Understanding Insurance: What to Know to Protect Yourself, Your Family, and Your Belongings

Claudia Glover [00:00:05]:
Alright. Good afternoon, everybody. Thanks for joining us for another edition of the wealth and wellness webinar with Lena and Claudia. I’m Claudia Glover. I’m an advisor and chair of the investment committee at BFG, and I’m joined by Lina Nebel, our president and chief operating officer. Last time we got together, I was in the hot seat taking questions on investments, and today we get to switch places. Lina is going to be in the hot seat. Today’s topic is quite fitting for a rainy day here.

Claudia Glover [00:00:34]:
We’re gonna talk about insurance. So let’s get started and explore all of the different ways that insurance can help to protect your wealth and your wellness. Lita, do you wanna kick it off and get us started on why insurance is important?

Lena Nebel [00:00:48]:
Sure. And I first, I think we need some type of, you know, musical interlude as we’re, you know, coming in and everything to kind of welcome everybody. But as as Claudia mentioned, this is our, part of a webinar series, her and I do, and she definitely was in the hot seat on the last one because it was all things investment. So if you haven’t had a chance to watch it, please go back to our BFG library and and take a look at it. And so we decided it was it was my turn. So she’s gonna ask me things about insurance. So we’ll see, if if I’m able to to answer. If you want to go back one slide, though, just to kinda go through the agenda so everyone knows what we’re going to be covering.

Lena Nebel [00:01:34]:
So we’re gonna kinda hit all things insurance that we can think of, and probably some things we didn’t think of either that will come up through conversation. Claudia and I meet with a lot of advisers, a lot of clients, and know, the various topics that that come up. So we’re gonna hit life insurance, health insurance, long term care, disability, your property, and auto policies, homeowner’s umbrella, and then just other things that that we think of. So if you wanna go to the the next one, also as a reminder, any questions you have, please put them in the chat box. I know Claudia’s has a lot for me, but if you guys think of anything, please put them there. Sarah’s monitoring all the questions, and at the end, we’ll, hopefully have some time where we can answer a few. So, to answer your question, Claudia, why does insurance matter? Well, here’s a few bullet points, you know, as it relates to financial protection and peace of mind. Obviously, we’ve had situations, and we’ll talk about some examples today, of scenarios where, clients’ families have had some significant issues to where it was a loss of a loved one.

Lena Nebel [00:02:46]:
It was maybe some, car damage, house damage, and needed to be able to to leverage that insurance, that’s the financial protection so that you don’t have to go into your savings and to your nest egg that you’ve been paying on a policy that will pay out to assist with these costs. So first and foremost, it’s that financial protection and peace of mind. It mitigates the risk and uncertainty. You know, all of the what if scenarios. What if I get sick and I can’t continue to work? What happens to my income? What happens if my spouse passes away? How do I replace his or her income? So by transferring the risk to the insurance company, that provides a little bit more certainty about what could happen in those what if scenarios. Safeguarding assets and income, you know, for many people, they’ve spent their lifetime building up assets, generating higher income, and you wanna make sure that that’s protected. So you don’t wanna have to stop working in the event that something happens to you where you need insurance or, take distributions from investments that could cause, adverse tax consequences as well. So that’s the beauty of having those insurance policies in place.

Lena Nebel [00:04:02]:
And then insurance can also support estate planning and long term care needs, which we’ll definitely spend some time, in going through. There’s a lot that’s, on the table for estate planning changes, state tax law changes. Insurance can help to provide liquidity to the estate. It can replenish inheritances to the heirs if that’s a goal for many individuals. So life insurance can provide, some of those features, and we’ll talk a little bit about that. And then, of course, in the event there’s some type of long term care need, there’s insurance that can help to to support that as well. So we’ll kinda get into all these different scenarios through the course of this webinar.

Claudia Glover [00:04:42]:
That’s perfect. Thanks, Lina. Why don’t we go to to the next slide, and let’s talk about life insurance to kick it off. So life insurance, could be used for a number of different things and and typically is is paying out to beneficiaries, after somebody passes away. So, Lina, why don’t you give us an overview on life insurance? But then why don’t we we talk about some, you know, common maybe misunderstandings? You know, I hear a lot of times from younger clients that that they’re young and they’re single and they don’t need life insurance. You know, what do you tell to clients like that? And, you know, how does that change if you’re talking to a young family or somebody kind of nearing retirement?

Lena Nebel [00:05:26]:
Yeah. So I would say as a a disclaimer across the board is that insurance may not be for everybody. There’s some that need it, and there’s honestly some that don’t. And each situation is going to be different on their circumstances, their health, their financial needs, and their goals. So I can provide some, kinda general comments, your general answers to those questions, but I think it is as just a blanket disclaimer. You know, you always wanna talk to a professional, whether it’s your financial adviser, your insurance agent, somebody who can really, dive into your particular situation. So in starting with kind of the younger clients, we obviously hear that a lot. You know, maybe they’ll think, well, I’m not married, or I don’t have children, or I don’t have debt yet.

Lena Nebel [00:06:15]:
Maybe I don’t need the insurance right now. And that could absolutely be the case. But at the same time, buying the insurance when they’re younger could provide some financial savings for them in the future because they can purchase the insurance now at a reduced rate because they could be healthier than they would be maybe in five or ten years. They’re also younger, but there has to be a need for that insurance. So, traditionally, at that age, you’re basically protecting the income. So for many younger clients, maybe they’re just starting, starting out their financial future with their spouse, then you’re protecting that income. Maybe they wanna have children down the road, then they could be protecting future education needs. And so buying at a younger age when maybe they’re planning ahead and don’t necessarily need it right at this moment could be, a a possible benefit for them.

