INSURANCE AND TIME PASSAGES
There’s something back there that you left behind
Al Stewart in Time Passages’
Harmonizing insurance coverage to life’s time passages means working with the client
throughout the life cycle. What we are looking at is the need for risk management at
particular points in life. This means checking with the client at any and all of these life passages. That will mean adjusting coverage or simply the re-
assurance that existing insurance continues to cover the client’s needs.
GRADUATION FROM SCHOOL AND FIRST JOB
Consider a nominal exempt insurance (universal or whole life) policy with a large guaranteed insurability rider. The guaranteed insurability clause assures access to increased coverage at pre determined future dates.
he exempt insurance provides a base of permanent insurance possibly
accumulating cash value with guaranteed access to more coverage in future.
Alternatively consider a large term policy that should
anticipate all reasonable foreseeable needs and commitments such as
marriage and future house purchase, to the extent affordable by the client.
Opting for the exempt policy becomes advisable when the client does not
have a clear view of the future and therefore of future needs.
Also: ensure that the carrier has a broad product shelf to expedite later
convertibility or exercising of options;
ensure that the client understands that much of the employer’s group
insurance coverage e is not portable and that conversion options are
often not attractive or well-priced; (long- term disability coverage tends
to be more portable than other types of coverage);
moreover, employer-sponsored group life is usually limited to only 2X
these factors mean adding outside coverage such as individual disability
insurance and individual life insurance and ensuring that the client sees
outside coverage as a priority
since few employers provide group critical illness coverage, that
should also be considered here, possibly with graduated premiums
One of the time passages that should trigger an evaluation of
existing coverage and whether, for example, it would provide for the
needs and expenses of either partner with the loss of the other.
BUYING A HOUSE
Check whether existing insurance would cover liquidating the mortgage if
Also: – if additional coverage is required, compare outside insurers’
premium charges and terms against term insurance quoted by
bank providing the mortgage. “Don’t assume that the bank employee is
providing unbiased, objective advice. That employee is also incented to
sell insurance,” Fleischacker says.
Check all insurance coverage again to see if adequate for anticipated needs;
Also: after setting up a Registered Educational Savings Plan, the next
priority would be exempt insurance;
ONE SPOUSE STOPS WORKING
In cases where one spouse elects to remain at home, check existing
coverage insurance to see whether it provides for all manner of family
services if the spouse dies or becomes incapacitated. The surviving spouse
may have to pay for outside services handled by the stay-at-home spouse;
EITHER SPOUSE ABRUPTLY LOSES EMPLOYMENT
Evaluate whether family finances will allow for continuing current coverage and the impact of cancelled employer coverage;
Consider long-term care insurance. Adult children responsible for parents may not have funds necessary to pay premiums and may have to convince their parents;
Also: those responsible for parents should check their own insurance to ensure coverage of expenses for parents in case of the adult child’s premature decease.
Check to see if insurance desired earlier but seen as not affordable is
still appropriate and revisit current insurance to see if the quality of
coverage should be improved;
DEATH, DISABILITY OR A MAJOR HEALTH ISSUE OF
IMMEDIATE FAMILY MEMBER
“If one spouse has a debilitating or terminal illness that gets you back to the drawing table to check existing coverage,” Fleischacker says. That means activities such as checking term insurance for convertibility to permanent insurance and whether it makes sense to make the switch. It might make sense if coverage is going to before anticipated life expectancy.
Check whether the drop in income means that all existing coverage
can still be afforded and is still necessary and can be afforded;