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Dear Everyone!
Where did February go? I missed it! I was just so busy with clients and prospects and training (there is always training!) that I just didn't get around to an issue of Tattler.
But I hope I've made up for it in this issue. In the six months or so that I've been doing this fish-wrap, it is spread to an unbelievable number of readers. I'm amazed. So I take it seriously... and I try to write quality "stuff" that you will share with friends and colleagues.
-Al
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| Get On Board... Before The Train Is Pulls Out |
There has been a lot of turbulence in the healthcare insurance world the past month. You all know that the state's universal care program failed to get enough votes to become law. This is a good thing as it was badly conceived and would have bankrupted the state... if the state was not already in the hole by $14 billion!
The next bit of front-page news was the good folks at Blue Cross trying to get doctors to be healthcare cops. They wanted the medical people to report to Blue Cross if they noticed anything that might not be on someone's application that might cause denial. It landed them on the front page of every paper in the state. If there was ever a dumb or dumber public policy, I can't think of it. This is the kind of thinking you get from people who have risen to positions that they are totally unqualified to be in! After the firestorm, Blue Cross quickly rescinded the policy... but the damage was already done. Another black-eye for the private insurance sector (and well deserved.)
Talking abut rescission I assume you heard about the $9 million judgement against HealthNet for rescinding a policy of a cancer patient. We in the industry know the other side of the story... that the patient (and agent) committed fraud... but the media didn't report that side (like you are surprised?) Now, HN was really stupid to attempt a rescission in this case because no matter what, it was going to be a no-win for them. As the old saying goes "Sometimes you get the bear... and sometimes the bear gets you." They should have paid the claims and written it off to bad underwriting. It would not be the first time. (If there is a more disorganized company than HN, I don't know it.)
Well, what has happened is that several carriers are trying to get back in the "good graces" of both agents and (potential) customers by quietly sending "coded" messages to agents and the media that they have "relaxed" their underwriting for older and "sicker" people. In other words, for the next X days, weeks, or months, the "door is open" with these carriers as they have let agents know that they would like us to submit business that we might otherwise send elsewhere (or not at all!.)
We agents get emails saying something like "... our company is proud to have plans that have proven popular with under-age seniors." (Under-age is insurance speak for those of us in the 55 to 65 range... not yet eligible for Medicare.) Agents who know the language know what is being said... without it being said. No company uses the word "senior" without the world "Medicare" unless they have opened the door for that age segment... and the door has not been open for a while with Blue Cross and HealthNet and Aetna. (It is never open with Blue Shield. I had a 55 year old woman denied this week because she takes a 20 cent a day thyroid pill. Honest. I got her on Blue Cross.)
So if you know anyone who does not have a health plan or who has one of those non-major-med (we call them "limited benefit") plans from companies like Mega or NASE or Alliance, now is the time to get on the train before it leaves the station. It may be a long while (or never!) before the next one arrives.
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What Life Is For You?
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I get asked more and more about what kind of life policy people should buy. There is no one answer for everyone. It depends on several variables... risk level, stage in life, current income, and financial savvy.
Term life (TL) is what most people buy... and while it has its place, it is not always best. These days most folks want universal Life (UL). I very much like UL but am still a believer in traditional whole life (WL)... if you can afford it.
My main concern with UL is that its flexibility can be its undoing. There are several moving parts to UL and while you can make a UL look and work like a WL... at the end of the day, the goals of UL are just plain "different" from WL.
The purpose of WL is to simultaneously provide for a legacy (the death benefit) AND build a savings account that can be borrowed or obtained by cashing in the policy. (That's why it is called "cash surrender value"... it's what you get when you no longer want to (or can't) make premium payments.) The WL premiums are high. No getting around it... often four or five times higher than term and twice or three times UL. There is no time limit. You pay until you die (or cash in.)
Term, on the other hand is cheap... it only does one thing. You get to 'rent" a death benefit for a specific number of years. If you live, you lose.... well not really because most term plans are now convertible to WL (and renewable at a higher rate)... and some have an ROP option (return of premium) which I don't think is a good idea to buy... but won't go into it here.
UL was invented as a hybrid between term and whole life. It was to NOT have a time limit (it is permanent) like WL but to also have the low prems like term. The way it works is like a bell curve. If you start out young, like WL the UL plan slowly builds up cash value... then more and more and more until you are out about 15 or 20 years.
You all know that the internal "base" cost of insurance gets higher as you get older. Why? There is a higher chance you will die. It's that simple.
With term, when it expires you pay the higher "older age" rate if you want to continue (and it is very high if you are in your 70s or 80s.)
WL starts out high... and stays high... and never changes... but builds cash value.
Remember I said that UL is like a bell-curve? After the cash value peaks it then starts to drop as you get older because the UL starts to use it's own cash value to pay part of the premium so like a bell curve it starts to drop in later life to the point that when you are in your 70s there is no cash value at all or very little.
There are ways to tweak UL to create more CV or to let the CV pay a premium if you are "short" a year or two. It is very flexible. I like UL for the more intelligent client who can get their head around it.