Lena Nebel [00:07:10]:
For retirees or I would say for individuals that are getting older, it’s important to reassess your insurance needs every year. So some of the things that we look at is we may decide to have some type of laddered insurance strategy to where maybe I I need a lot of insurance my first ten years while the kids are young. I still have my mortgage, and I’m not making as much an income as I am in twenty years or thirty years out. So maybe in twenty years, I have a lower amount of life insurance. And in thirty years, I could even have less amount in life insurance because my debt is being reduced. I’m building up more savings. The kids’ education is taken care of. So retirees may still have a need for insurance.

Lena Nebel [00:07:58]:
It just may not be as much. One of the strategies that we tend to look at a lot for retirees, or I would say pre retirees, is what if one spouse has a pension? What if one spouse has higher Social Security income or we need both Social Securities, to be able to maintain the retirement lifestyle, insurance can be used for maximizing those benefits. So that’s a very common strategy to where you can maximize that pension so that in the event that the individual that is receiving that pension predeceases their spouse, and now that pension has gone away because they didn’t choose a survivor benefit, we can replace that pension with life insurance. And so the same thing holds true with Social Security. So for some individuals, that may make sense as they get older. A lot of individuals also, one of the misconceptions, and I would say this is with every insurance, maybe just not life insurance. And I think this is why this webinar is super important, but also one of those topics nobody likes to talk about because it’s insurance. And I think one of the things, Claudia, that you and I hear a lot is, well, what if the insurance company doesn’t pay? You know? I I pay all this money, and they don’t even give me you know, they don’t, process my claim.

Lena Nebel [00:09:15]:
So that’s why it is important to look at the financial strength of the company, make sure that they are highly rated. They’ve been around for a long time so that they have a high claims paying ability so that you don’t have that risk whatsoever. So, so life insurance for any age can be super beneficial.

Claudia Glover [00:09:36]:
That’s great, Rena. And what if we start thinking about, legacy giving or estate planning? You know, there are some ways to use life insurance there as well, maybe on a more permanent basis for clients that have those types of goals. Why don’t you walk us through some of those examples on how that could be used?

Lena Nebel [00:09:53]:
Sure. So I’ll I’ll give you a personal example. So on we I have three children. And for each child, we decided to purchase a whole life policy on their life, which for some individuals, they may think that’s, well, that’s kinda morbid, Lena. Why would you put life insurance on your kids? One, in the horrific event that something should happen to them, then I have, an an income I have, income that would be able to pay for those funeral expenses. That’s not why I did it. But for some individuals, they need that type of policy in that type of event. And, unfortunately, we’ve seen everything, so I know all those worst case scenarios and how they actually come true.

Lena Nebel [00:10:36]:
But how we did it, which kinda ties into your question, talks about legacy planning. I wanted to make sure that I’ve protected my children’s insurability, and I wanted to make sure that I would be able to pass off an asset to them in a tax efficient manner. So as an example, we purchase whole life policies for each child. And so they are permanent policies to where they will have this insurance for the rest of their life as long as, you know, we continue to to make premiums based upon the time period that we’re supposed to make premiums based on the contract. And so if something happens to one of my children to where they develop a a particular disease, which, again, personal story, one of my, children did to where we have risks now that she may no longer qualify for any type of insurance when she’s an adult. She will always have this type of life insurance for her, and that she would be able to use that for her family to where she can make her family a beneficiary of that policy. So one, we were able to protect insurability because when they’re young, you have no idea what’s going to develop over their lifetime, so we wanted to take care of that. And then, two, from a legacy standpoint, over time, I can make the decision if I wanna transfer ownership of this policy to any of my children to where they would be able to use it for starting a business, purchasing a home, getting married, because there’s cash value associated to that policy.

Lena Nebel [00:12:02]:
So for certain parents or grandparents, this is a great technique to use from a tax efficiency standpoint, for legacy planning. And then from an estate planning perspective, life insurance is tax free when received. So for some individuals, they wanna be able to enhance the their legacy, their inheritance, and that is a way in which they can do it by creating some life insurance death benefits to their heirs. And those can be received in a much more favorable way than, let’s say, IRA assets.

Claudia Glover [00:12:40]:
That’s a great point, Lina. And something that we’ve been looking at for clients is is for those that may not need the IRA assets for income, we’re looking at strategies to use those towards life insurance premiums to maybe leave behind a more tax efficient asset, for their beneficiaries. So really good point. Great. I I think we could talk about life insurance, really the whole webinar, but why don’t we why don’t we move on so we can make sure we cover everything? Sarah, if, yeah, we did kinda touch on the types of life insurance there. We’ll skip right past that, but let’s switch to health insurance. So this is something that people deal with every day, that they have through, a lot of times, their employers, both, you know, spouses, if they’re working, have access to it. But why don’t I go over the, you know, the important things with with health insurance, what people should be looking at, you know, maybe some of of of the the differences between high deductible health plan and the benefits there versus a PPO and and what that might be.

Lena Nebel [00:13:40]:
Sure. If, Sarah, you wanna go to the next slide, I think we have, the the different ones. So a lot of people don’t realize all the different types of plans that are out there. It can be very daunting. So when you think about your open enrollment, and there’s all these different plans, sometimes people just look at, well, how much does it cost me? And let’s just do that. And that’s not necessarily the best way to examine, your health insurance options. But just to give kind of a quick summary on the different types of plans, you have your HMO with a which is a health maintenance organization plan. It tends to have lower premiums, but the big thing about this one is you always need referrals.

Lena Nebel [00:14:21]:
So when you’re getting an HMO, you always have to have a referral to get into another doctor, so there’s limited flexibility. A PPO has the most flexibility. There’s no referrals that are needed, and you can usually go in network and out of network compared to the EPO, which is the exclusive provider organization. You don’t see a lot of these, but they’re out there. This does have, a lower cost than traditionally your PPO, but there’s no out of network available. So because of the limited flexibility, that’s why you don’t see a lot of these. And then lastly, there’s the POS, which is the point of service. Again, you need referrals for this one.

