Mitigating risk in our lives and achieving the peace of mind needed for our day-to-day activities has become more difficult lately. The new risk of COVID-19 may have brought new focus to just how fragile we can be, but it is hardly the only risk we face. Some of the risks can be addressed easily, and some can be diffused among a large population using insurance.
For this to be a win-win scenario for everyone, the insurance company projects risks and actual benefits to be paid, which drives the rate of premium. This assessment is made by an actuary.
COVID hasn’t just affected individuals. It has affected actuaries, too!
Although new insurance policy sales have been up for the last two months, some life insurance companies have ceased offering new policies to those 70 and over because of the uncertainty of COVID risks. The frequency of death that actuaries need to assess has changed, and the policies and premiums need to change as a result.
That’s not the only variable that’s changed. The ultra-low-interest-rate bond environment that the pooled assets are generally invested into has a much lower yield. If they can’t earn as much on holding the assets, they can’t pay as much, which has reduced the benefits that could be provided for new policies or increase the premiums.
This means that those that already have a policy that has a locked-in premium and benefit may be well situated. For others it may be their last chance to get a policy.
Insurance can provide a little peace of mind that’s really needed right now for loved ones and may have a tremendous impact should the worst come to pass. Here are some fictional examples of the impact insurance may make:
The Holdens
Tom Holden had always been the responsible child and was doing quite well with his own law firm. He was the first in his family to go to college, and his parents were extremely proud of his success. His father passed away a year ago, and his mother, Jane, started to deteriorate soon afterward. At first, it just meant that he would stop by a few times a week with meals and to spend more time with her, but as the months continued, her mobility decreased and it was clear that she needed care on a daily basis.
He realized that eventually he would need to hire someone to take care of her, but the costs for full-time care can be above $60,000 each year. Paying for that would mean other family sacrifices, and the college fund he started for his own children might need to be tapped. What he didn’t take into account was that while his family was willing to make those sacrifices, Jane didn’t want them to. She was very proud of her son, but proud of herself, too, and already felt like a growing burden for him.
Tom didn’t realize his parents had the same knack for planning ahead as he did. They had already arranged long-term care insurance which could be drawn on. This allowed Jane to maintain her dignity and financial independence, and Tom to continue focusing on his own work without needing to take time off to be a caregiver as well.
The Belinis
Elaine Belini had a loving husband, James, three children, and a part-time job as a caretaker for a special needs individual. They both enjoyed their jobs, lived within their means, and were developing equity in their home based on their combined income. Suddenly tragedy struck , and James passed away from an undiagnosed tumor.
Grief-stricken, Elaine’s life changed in many ways that day. They had a nest egg in place that would cover funeral costs and a few months of mortgage payments. This was enough so that they wouldn’t need to sell the home immediately at a fire-sale price.
Fortunately, the Belinis also had a life insurance policy for the surviving spouse. This meant that Elaine could afford to continue with the mortgage payments to keep their family home and had time to find full-time employment.
Larry Glass
Larry Glass had a great job which he loved as a professional pianist. As a single father, he provided for his daughter’s private education. He was only 49, yet when planting a new tree in their front yard, the shovel caught on a root. He pulled with all his might and found that he was suddenly on the ground with severe pain in his lower back. He had a herniated disc and would not be able to sit in front of a piano for months, if ever again.
Larry was an independent contractor and didn’t have an employer to cover his paycheck in the meantime should he be injured. Knowing that he was the income stream in the family, he had the foresight to purchase disability insurance. Larry eventually recovered and was back to playing professionally in six months. The policy stepped in to continue payments while he was disabled and healing, so his daughter could continue going to private school and their bills could continue to be paid on time.
How do I know what the options are, or what is appropriate?
A client advisor, such as those at Arvest Wealth Management, will be able to assess your situation and let you know what insurance options are available and appropriate. Some issues might be more urgent than others, given your family dynamic and dependents. Some policies might be more suitable than others. For example, a client advisor could explain the differences between whole and term life insurance. Click to find a client advisor and learn more.
This content has been provided by Merrill Anderson and is intended to serve as a general guideline.
© 2020 M.A. Co. All rights reserved.