[content_block id=1967]
Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative. Securities offered through Cambridge Investment Research, Inc., a broker/dealer member, FINRA SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well this is Nate, James joining me again this morning. James, it’s hard to believe that we have transition into Fall already. I know the nights are starting to get a little cooler. Pretty soon leaves are going to start turning, seeing some falling already and that time of year I think.
James Nelson:
Yeah, yeah. Hard to believe. I love the Fall weather, but I don’t like what’s behind it. Double edged sword there.
Nate Kreinbrink:
No, it isn’t a fun time of the year. I know homecoming weeks, football in full swing getting into there. I know that’s always fun. Seeing a lot of Halloween costumes out in the stores or whatever. So getting to that time of the year. Keep continuing to go fast. Like you said, definitely not looking forward to that that winter and that white stuff falling on the ground.
James Nelson:
Yeah, exactly. Fun time of year with kids. Halloween, like you said, it’s always a good time.
Nate Kreinbrink:
So today’s show, I know James and I were talking on the way up as far as what we wanted to go into today. And we talk a lot on here as far as managing risks. And I think when people hear the term risk they think investments and what type of risk are you taking in as far as what your investments are in the marketplace today. We also talk longevity risk, basically. Are you going to outlive your money and how social security kind of factors into that part of it. Another risk we want to talk about that and really hit on today is just that loss of income risk. As far as a married couple, one of the incomes unfortunately passes away. That loss of income, how are you going to to get by without that? And insurance comes in and plays a big part of that.
Nate Kreinbrink:
And I know a lot of times people look at insurance and is it needed, is it not needed, how much do I need? And that’s obviously all individual questions that you need to sit down and answer and seeing how much you need to do to basically replace that. But I think a lot of times people just don’t quite necessarily understand the different types of insurance. And if they do have policies, how much they have and what actually goes into all those different numbers that are on the statement out there. And I think the biggest thing is just understanding the two generic types of that, and is it a term insurance or is it a permanent policy?
James Nelson:
Yeah, exactly. And like you said, I mean it just comes back to what are you trying to accomplish? Is this to replace income if somebody checks out at the wrong time? Is this to pay down any remaining debt? Is this to leave a legacy to the kids or the grandkids? People will buy insurance for any various reasons, and all of them are are certainly legitimate. And like you said, what do you own and what’s it for, because not always do those line up. I’ve sat down with a couple of people that have purchased insurance for, they think, it’s a permanent need. Hey, I want to leave some money behind to the kids or the grandkids. And come to find out it’s been a term policy. Well that term eventually runs out, and then the insurance is probably too expensive for those people that keep it.
James Nelson:
So understanding what you own is a big item. Nate, you said the difference between term and permanent. The term policies, generally speaking, 10, 20, 30 year term policies. I think people kind of get that and understand that. That’s usually what’s offered through all an employer, if you want to buy through a group plan. And then the permanent, maybe more expensive, probably more expensive than the term, but you’ve got that coverage as long as you’re making the premiums or if you have enough cash value build up that the premiums are kind of being made for you through either the investments or dividends or whatnot. So yeah, understanding what you own and then figuring out what it’s for really helps determine what you need going forward.
Nate Kreinbrink:
Right. And I think as you said, understanding exactly what it is that you’re insuring. I know a lot of times younger couples especially, they’re taking out that policy to insure against a surviving spouse being able to stay in the same home that they’re at. Being able to still live that same lifestyle that they had and not be put out on the street because of obviously the unfortunate checking out. But again, being able to manage that lifestyle. As they transition down the road, 20, 30 years or whatever, if it’s a permanent policy, they’re still making those premium payments. Let’s say things have been good, they paid off the house. Is having that larger policy still what they’re looking to do, and still being able to keep that?
Nate Kreinbrink:
So again, once we have a a policy, we want to always make sure that we’re taking a look at it, making sure it’s still in good standings, and making sure that what we’re paying the premiums for to insure still fit our needs as our lives changed. As kids come into play, maybe we need to up that a little bit. Paying off the mortgage and things like that. Do we want to look to have this insurance policy for the next generation? Insurance policies being passed on a lot of times have some tax benefits and our tax favorable, as far as being passed on.
Nate Kreinbrink:
So a lot that goes into it. And a lot of times the insurance gets a bad rap sometimes, because they think home insurance, they think car insurance, where you pay these premiums and if you don’t need it you’re basically just paying for nothing. Whereas sometimes life insurance can fit into that mold, but it also can be used as a piece of the overall retirement plan as far as talking to individuals, understanding what their goals are, what they’re trying to accomplish, and how that may potentially fit into it.
James Nelson:
Yeah, nobody likes paying for life insurance. We see it all the time. But like you said, you pay your homeowners insurance but your house isn’t guaranteed to burn down. You pay your car insurance, but you’re not guaranteed to get in a car accident. We are guaranteed to die at some point. So if there’s any insurance that’s going to pay out, it’s life insurance, assuming you hold it until your death. It’s definitely going to pay out. So nobody likes insurance, but it’s something that people need to consider. And there’s a lot of different policies today. It’s not always just the straight life insurance. We’re seeing all different kinds of hybrid policies that maybe you’ve got this old policy in place. Maybe I don’t so much need it for the death benefit, but is there a way that I can get maybe some longterm care benefit or things of that nature? So there’s a lot of new policies out there and we’re going to touch on that just a little bit here.