Lena Nebel [00:15:07]:
It tends to have a little bit of a higher, higher premium, and you can go both in network and out of network. So the other, type of plan that can be part of all four of these is a high deductible health plan. So within, let’s say, a PPO, you could have a high deductible health plan, which would then give you the opportunity to get into a health savings account. A health savings account is a way in which you can put money into a plan. There’s certain limits each year, and it’s different based upon if you’re an individual versus a family. But that money goes in pretax. You have until April 15 of the following year to make the contribution for the prior year, and that money grows completely tax free if used for health related expenses, co pays, prescription costs, deductibles. So for a high deductible health plan, the the initial intention of that the HSA was you start putting money into your HSA account to help you pay for that higher deductible.

Lena Nebel [00:16:14]:
However, there’s a few key characteristics of the HSA that would allow individuals to really leverage the tax free nature of the HSA. You could actually do a one time IRA contribute, IRA rollover into the HSA to basically kickstart it. It’s a non taxable event. It’s a lifetime rollover, so you only get one. And that money would be invested because you do have investment available to you. Any contributions that you make into the HSA can be invested. And unlike a flexible savings account, this can be rolled over each year. So it is not a use it or lose it plan.

Lena Nebel [00:16:54]:
So assuming that you continue to make contributions each year you invest it, think about this as a Roth account for health related items. So when you’re retired, you now have this HSA that has a healthy amount of assets in it that you can draw tax free for health related expenses. Well, I know when I’m retired, I’m going to have health insurance premiums. I’m going to have prescription costs. I’m going to have co pays. Going to need to spend money on those expenses. This is a way to do it tax free. There’s a lot of rules associated with HSAs if not used for, health related expenses.

Lena Nebel [00:17:32]:
I’m not gonna get into all the the nuances of that right now, but it’s a fantastic strategy to use if it makes sense for your situation. For some people who have high prescription costs, limited, cash flow, maybe they see the doctors monthly for different types of visits, and HSA may not be the best type of plan for them. So we always tell individuals, you know, look to see what’s important for you, what your family needs. And for two individuals working, compare your health insurance plans available. Don’t just look at the difference in premiums. Look to see if there’s an HSA and if the employer is matching into it like a four zero one k because then that’s free money. Or maybe you work for an employer that will give you a credit if you, don’t allow your spouse to jump on the health insurance. So that was something we saw a few years ago through the health care affordability act was more and more employers, incentivizing their employees not to do a family plan, and they were basically giving them money, to incentivize to do that.

Lena Nebel [00:18:45]:
So it is important to take a look at all your benefits and then compare them with what your spouse may have too.

Claudia Glover [00:18:51]:
That’s great. And what happens if you change employers, Lena? What what happens to those health savings accounts?

Lena Nebel [00:18:56]:
Great question. So you have a couple of options. You don’t have to do anything. You can keep that money, where it is. The one thing that I tell individuals, though, is depending on the amount that’s in there, it may not be advantageous to keep it there. So let’s say you you only had $500 in there because you didn’t spend a lot of time contributing to it or you weren’t with that employer for a long time. Use that on health related expenses so you don’t get hit with maintenance expenses that the HSA may start to incur, on your plan. Or if your new provider has an HSA, you can roll that HSA directly to your new plan.

Lena Nebel [00:19:36]:
And you can have as many HSAs that you’d like. We try to tell individuals, consolidate as much as you can. It helps from a diversification standpoint, and it helps to minimize cost, but you’re not forced to take any distributions from the HSA.

Claudia Glover [00:19:53]:
Right. Thanks. Alright. Let’s talk about long term care insurance, and this is not typically found, in benefits that we’re seeing. So this is something that individuals do have to go out there, and shop for themselves. And it’s, you know, this is typically care that’s going to be, for for aging clients that can’t perform quickly changing and evolving, and there are lots of ways, to fund long term care insurance. Why don’t we, spend some time talking about that?

Lena Nebel [00:20:27]:
Sure. So for long term care insurance, you know, I I looked it up because I was curious if the if the numbers changed. But the average stay for, a nursing home is one and a half years, which basically says, you know, typically, when you go into a nursing home, you’re unfortunately, you know, not coming out. But that time you’re there can be extremely expensive, and we’re just talking about the financial side. There’s obviously a lot of emotional, aspects when a spouse or a loved one is in that situation. But the national average for a private home and a nursing home is, just shy of $10,000 a month. So one of the misconceptions, is it’s not covered by Medicare. Most people think, well, I have Medicare insurance.

Lena Nebel [00:21:22]:
That will cover me if I need to go into a nursing home or assisted living or adult day care, and that’s quite honestly not the case. So having the insurance, if, again, it makes sense for you, could be able to pay for that benefit. For some individuals, they elect to self insure, and self insure means that they’re gonna pay for it on their own. So that may mean that they’re going to tap into their assets, tap into their portfolio, cause taxable events. And they could be significant taxable events depending on the tax laws that are in place at the point in time to be able to pay for these expenses. And so for a lot of clients that will say, I’m not paying on this insurance. We have enough money. We’re just going to take care of it on our own.

Lena Nebel [00:22:08]:
The issue is when spouses have to go in together. Right? For some people, they can afford when one person goes into a nursing home. But if both have some type of nursing home need, one person may have already spent down some of that money. And then there’s really nothing left from an inheritance perspective if that’s important for individuals as well. So I think, Claudia, you and I can both agree. We probably have majority of clients that will say, one, I can either self insure, or, two, just I’ll, you know, put me in the backyard or something. I’m never going into a nursing home. And the problem is usually you don’t know that you need to go into a nursing home when it’s time for that to happen.

