Bob O'Brien
Head Instructor
bobrien@mywealth.com
Insurance companies make a lot of money and most people do not like them too much. Fool me once shame on YOU, fool me twice (You don’t get a fooled again!) shame on me. First of all, we need insurance (things like life, health, auto, home disability etc)... These are real necessities to protect us from a catastrophic loss, which unfortunately can happen to anyone.
Realize that insurance companies are pretty good with numbers. However, this is not advanced calculus or even beginner’s Algebra. In fact Warren Buffet, the wealthiest man alive, who has made a ton money owning insurance companies, has made it clear that he is not that great with numbers. So don’t let this be a limiting belief that keeps you from mastering your finances. Do you have a Personal Finance question for Bob?
(AIG) would be the exception in which an Insurance company was not smart. In fact, this is when you have a right to hate insurance companies. They were literally insuring things that they could not insure, such as mortgages in the form of credit default swaps. This is fraud. This is just another example of how big financial services firms do not care about anything but their own profits (which backfires in time anyway).
In addition, realize that underwriting insurance (determining the price for what they are insuring) is really common sense for the most part. But you need to think like the insurance company and what risk there is with you, the insured… because they are going to charge you accordingly. In a recent blog post of mine, The Basics of Retirement Planning, I made the case for retirees to wait until they are age 70, before seriously considering using an annuity as a retirement income stream. Insurance companies will never ask you take a physical before they sell you an annuity, but they will do this for life insurance.
How about long-term care insurance? A lot people think the underwriting is the same for long term care as it is for life insurance or disability. Disability and Life are pretty similar and in case you are not familiar with long term care insurance, it is the insurance that kicks in when you need assistance with basic day to day living. This is usually brought on by something like Alzheimer’s disease for example.
This care can be really expensive and it will only be getting more expensive into the foreseeable future. This is interesting to know. Healthier people may have higher premiums for long term care insurance because they tend to hang onto life longer than people that are either not as healthy. (I realize that this is a bit of a morbid example, but never the less, it’s the reality of what is going on behind the scenes in the insurance industry.) The less healthy people tend to pass on instantaneously and therefore there is no long period of time in which they require care.
Remember, that my goal is just get you thinking on a higher level when it comes to your insurance and personal finances. Everyone’s insurance needs will vary from person. There is not one real piece of advice for the masses. I will have future blogs that go through the different types of insurance in more detail.
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Sincerely,
Bob O’Brien
Sr. Instructor