Nate Kreinbrink:
Right. Longterm care is a big thing that’s starting to kind of creep back into the overall picture, compared to when longterm care insurance first came out years ago. At that point in time, longterm care insurance was basically just like your home insurance, your car insurance. Your paid these large premiums to have insurance. If you never went to a nursing home or never needed it, you were basically out. It was a use it or lose it type of thing. Well insurance companies kind of came back and said, we need to start looking at these a little bit more closely and figure out how we can make these more beneficial to the people. Because they saw what was happening in the longterm care space, as far as cost of people going into it, and the absolute need that people were looking at having to have some insurance in place.
Nate Kreinbrink:
So as James mentioned, these hybrid products kind of have came about and have really taken off, as far as being able to provide some coverage, but yet tying them onto a life insurance policy possibly, and having it. Being able to pay premiums, being able to use it for longterm care should that individual need it. But if you never happened to need the longterm care, there’s a death benefit. There’s some value that’s going to be passed on to your beneficiaries. And I think that, obviously, opens the door a lot more inviting for people knowing that, hey, if I’m going to pay these premiums and hopefully I’ll never need this, and if you don’t, someone’s going to get the death benefit that’s going to be passed on. And I think when people start looking at it this way and when we have these conversations to people, understanding how much you’re going to have to insure.
Nate Kreinbrink:
A lot of times when people see these healthcare costs as far as longterm care, when it’s seven, $8,000 a month, which is kind of the average as far as what you’re going to have to pay to have that kind of care, they’re kind of blown away. But when we look at longterm care insurance, we look at your Social Security benefit, how much of that is coming in the door? Do we have any pensions? And then looking at potentially insuring that gap in there. So we don’t have to insure the whole amount, which drives, obviously if we’re insuring a lesser amount, that drives the premiums down a little bit and make it a little bit more affordable for people to look at.
James Nelson:
And I think that’s so important, because most people still have that view of longterm care insurance being expensive. Well, if there’s an old life insurance policy potentially in place and we can utilize maybe some of that cash value to bring the overall cost down, that’s really appealing to a lot of people. Because they just think in terms of it’s either life insurance or longterm care, and they’re totally separate policies. And that’s the way that it’s always been, until recently. Now we’ve been able to combine those two and really offer a better product. Like you said, at some point, whether you use it for longterm care benefits or beneficiaries get it, it’s nice to know that the money’s coming back to you or the family at some point. And again it’s something. A lot of these companies have gotten out of this space. You need to know what you’re getting into, you need to know what you’re buying. There’s a lot of options out there. But certainly a much better product today than there was even five, 10 years ago. A lot more options for people, I guess the bottom line.
Nate Kreinbrink:
Right. And a lot of times these policies, as they continue to change, we’re seeing more and more where these policies are allowing it to be kind of like a shared pool of money between a husband and a wife. Where you have a life insurance policy, you have this built up value that can be used for longterm care, and it can be used in any combination for the husband and wife. So if the husband goes into longterm care and he needs it for six years and they have eight years of coverage, well the wife still has two years left of care that she could potentially use. If she doesn’t use that, then whatever’s left over then is passed onto the beneficiary. So again, that flexibility, because again, it’s insuring the unknown.
Nate Kreinbrink:
None of us know for sure that we’re going to go into longterm care. You can see all these statistics, and they’re increasing, that we’re going to end up needing some of these care or in home care. I think which is the way a lot of these policies are going towards. But again, the flexibility to insure two people and being able to have this open pool of money to be able to utilize that in whatever way is needed for any length of time that’s needed, as long as it has enough in the policy. I think again, it’s definitely something that people need to start looking at seriously, and really thinking about. To say okay, if I do go into a nursing home and I’m going to need care for an extended period of time, we either going to have to eat away at our other assets, or is it worth putting into insurance policy now to help offset some of those costs?
James Nelson:
And that’s huge, because the likelihood of a husband or wife going into a longterm care facility at some point, again, those numbers keep going up. It’s probably a pretty good chance somebody’s going to use it. So those joint policies where one or the other, both, can use them are awesome and getting a lot more intention than they used to.
Nate Kreinbrink:
If you have an old policy, you have questions on a longterm care, give us a call. It doesn’t hurt to sit down and we can chat and see where we’re at and see what we can maybe take a look at. See if you may find, because again it’s that peace of mind. It’s a knowing that you’re covered for these unfortunate circumstances.
Nate Kreinbrink:
Did want to mention real quick that every Friday NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of September will be donated to the Quilts Of Valor Foundation. James, thanks again for joining me today.
James Nelson:
Absolute.
Nate Kreinbrink:
Again, Nate and James with NelsonCorp Wealth Management bringing you this week’s Financial Focus. Thanks again for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative. Securities offered through Cambridge Investment Research, Inc., a broker/dealer member, FINRA SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.
[content_block id=1539 slug=button-for-all-tv-and-radio]