Lena Nebel [00:22:52]:
So there’s insurance in place, insurance available for just these things. So again, personal story, When my grandmother had to go into a nursing home, they did not have a lot of money, so both my mom and my uncle had to pay this bill. And as I had said to my mom, you know, when we planned for their retirement, we didn’t plan on her having to support her mother. So she was really limited in the quality of care that they could go to because they could not afford a lot. And I could tell you it was not good quality of care. And so sometimes having that insurance, even though you can self insure, having that insurance gives you that opportunity for more flexibility in the quality of care. But I I remember every time my mom went to go visit my grandmother, she would then call me and say, would our insurance policy cover this? Because my parents have long term care insurance, and they would ask me, would it cover this? Would it cover that? Because she was seeing everything that, her mother was going through. So, unfortunately, it’s not until you’re in that situation when you really start thinking about it.

Lena Nebel [00:23:59]:
And for a lot of individuals, they should start thinking about this in, like, early fifties is the ideal time to to start that conversation.

Claudia Glover [00:24:08]:
That’s great. Sarah, if we could go to the next slide. Let’s talk about the the different, types of long term care insurance and and the cost because I think you you make a good point. A lot of people, either, you know, see the cost of long term care insurance or see the assets in their portfolio and and choose to not go the traditional long term care insurance route. But things are evolving, and there are ways for couples to take advantage of maybe shared benefits, for example, or, ways to mitigate the cost of the long term care premiums as as people are aging and the cost go up, or maybe even something as simple as, like, annuities that we use to help offset some of the cost, but maybe not all of it. So, why don’t you take a few minutes and talk about some of those options?

Lena Nebel [00:24:53]:
Sure. So on this slide here, where it says hybrid life and long term care policies, a few years ago, probably more than ten years ago at this point, life insurance companies, got or I’d say long term care companies got, you know, pretty smart. Because the biggest issue and the the biggest, I would say, frustrating, point that a lot of clients had with long term care insurance is what if I never need it? What if I just pass away in my sleep? What if I get into a car accident and and pass away? And I never needed this long term care insurance, and that’s correct. There were policies, and there still are policies, that are just for long term care insurance. It doesn’t pay for anything else. It’s kinda like your auto insurance. If you never get into an accident, most insurance companies aren’t going to pay you back all of your premiums and or give you some type of significant benefit. And with these long term care policies, you had to pay on it for the rest of your life.

Lena Nebel [00:25:55]:
So it could get very expensive, especially when the insurance company keeps increasing the premium. However, the benefit to these policies is that they tend to be less expensive than what’s called a hybrid policy. So the insurance companies got smart, and they said, what if we wrapped a life insurance and a long term care policy together to create a hybrid? This way, people are gonna use it for one thing or another. They’re either going to use it for nursing expenses or they’re going to pass away, and there’ll be a death benefit that will come out. So individuals started purchasing long term care policies, started purchasing these hybrid policies more and more because they knew there would always be something that would come back to their spouse or to their heirs. The disadvantage with these types of policies, they tend to be more expensive because you’re wrapping, you know, a couple of benefits in one. But for many individuals, it makes a lot of sense to do it that way. You have structure around your premiums because you’re not paying on them for the rest of your life.

Lena Nebel [00:26:57]:
You could do what’s called a single pay. So you just put the money in the policy of one shot and you have this, or you could do it over ten years, twenty years, etcetera. So you have some flexibility within your premium structure. The other thing that you mentioned, Claudia, has to do with annuities. So not really to wanting to go down kind of an investment conversation, but when we think about self funding and using your portfolio, you could structure your portfolio to incorporate an annuity, which is an insurance product that has some type of long term care benefit. So there’s a lot of annuity carriers out there that have what’s called an income benefit that helps to provide additional income for you when you are retired. But in the event that you qualify for some type of long term care need, then that benefit could double or could increase in some way to give you additional income to help to pay for that long term care need. Now I think it’s important to understand when I say to qualify, you have to fail to activities of daily living.

Lena Nebel [00:28:06]:
So activities of daily living are traditionally transferring, toileting, eating, changing, walking, things like that. So if you can’t do two of those activity, two of those activities, chances are you’ll qualify for some type of long term care insurance, you know, that that will, you know, pay out. And I know we’re gonna talk about disability insurance in a in a little bit, but disability insurance is different than long term care insurance. So long term care insurance is paying for you to go to a nursing home. It’s paying for any of those costs associated with assisted living, or it’s paying for somebody to come into your house and take care of you. What a lot of people also don’t understand, is that those policies can also pay for somebody to come and help you go grocery shopping, somebody to come in, help to clean the house, or, you have to put in an elevator in your house. You have to put in a chair lift. You have to redo the outside for a walkway.

Lena Nebel [00:29:15]:
You have to put in handrails and a shower. The policies can also pay for that too. So even though we can self insure, we can self fund, sometimes it’s more economical to pay for the insurance policy to help to take care of all of those items.

Claudia Glover [00:29:31]:
That’s great. Yeah. With with people aging and living longer, this is, unfortunately, one of the areas where we are seeing people use their policies to some extent, than not. So definitely something to consider. And and if there are any questions, we’ll we’ll take them, after after we wrap up here. But let’s let’s switch gears and and talk about disability. So, disability comes into play if you’re still if you’re still working. So unlike long term care insurance when you’re likely retired, disability is going to protect you if you’re unable to work, either permanently or temporarily.

Claudia Glover [00:30:08]:
So why don’t you kind of walk us through? I think that, you know, the biggest thing is people understanding what benefits are available to them. You know, some people have the option to buy up a benefit, but, you know, depending on on somebody’s, needs, that may not be enough what your employer provides for you. So how do people go about getting the right amount of disability insurance if it’s not provided through their employer?

Lena Nebel [00:30:34]:
Yeah. So if we’re looking at if we’re looking at basically self insuring, then you’re going out to what we call the marketplace. You’re talking to an insurance agent and looking at getting a separate disability policy. And what they’ll do is they’ll look the the insurance company will look to see, well, what is your job? What you know, what would be considered a disability? So as an example, a surgeon who’s using their hands a lot, if they break both of their hands, then they’re not gonna be able to perform that surgery. So they would be considered disabled. But what if they broke one hand? Could they still do the surgery, or what if they broke their legs? So you wanna make sure that when you’re getting a policy on your own, you understand the definition of disability and how it applies to your job. And if you change your job over time, how does that disability policy carry with you? For the insurance policies that we do see through the employers, which is, I’d say, the majority of individuals who, have an employer, they’re not a business owner, they’re not self employed, and they have their own disability insurance where they have it through their employer, There’s two types of disability. There’s short term disability and there’s long term disability.

