Chapter 6 – “Life and Disability Insurance”

In this episode, podcast host and author of “Control Your Retirement Destiny” Dana Anspach covers Chapter 6 of the 2nd edition of the book titled, “Life and Disability Insurance.”

If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.

Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.

 

Chapter 6 – Podcast Script

Hi, I’m Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny, a book that covers all the decisions you need to make as you plan for a transition into retirement.

The book has incredibly thoughtful 5-stars reviews on Amazon. If you like what you hear today, go to Amazon and search for Control Your Retirement Destiny. Or, if you are looking for a customized plan, visit sensiblemoney.com to see how we can help.

This podcast covers the material in Chapter 6, on life and disability insurance. Both types of insurance can protect you and your family against risks that can derail your retirement security.

Today, I’ll be teaching you how to assess your insurance needs, and how those needs change over time.

Let’s get started.

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As a financial planner, I think of financial products as tools… perhaps in the same way a carpenter might view his or her own toolbox. You look at the job, you look at the tools, and you figure out which ones will help you most effectively do the job.

Insurance is a financial tool. Unfortunately, many of us have an instant adverse reaction when we think about insurance, or even hear the word. I believe this happens because most of the time our experience with insurance is associated with either a salesperson trying to get us to buy more, or a benefit selection page where we feel like we are just guessing as to which options to pick.

Overall, we don’t have very many positive experiences with insurance.

That means you have to do a bit of a mental shift to begin thinking about it as a tool. For example, what if you begin thinking of insurance like a seat belt? Then, you view it as a safety feature. Hopefully you never need it, but, if you do, you’ll be glad you got in the habit of buckling in.

Of course, it’s a bit more complicated than that - because the type of insurance you need changes as you age and as your financial situation evolves. Overall, though, both seat belts and insurance are there to protect you against a risk – a risk that you hope never materializes.

Let’s discuss how to think about this type of risk.

Any conversation about insurance should start by assessing your exposure to a financial hardship, as insurance is all about shifting risk. When you buy insurance, you choose to pay a known premium so that if a devastating event happens, the insurance company bears the bulk of the financial burden.

Not all risks are equal. Take the common example of your home burning down. Although unlikely to happen, if it does burn down, the consequences are severe. Therefore, if you own a home, you carry homeowner’s insurance. You choose to pay a reasonable premium to minimize the financial impact of such an event.

Contrast that with death. There is no argument that death is a high-probability event. There is no question of “if” it will happen – it’s only a matter of when. The severity of the financial impact, however, depends on where in your life cycle it occurs, and who is financially dependent on you at the time.

If you’re young, and have a spouse and children, your premature death is likely to cause a big financial hardship for your family.

But