indeed. Uh let's see. Um did we answer this one? Who chooses the independent agency that makes that determination? Uh especially from the person in need of insurance company. Yeah. Yeah. When they apply to the insurance company, they'll have a they'll do an assessment and it'll be an independent but it won't be from the person. It'll be from the company. Perfect. I don't see any other questions coming in. So everybody, if you do need that wellness points, please use fall fever after you answer that survey.

45:12

And it was a pleasure presenting with you, Steve. You are such a world of information and we appreciate all your efforts. Awesome. Thanks for having me. I had a great time. And again, if people have questions, they can reach out to our email box at NFP financial education atnfp.com. Fantastic. Thank you so much everybody and hope to see you on the next show on October 8th at 1 p.m. Thank you everyone.