Lena Nebel [00:31:56]:
So short term is exactly how it sounds. Short term disability typically lasts a few months. Long term, it’s usually all the way up until, you know, usually 65, is the magic number. Some plans, it can be a little longer. And, Claudia, you mentioned about buying up. When we’re looking at employee benefit plans, we’ll point out to a client if they have the opportunity to buy up that insurance, and we’ll typically recommend that they do because these disability plans don’t provide a % replacement. So you may wanna have a private plan to, coordinate with your employer plan. There’s a lot of strategies that we leverage for residents in medical school, because their income ability hasn’t really kicked in yet, and they’re able to get some private plans, first.

Lena Nebel [00:32:49]:
And then once they start working for, let’s say, a hospital or a practice, we can then coordinate that group plan with the private plan. So for a lot of residents, we may look at those options. A lot of people tend to not elect the short term disability because they think, well, I don’t need it or I’m not gonna get sick. And, you know, the the two biggest areas that I see the need for people to have it, which as a female I find amusing is, pregnancy is considered short term disability because, I guess, we are considered disabled when we get pregnant, and have a baby. So for some women who are planning on having a baby, make sure you have that disability in place. Make sure you understand the maternity leave because you can coordinate all of those benefits together. For, the past few years, we’ve had COVID, and people have gotten significantly sick and out of work. So making sure that you have that short term disability in place would cover illnesses that last for a few months.

Lena Nebel [00:33:51]:
So, again, you wanna make sure that you understand the definition of disability, what your employer’s covering, and for how long. And if for any reason you don’t have these plans available or you can’t afford those plans, make sure that you have emergency reserve set up in the event that you become disabled in any way. Alright. And what about people that are that are self employed that are starting their own business? Are they eligible to get disability insurance? Absolutely. I would say everybody’s eligible to apply for disability insurance. And, traditionally, for self employed individuals, they tend to look at the last two years of your tax return to get an understanding of what your income has been. So for somebody who may be just starting out, they’re not going to receive a lot of disability insurance that they could apply for. So you wanna make sure that there’s a cost of living adjustment added on there or there’s a, income increment that’s added on there where every two years, you submit the most recent tax return, so you get the bump in income benefits on your disability.

Lena Nebel [00:34:57]:
And then you would wanna talk to your CPA, your accountant, on if you should deduct those premiums or not. So there’s pros and cons to deducting the premiums on your disability insurance because if you deduct them now and you have some type of disability event down the road, it will be taxable income to you versus not deducting the premium right now. That disability income will actually be tax free. Right.

Claudia Glover [00:35:25]:
Thanks, Lena. Alright. Let’s, let’s talk about something a little different now. Let’s talk about the property insurance. So, different types of property insurance here. I think we’re gonna focus on auto insurance first. So, you know, I I think this is this is an area where I get comments, mostly from other advisers that ask, you know, why why are you talking to people about their auto insurance? Or why are you talking to people about their homeowner’s insurance? And a lot of times, it’s it’s the the asset that people use the most or in most cases, it it might be a significant portion of their assets. And also liability, an important, part here.

Claudia Glover [00:36:02]:
So why don’t we, focus on auto insurance? I think I know what what people I think people know what it is, but why, do we as advisers focus on this, and what do we try to make sure that, clients are covered?

Lena Nebel [00:36:15]:
I think as advisers, we focus on all areas of insurance because we wanna make sure that the assets are protected. Right? So we may use the ComEd in the office. We wanna put the moat around the castle. We wanna be able to protect everything that you have. And auto insurance is one of the big ones to where people get sued. So you have a car accident, you want you don’t have enough coverage, or the person that’s involved with you doesn’t have enough coverage, guess what? You’re coming out of pocket, which means you’re tapping into those assets again. And that can be extremely stressful. It could be tax impact.

Lena Nebel [00:36:51]:
There could be a lot of issues surrounding that. So auto insurance is an area that we wanna take a look at, one, to make sure that they have appropriate coverage. So in the event there is something that happens, they’re protected. And two, as we’ve seen, I’d say over the past twelve months, premiums are jumping up on a significant, on a significant rate for both auto and home insurance. So understanding the policy that they have to see, are there any other discounts? Should we change any deductibles? Is there anything else we should be doing to help to kind of maintain a a certain premium based upon cash flow? That’s why we would wanna be able to look at it. As a mother of a teen driver, it’s another aspect of making sure that when you think about trying to get discounts, making sure you’re submitting those report cards for the good student discount, and when you’re retired, to notify your insurance company that you’re not doing the driving that you once used to do. You’re not doing the commuting that you once used to do. So by updating your driving information, that can also save some premiums.

Lena Nebel [00:37:59]:
I just had an issue with a client the other day to where the husband is no longer driving due to some health issues. So contacting the insurance company and just getting him off the policy because he’s no longer driving could potentially save some money as well. So the the auto insurance is a big one that that we’ll spend time with clients and take a look at. And sometimes we’ll hop on the phone with them and State Farm or USAA or GEICO to kind of walk through any adjustments that we may recommend.