But for many people I like the simplicity of WL. I'm one of the few agents who does. Most are in love with UL. I'm OK with UL so long as people understand that it is basically permanent term insurance.... not a good vehicle to build cash value (although it can be done... have a good agent if you buy UL!)
For people who really CAN "buy term and invest the rest" without losing it, UL is great. They get the best of both worlds... low premiums and never-ending protection. But they have to convince me that they really WILL invest the rest in either a good, safe CD or annuity or T bond. I don't want to hear anything about mutual funds or anything with high (or any) market risk!
There are two other plans you might get pitched by some agents. Variable life (VL)and variable universal life (VUL). I don't sell these because I don't have "6 and 63" license. Personally I would never own either of these but that's all I'm probably permitted to say... and maybe even that is going too far (if the Feds are listening in!)
With all the financial uncertainty in the markets these days, the old traditional WL plan, even at 3% is not a bad deal. It's not designed to be an "investment" as much as it is a "forced saving" plan. For a lot of people, "saving" is a discipline they don't have.
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| Greed vs. Seed |
I had a discussion with a financial planner last week and he chastised me for recommending the above... that people take a serious look at the "old" whole life plans.
He said "You can find investments that will do much better than two or three percent."
Absolutely.
He was talking "investment" and I'm talking "savings." It is risk vs. reward.
My friend, who advises that people invests in real estate and stocks and variable insurance products is part and parcel of the financial planning world that worships the "greater fool" theory... that there is someone more stupid then you who will pay MORE for your house even though it is older and in worse shape than when you bought it. Same with stocks. There is someone stupid enough to buy a piece of paper (stock certificate) tomorrow for a dollar more than you paid for it today.
Great fortunes have been made (every day and over time) via the greater fool theory. But so have great loses.
I submit to all of those who buy into this greater fool theory that at the end of the day, it is not how much you make that determines your net worth... it is how much you don't lose.
Financial planners are more concerned with the "make" part of the equation... while I am concerned with my clients on the "lose" side of the equation. I call it "greed vs. seed."
Insurance is NOT a good investment. However when you look closely there is NO good investment. There is only high-risk and low-risk investment.
What I say next is what people in the financial markets don't want you to know. They really don't.
Nothing keeps up with inflation anymore. Not wages, not commissions, not social security benefits... nothing. The only way to do it is to gamble. And when you gamble... you lose.
So how do you want to lose to inflation? You want to lose big by buying "a chance" in the equities lottery (stocks, bonds, etc.)? If you win... yeah, OK, you beat inflation... for a while... because just like in any casino, the longer you stay the more you will play and the more you play the more you eventually lose. If you lose big you may not get to play again... ever.
Or would you rather lose slowly and invest in safe "no" risk plans like interest bearing products and insurance? It is your choice.
Here comes the part that the finance guys and gals hate.
Think of safe investing as slow death. That should not scare you. We are all slowly dying. Each day that goes by brings us closer to death. Same with safe-money investments. Inflation eats at it, but it is slow enough that you don't "feel" it... and if invested wisely we will outlive it and still have plenty to pass on. (It is a good thing we don't live forever!)
I advise my clients to take 10 cents out of every dollar they ever earn (or get... including dividends, gifts, etc.) and put it in safe-money products... CDs, muni/treasury bonds, insurance, annuities, long-term care, etc.
The idea is not to get rich, but to be able to live free of financial fear and worry.
When you have a house with some equity and you have a large amount in safe, solid, liquid assets, you don't care much about what the Dow did today or if the dollar has dropped, or even if the Fed has cut rates (because eventually they will go back up.)
I tell my (younger) clients to NEVER finance anything that gets worth less (like a car) unless the finance terms are way below what you can get in the market (like 1% interest on a car where the price is same for cash or finance... which it usually isn't at a dealer.)
I tell them to buy the cheapest house in the best neighborhood they can afford as soon as they can... one they can afford so as to let them continue their 10% savings.
I tell them to live below their means. That is measured by AGAIN the simple yardstick of "Can you make the 10% savings." If you can't, you are above your means. Borrow for school or for a home... but damn little else... as these both get worth more over time.
If you want to play the market, fine. But never with more than 10% of your holdings.... and you are only allowed to buy dividend paying stocks or mutuals.
There are a million ways for you to lose money. There is only one way for you to not lose money.
I've never understood why people don't understand that it is better to live free from fear and want than to have one of everything ever made and toss and turn at night worrying about what might happen if they get sick, laid off, or if someone dies.
Live 10% below your means, save your money, buy coverages to mitigate the big risks (I can help with that :-) ) and be happy. OK, so you can't afford a Benz or your kid doesn't get $120 Nike shoes? You're not making car payments and if the kid steps in a puddle... what do you care!
Money can't buy happiness. It CAN buy security. There is nothing as secure as knowing you have coverage to mitigate most of the risk in life... sickness, job loss, accident, disability, disaster, critical illness, divorce, death.
There is nothing quite like being able to walk into any store or any auto showroom and know you can buy anything in the place... and walk out without it. (I'm not preaching austerity. Buy quality... always... and quality will cost more.)
Remember, it's not how much you make... it is how much you don't make. "Greed vs. seed."
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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