19 Sep 2024 Get a Helmet

I grew up watching Boy Meets World on ABC’s TGIF lineup like many millennials. One of the show’s promo videos must have included a clip with a scene with the line, “Life’s tough, get a helmet,” with the clearness I can still see it in my mind. In the clip, the older brother Eric offers that advice while knocking his younger brother Cory on the head before he sees what’s coming. If only we could fully protect ourselves from life’s hardships with an easy fix like simply putting on a helmet! (Although, please wear one – the number of times I see someone without one on the Greenway or the roads makes me cringe!)

We think about risk often as financial planners. Risk is out there, but what do you do with that inevitable fact? Do you retain, avoid, or reduce risk? A helmet is a risk reduction method – you may still have an accident, but the damage potential is lessened. Or, you can avoid the risk by simply not doing the activity that would need a helmet, and sacrifice the enjoyment that comes from biking. In the financial world, you can avoid the risk of a market decline by not investing, but then you introduce different risks. You can reduce risk by having an asset allocation appropriate for your needs, goals, and tolerance and being mindful of things like fees and concentrated positions.

One of the primary ways we mitigate risk for some areas of financial planning is with insurance – transferring or sharing risk with the insurance company. Like the saying that the cobbler’s kids have no shoes, I found our family had insufficient coverage when life moved too quickly for me to keep up! Wesley had a job change so we no longer had some coverage through his employer, and we had two kids in two years which greatly increased our need for life insurance. Finally, after being on my to-do list for too long, we got this in motion after our second son was born.

We’re almost through with getting term life insurance policies in place, so I thought I’d share my experience from sitting on the client side instead of the financial planner side of the process.

What is the overall process?

• Determine need: At Beacon, we often work with clients to determine sufficiency of current coverage and how much additional coverage is needed. 
• Talk to an independent insurance agent: Independent agents can work with multiple carriers to help shop around for policies versus being tied to one company and its products. They can help “pre-screen” to have a sense of what may pop up during the underwriting process and direct you to carriers that are best suited for your individual needs. The agent will help get initial quotes to provide you with a premium range for coverage requested for different health rating classes. We worked with an agent to know I should wait to apply until after my 6 week check after our second son was born. 
• Apply: We had filled out a form during the previous step with some basic information, so when we had phone interviews with the carrier, they already had some of our information and confirmed details during the call. You need things like names of physicians, medications you take, recent out of country travel dates, existing insurance coverage/replacement information, and income/net worth details. We’d already gathered this during the previous step so I just made sure to have this 20-30 minute call when I had that information easily accessible. This is when you can explain something that might show up in your medical records. 
• Medical Exam and Records: After the interview, I scheduled a lab work appointment. You typically fast for 12 hours prior. They collect blood, urine, and record your height, weight, blood pressure and pulse. Sometimes an EKG is requested. The insurance company also requests your medical records from physicians.
• Underwriting: The insurance underwriters review your application and all the materials, and ask for any clarifying information if needed. The speed of this step can be impacted on how quickly they can obtain all your records. 
• Approval and Offer: Once the underwriters finish going through everything, the insurance company sends an offer for policy coverage if you’re approved. You find out your health rating from the company and the actual premium, which may be slightly different from the original quote you received. You have a final chance to review things like term and coverage amount then can decide whether to move forward.
• Acceptance: I signed the policy documents, paid the first premium, and policy was in force. I think the overall process from start to finish took about a month, but I was also a little slow in finding time to complete the phone interview. 

What impacts premiums?

• Age and gender: Based on actuarial tables, women live longer than men, so premiums are more expensive for men’s life insurance. So on the flipside, premiums are less expensive for men’s long-term care insurance and more expensive for women.
• Riskier activities: Things like being a pilot, skydiving, scuba diving, rock climbing, etc. are disclosed on your application and may require additional forms. You also will disclose any convictions or history of being declined or rated for insurance in the past.
• Health: Ideally, you have a sense of what is in your medical records before applying for insurance. Electronic records make this a little easier to know than it used to be. If you’ve seen a doctor about an issue, how was it coded in your records? Have you been for a follow up if the issue has resolved, or is well-managed by medications? Some health factors impact premiums more than others. Common illnesses include hypertension, diabetes, osteoarthritis, depression, and tobacco addiction, and some impact your premiums more than others. If something like hypertension or diabetes is well managed by medication, your rate may not be impacted. This is when working with a good agent who can help you know what to expect is of utmost importance!

Tackling this task is never something enjoyable to think about, but it does give peace of mind when it’s done. If you are unsure whether something in your medical records may impact your ability to get or afford care, talk to us. We have some excellent insurance contacts who can help set expectations. 

So what is Beacon’s role? As a fee only fiduciary firm, we do not sell insurance and don’t earn any additional compensation if we recommend that someone needs insurance policies. Instead, you can think of us as your “financial quarterback” to walk alongside you during the process. Our role is to help determine sufficiency of current coverage, and if there’s a gap in coverage, determine how much is needed. We also examine the impact of different options on your long-term financial plan and join you for meetings with the professionals. 

This is something to also revisit over time. Your needs change as life changes! Things like having kids, kids graduating from college, lifestyle changes, increased or decreased debt, income changes, business transactions potentially impact your plan. We can help you assess whether you still need your current coverage, or if your need has increased or decreased based on what’s going on in your life. 

I can’t say this was a fun thing to work on over the summer, nor is it a fun expense, but I am very glad it’s done and that we had great professionals to work with. The metaphorical helmet is in place and I sure hope we never need it!