Claudia Glover [00:38:31]:
That’s great, Sarah. And if you could just, pause on the next slide for a second there, all the factors that affect the premiums because these these are the things that we do talk about. And and like you said, if if you have teenage drivers in the home, you’re probably not saving a lot of money on your premiums right now, but it’s important to keep the insurance companies updated with the changes and who’s driving and whether or not they’re still at home because all all of these factors, could could cost you or save you some money. And then, when we talk look at coverage limits, let’s kind of, you know, tie that in with the homeowners policy because a lot of times, especially when we look at liability, you could you could maybe increase, some of the limits, on one policy, decrease them on another. But let’s talk about how how the homeowners is is structured and then how they’re related. So, Sarah, if you could go to the next slide. So, Lida, I’ll kinda let you just take us, here just so you know, homeowners, if if you own a house, what are you trying to protect? And if and if you’re a renter, you know, why do you need insurance if you don’t own the property?

Lena Nebel [00:39:32]:
Mhmm. So I’ll start with the rental policy. So if I have an apartment, I’m going to have all my furnishings in the apartment. I’m gonna have my clothes. I may have TV. I’m gonna have my computer. I’m gonna have jewelry. I have things that are very important to me that if I lose through a flood because the bathroom with the tenant upstairs leaked and ruined all my stuff, I wanna replace.

Lena Nebel [00:39:59]:
Or if there’s a fire or a break in, I wanna make sure my my household items are taken care of. And that’s how most people think about it, but they don’t think that you can actually have renters insurance. And they think that the apartment complex where the landlord, if you’re running a townhouse or a single family home, that their insurance is going to cover your property. It doesn’t. You need to have a separate policy for that. So we always, recommend that renter policy, and then we’ll take a look at it to make sure it’s covering the things that you want. Homeowners policy, I never knew how much I would rely on my homeowners policy, until about ten years ago. We had a major flood in our house.

Lena Nebel [00:40:44]:
We went on vacation, and, my kids had used the bathroom right before we hopped in the eight hour drive. And the, within the toilet, some of the plumbing broke, and so the toilet kept running and then flooded the entire house or about 80% of the house. So, you know, I I will give a a major shout out to State Farm because they were able to take care of basically, relocating us to where we needed to live for nine months before our, you know, while our house was rebuilt, I had to create an inventory of everything in our house that would have to get replaced. Now if we all think about our house and you just pick one room, I guarantee you, you can’t remember every little thing in that house. So since then, a few things that I’ve learned is every few years, take your cell phone, put it on video, walk around your house, and film everything in there, and then store it in the cloud. That way, if something should ever happen, something gets damaged, you will have, inventory. You will have video that you can furnish to show what needed to be replaced, whether it was a little $10 frame from Target or the $3,000 TV. What we also learned was and this was kind of conversation in dealing with other individuals who have had some serious damage to their house, was all of your belongings that may be really important, like papers, passports, things like that that you keep in a safe, that you wanna put those documents in, Ziploc bags.

Lena Nebel [00:42:25]:
Because even though it’s fireproof, it may not be protected from water damage from the fire hoses that are coming through to, you know, put out the fires and everything. So you wanna make sure, when thinking about you having to to process claims to be able to protect those belongings. These are just a few little things to kinda keep in mind, but the the and I know it kinda went on a tangent, Claudia, so my apologies. But the the homeowner’s policy, it’s designed to do exactly that, protect against damage, to both the the structure as well as all the belongings that are in that property. That’s great.

Claudia Glover [00:43:04]:
And, Sarah, if you could go to the next slide, you’ve mentioned, in your story there a couple different things, that maybe aren’t necessarily covered just under the basic homeowners insurance policy. So folks that live in in certain areas might need to add some additional coverages. Why don’t you touch on on some of those that are listed here?

Lena Nebel [00:43:24]:
Sure. So flood insurance, we see quite a bit in areas where, you know, they’re they’re right on the water, they’re in flood zones, and those could be required, you know, and you don’t have a choice, and there’s significant, significant premiums. So when you’re thinking about getting that house on the beach, make sure you take a look at, okay, well, how much in insurance is that going to cost me? Same thing with earthquake insurance. Earthquake, you’re gonna see more in certain areas just like the flood insurance. It’s not going to be, you know you know, we’re in Maryland right now. We’ve had earthquakes. It’s not something I’ve ever actually considered. But if that becomes more of the norm, that may be something that we start looking at as earthquake insurance.

Lena Nebel [00:44:07]:
Because if something happens in our house where we have damage, but it’s because of an earthquake, I may not be able to get as much of that claim paid out if I don’t have that policy, because my existing policy may exclude earthquakes. That’s where I may need a supplemental plan. And what’s extremely common is the valuables rider. So anything that you have that you will miss and want to replace in your house if it was ever damaged or stolen, that’s what you wanna have a separate rider for. So, traditionally, your homeowner’s policy covers up to a certain amount of personal property. But if you have, like, an engagement ring, a wedding ring, collectibles, family heirlooms, baseball card collection, you know, sports memorabilia, guns, things like that, artwork. You wanna make sure that you get everything appraised and then have a separate policy for that. You know, we’ve had situations to where wedding rings have gotten lost, you know, you’re out laughing or you’re in the ocean.

Lena Nebel [00:45:11]:
And if they’re insured, it’s a very easy claim to submit and and replace that ring. And then sometimes you can override it too.

Claudia Glover [00:45:19]:
Yes. Yeah. There’s a lot of things you can assure against that I’ll throw out there. If you own a home, you know, sewage, coverage. If there’s a water main break, a lot of times, there’s a portion in your yard that is not covered. If they need to go in and dig in to fix a pipe or a sewer, and and you’ll have to repair that on your own. So a lot of, coverages out there that are inexpensive, but, just kinda smart to have in case the the unexpected happens. Right.

Claudia Glover [00:45:46]:
So let’s let’s wrap up the property and casualty discussion, talking about the umbrella coverage. Walk us through what umbrella coverage is and how that’s different or how it it supports the other insurance that we just talked about.

Lena Nebel [00:46:02]:
So umbrella, insurance is additional lines of liability to cover your auto and your home. Traditionally, you have to have the auto and the home with the same insurance company. That’s what they prefer. It’s in million dollar increments, and, traditionally, it’s about a hundred and $75 a year. However, if you have teenage drivers, it is much more than a hundred and $75 a year because they’re risky drivers. Traditionally, we recommend getting enough of insurance to protect the net worth. So if somebody’s net worth is $4,000,000, we’re gonna recommend a $4,000,000 umbrella policy because if there’s some type of lawsuit damage, etcetera, that exceeds your existing liability coverage to the home or the auto depending on where the issue occurred, you’re going to have to go into those assets. You’re impacting your, you know, long term, needs.

Lena Nebel [00:47:02]:
That’s why we wanna take a look at the net worth. For individuals that I would say I’ll use the example for doctors. If people find out, that they’re they just got into an accident with a doctor, they may think there’s a lot of dollar signs attached to the doctor, so they may tend to sue. Because a lot of people sue these days for anything, the umbrella policy could potentially protect that as well. So it is, an important level of coverage. However, you two things that are important to remember. If you have teenage drivers, premium is gonna go up. And number two, traditionally, you need to have the auto and the home with the same, insurance company.

Lena Nebel [00:47:41]:
So if you have them separate right now, you may wanna have a conversation about consolidating them. Great. Thanks, Lena. Alright. Let’s talk about some

Claudia Glover [00:47:51]:
of the other more fun insurance that we’re starting to see these days. We’ll we’ll call them specialty insurance, but, you know, I think the first one on there is pet insurance. I I know we have a few clients that have that covered. I’ve even seen it as an employee benefit, for some, for some, clients as well. So why don’t you walk us through some of these and and when we might wanna consider?

Lena Nebel [00:48:13]:
Yeah. These are, as you mentioned with employer provided plans, we’re seeing more and more employers offering some of these types of options for insurance. So pet insurance is if for those of you out there who have pets, cats, dogs, etcetera, you know how expensive it is. If they need a procedure, they go in for a visit and something happens to them. So for pet insurance, what I’d recommend is talk to your vet to see if do they even take insurance? Because some vets don’t, and it would be pointless for you to pay for the insurance and then find out that your vet does not take it. So talk to your vet first, see, do they take it, and then what does it typically cover? And then you just kinda go from there. Sometimes the animals that you get from the shelter, you don’t know their health history or anything. That may be, a time when you wanna be able to have that that pet insurance.

Lena Nebel [00:49:05]:
Travel insurance, travel insurance has come under, you know, comes under, I would say, a lot of scrutiny just because you have to make sure that you understand all the rules on when you need to file that claim. So I always tell individuals, if there’s a chance that you think you’re gonna cancel your travel plans because maybe, somebody is, you know, not doing well health wise, and you don’t know if you would have to cancel from that perspective or there’s some things happening at work, maybe there’s a chance you’d have to cancel, then purchase the travel insurance. But there are a lot of rules to follow, so make sure you understand what all those rules are, because they’ve gotten to be pretty tight if you have to cancel your travel plans because of airline issues or because of threats of terrorism. COVID is now an exemption in a lot of policy, so just be mindful of that. Identity theft protection is huge. We recommend this all the time in looking at whether it’s credit monitoring, identity theft protection, and making sure that and and this, you can also have, on your homeowner’s insurance policy. A lot of a lot of insurance companies have this as an add on. It’s usually about $10 a year is what it costs, but it can help to reimburse you for expenses incurred due to identity theft.

Lena Nebel [00:50:26]:
So that’s one, you know, I would definitely have you take a look at. And then business insurance, again, if you’re an entrepreneur, you’re self employed, and you wanna have some, professional liability insurance or business insurance based upon your plan, that’s something that’s super important. So self employed individuals, the exciting thing for those individuals, business owners, is you get to kind of craft your own policies, whether it’s the disability side, the health insurance side, but also various types of businesses, Keyman insurance. I mean, you can get pretty, fancy with the different types of insurances out there on the business side, and we’ll probably have a whole separate webinar catered just towards business owners, which we’ll pull Yanni in on that one.

Claudia Glover [00:51:06]:
That’s right. It’ll be his turn. Right. Right.

Sara Lohse [00:51:09]:
Not see.

Claudia Glover [00:51:11]:
Well, we covered a lot of different insurance types, and I I think certainly, it’s a lot for people to think about. But when people are thinking about insurance coverage and what to prioritize, it’s it’s not always going to be easy to kind of fill, all of the insurance buckets, nor have made people need to fill all of the insurance buckets. So in closing, why don’t you just give us a a a couple of pointers for how people should go about thinking about insurance, and and making that assessment and making the decisions?

Lena Nebel [00:51:45]:
I think that the main question to ask yourself is where is your greatest financial risk? Is it in the loss of your income? Is it the loss of a spouse? Is it in the event you get sick? Where’s your greatest financial risk? And by doing that, that’s what will help you to identify where your needs are, what you can afford. You know, I’m just gonna say this one comment. I I forgot to say it on the life insurance side. One of the biggest misconceptions, especially for nonworking spouses, spouses that may be staying home with the kids and everything, typically don’t have life insurance, and they need life insurance. Because in the event they pass away, somebody needs to still take care of running the house, taking care of the kids. You may have to leverage day care expenses now. So that’s one area where we see a lot of people underinsured. So you have to determine where’s our biggest financial risk right now, and then you go from there.

Lena Nebel [00:52:43]:
I think it’s super important to work with a certified financial planner or a licensed insurance agent, and they’re talking about all of these things together. Not every insurance policy is right for everybody. Great.

Claudia Glover [00:52:58]:
Thanks, Lita. Well, with that, I think that gets us to the end of of our topic here. But, Sarah, do we have any questions out there from the audience?

Sara Lohse [00:53:10]:
We do. So somebody did ask us to kinda jump back over to life insurance, and I know we kinda skipped over these different types. So if we could do a quick overview on what these types of life insurance are.

Lena Nebel [00:53:28]:
Sure. So term life, on the term life side, you’re paying for a fixed amount of years, and your premium is level. So let’s say, for example, you chose a thirty year term life insurance policy. You have that insurance for thirty years. You have that same premium. It’s a level death benefit. And it tends to be your least expensive type of life insurance. So it can be used for certain needs based upon that client’s goals.

Lena Nebel [00:53:55]:
And at the end of those thirty years, traditionally, the in the premium skyrockets, so you usually cancel the policy. And the idea is you don’t need the term insurance at the end of that time period. Universal life universal life, whole life, and variable life are all similar from the standpoint that there’s some type of there can be some type of cash value that’s associated to it. Universal life traditionally doesn’t have a lot of cash value built up, but it has flexible premiums and coverage. So if we wanna have a more permanent policy, but we’re trying to keep the pot the premiums down low and I don’t need to build up some cash value, I can use the universal life. Whole life is your more traditional permanent policy, tends to be a little bit more expensive than a universal policy. That cash value, can be used for a lot of, basically, any type of expenses you need. I I briefly mentioned it about buying a house, starting a business.

Lena Nebel [00:54:56]:
There’s ways to which you can access that cash value in a tax efficient manner. And then variable life, variable life is not traditionally a permanent policy, but it could be if used properly. There’s more an investment piece that’s, added on there, and it’s important to make sure you’re reviewing that policy annually. A lot of people, unfortunately, that have these policies don’t take a look at them regularly, so they don’t rebalance the portfolio, that’s within that variable life policy. And that cash value projection may not be living up to what it needs to do to support the life insurance and could actually cause it to lapse. So variable policies tend to be more, more expensive, but they’re also one where you have to really pay attention to on that allocation and make sure that you’re adjusting the allocation based upon the insurance premiums, based upon what the market’s doing in in the, investments, etcetera.

Sara Lohse [00:55:55]:
Thank you. Is there something to add to that? Oh, no. Go ahead. I’ll jump back in the slides, but, talking about insurance for business owners, this might be more of a lawyer question, but how does that insurance differ from the protections you get when you own an LLC?

Lena Nebel [00:56:18]:
Yep. Claudia, did you wanna take that one?

Claudia Glover [00:56:22]:
Yeah. I I mean, sure. I think within, business, you know, business owner, business insurance, there are, different ways to protect the business entity. An LLC typically is going to be a a pass through entity, meaning that it does pass through to the individual’s tax return. The liability is limited, but but a lot of times, it is closely tied to the individual. When we’re looking at, a more traditional business structures, there are various ways to use insurance there. You could do buy sell agreements to protect partners. You could have, in insurance in place, you know, for Keyman Life Insurance to protect a certain person in the business.

Claudia Glover [00:57:02]:
So there are, different ways that they can be used, for business owners, whereas an an LLC owner, you know, it kind of depends on the the stage of the business, whether you wanna protect, that individual. They may still be looking at traditional disability insurance to protect income, or traditional life insurance to protect, some of their heirs. But, Lena, if you wanna add anything to that.

Lena Nebel [00:57:28]:
Yeah. The only thing I’d add to that I agree with everything you said. I would just add that that’s the conversation that we like to have in incorporating the accountant and the business attorney in place too to make sure that we’re not missing any deductions. We have all the operating agreements in place. You know, there’s been a lot of changes in the tax laws over the past few years regarding LLCs, and how we can leverage certain policies. So it’s really good to incorporate all your professional advisers in those types of conversations.

Sara Lohse [00:58:04]:
Awesome. I think we have time for one more quick question. I know I can relate to this question living in Austin, Texas where we get a lot of hailstorms. With with homeowners insurance, there can still be a pretty big out of pocket deductible. What is a normal, like, expense that you can expect when it comes to deductibles with homeowners insurance?

Lena Nebel [00:58:27]:
Yep. So I would say this is going to vary depending on how much insurance you have, you know, how big is your property as an example. But it would be, I would say, anywhere from about 500 to $2,000 is where you would see your deductible. I don’t know if, Claudia, if if you have a a different opinion on that. But the thing that, you know, you gotta keep in mind, even though you can increase your deductible to minimize that premium, you wanna make sure that you actually have the money in the bank to be able to pay that deductible. Okay? And if you don’t have that money in the bank to pay the deductible, it may be set may make sense to keep that deductible a little bit lower. So, Sarah, as you mentioned, if you feel like, oh my gosh. I keep having to get hail damage and everything.

Lena Nebel [00:59:14]:
Maybe you have a lower deductible because you feel like you’re using that policy more. And that deductible is carried through the course of the year. So if you had multiple claims, you only have to pay that deductible one time until that claim until that year starts over, and then you’re basically at square one on the on the deductible. So I don’t know if, Claudia, you had anything that you wanted to add to that.

Claudia Glover [00:59:38]:
No. I think that’s spot on. And, also, just to keep in mind that, you know, they they are looking at how many claims you file. And so, you know, typically, use your homeowner’s insurance for the big things. It’s it’s the flooded basement. It’s the hail damage to to the, you know, the the shingles on your roof. You know, it’s it’s not necessarily, a cracked window that you can maybe pay for from cash flow. So just keep that in mind, and, you know, obviously, consult your in insurance professional or your adviser to help kind of, work through those decisions as well.

Lena Nebel [01:00:14]:
Alright. Well, this was the next webinar that we have. So, we have a QR code here if you wanted to register for the next webinar. Claudia and I have quite a few items coming up, this year on webinars. You can go check out our history also as far as some of the other, programs that we’ve done. I think on our, BFG library, we have additional resources regarding podcasts and some webinars and some ebooks regarding some of the things that we’ve we’ve talked about. But this is our next webinar that we’re gonna be hosting. And I think that’s that’s all we have.

Lena Nebel [01:00:54]:
So, Claudia, you were easy on me today. I appreciate that.

Claudia Glover [01:00:57]:
Yeah. Not too bad. Thanks everybody for joining us, and, we look forward to seeing you on the next one.