Top 3 Most Underestimated, Overlooked Vulnerabilities
What started out as a single blog has expanded into a series, let’s recap. National Health Care Decision Day was April 16th. While I’m not an attorney, financial advisor or insurance I’ve spent a lot of time consulting with professionals on how best to protect my family and our business interests in case of any kind of emergency. Part 1 offers thoughts Top 5 Questions Every Adult Should Answer and how to protect your family when you can no longer make decisions. Part 2 offers insights on what items to have collected and available for your beneficiaries and decision makers to offer a smooth transition in leadership and clean up of family assets. Below is Part 3.
Part 3 | Protecting Your Family
Next let’s look at financially vulnerability. Most people see these coverages as optional or only suctioning cash from a paycheck. However, these gaps can leave the whole family very vulnerable in the case of catastrophe and coverage costs are usually not expensive. Talk to your insurance agent and financial advisers to see what makes sense for your family.
#3 RISK: If a member of the family dies today, do we have enough to cover the expenses for cost of living that are left behind?
SOLUTION: Life insurance coverage for every person in the household including children
The average opinion on the amount needed for life insurance is 10 TIMES the Annual Income of the individual/household. While I’m not an insurance agent, this quick calculation leaves a lot of questions in my mind that one may be worth a discussion with an insurance agent (or broker) to see the amount and what type of coverage might be recommended for you and your family.
Is there be enough extra to pay for medical bills, creditors, and final expenses?
Is there be enough for tuition for the kids to remain in their school and also activity fees, medical expenses or college?
Is the remaining spouse manage the expenses on their income or with what is left? How would lost income from the deceased partner affect the family?
Would a spousal death affect income earning abilities for the remaining partner with taking the extra responsibility of managing the house, finances, kids, etc.? Would extra help be needed?
People often forget that in case of a loss of mate to allow for grief time. You don’t lose someone on Wednesday and go back to work on Thursday. It can take several months to settle things and be able to grieve, help create a new normal for children, etc. Is there enough benefit to allow the family to take some time off?
Some joint accounts require death certificates and probate to be released until probate settles. Do you have enough separate resources to ensure that operations can continue? Do you know which accounts these are and do you have all the other accounts listed with Beneficiaries or Transfer on Death?
Do you own your own business or are you in a partnership? What happens when one partner dies? Does the family also lose income?
#2 RISK: Will a death create a financial burden to the family?
SOLUTION: Consider a Funeral Policy, Plan or Specified Account
I’ll be honest - this is one thing I’ve had to trouble confronting here in Florida. I’ve buried a lot of family members - in Indiana. But in all my driving I think I have count on one hand the number of cemeteries I’ve seen here. I recently had the opportunity to visit with a man who works in this field here in central Florida. I found it fascinating how many options there are for families here. However, as I expected, with cremation and without any services, final expenses can be $10,000 or more. What I didn’t expect is the comment on inflation. These costs will likely go up over the rest of our lifetime and by the time, we (hope to) need them, these could be over $50,000 or more. It’s at least worth the discussion as to what the options may be for your family. It seems that every agent I talk to has a different opinion of how best to use this money:
1) set up and pay for a plan directly with the funeral home,
2) List the funeral home as a beneficiary on a specific life insurance policy,
3) put it in an account marked payable on death to a specific person.
Ultimately, it is beneficial to talk to someone and make the decision that is best for your family.
Once you’ve covered the costs of services, burial, plot, headstone, flowers, a viking cruise, a volcano climbing, a last around-the-world Disneylands tour or whatever you’re wishes are, the next step is to ask: Does the family know my wishes for services and burial? It’s important to make sure these wishes are communicated and if possible written down, so there’s no questions later.
A DISCUSSION FOR PARENTS AND CHILDREN
While this is a gruesome subject, I would encourage parents to discuss options with their children, too. My parents have been gone for a number of years and in 2021, we decided to escape Florida after the big covid-hunkerdown and do a long (20 days) road-trip. Liam was an energetic 5 year old that had been asking a lot of questions about my family and we decided to take the opportunity to make some memories with some family and friends in the Midwest. Liam got to ask his questions to my older, more seasoned aunt, uncles and cousins that could share some wisdom about his grandparents and maybe a perspective that Josh and I couldn’t. We took some time to pick out some lovely rocks and write messages for my parents, so that when we visited their gravesite Liam might have something to share with them. He enjoyed leaving the rocks, but he was still confused about what happens to us when we die. While Josh and I weren’t sure how much we should tell him, we agreed that truth, even if it’s hard, should be a priority.
“So Liam says, “Wait! so my options are earth or fire?”
Yes? Josh and I agreed.
He says, “I don’t accept that. There has to be another option.”
Ok. We’ll think on that.
So a few days later we go to southern Indiana and visit the graves for Josh’s grandparents and other family and Liam notices a “building” and starts asking questions.
“What’s that?” I respond, “that’s a mausoleum.”
Liam says, “I thought you said my options were only dirt and fire.”
We did…
“But people are buried there?”
Yes.
“That. That’s what I want.”
Josh asks, “It is. Why?”
Liam responds, “It has my name in it …
Maus-a-LIAM … AND we can all be together.” ”— Thoughts on burial from a 5-year-old
While the #3 and #2 Risks have to deal with death in a family and how to deal with a Worst, Worst Case Scenario. The #1 most underestimated risk is what happens if you’re in a situation of “What doesn’t kill you, only makes you stronger.”
#1 RISK: If an accident, injury or illness suddenly occurs, what coverages and resources do we have in place right now to manage finances until we can recover OR if we need long term options?
SOLUTION: Gap Coverage for deductibles, co-insurance, travel costs and lost wages, short-term/long-term disability, AND a long-term care plan
While health insurance is considered “required” here in the US, many people are still without even basic coverage. This would be step numero uno. But for those of us that have coverage - we know that deductibles are getting higher as is our co-insurance or co-pays while what is actually available to be covered may be shrinking.
So once a year - if not more - I ask these questions and have a discussion with our insurance agents and financial advisors.
Has anything changed in our existing health coverages?
or with our personal health situation?What are our options to cover the gaps between what is in our bank account now and what we have in coverage?
How much cash do we need in the bank to overcome any incident? Evaluate for every scenario with each person in the house (including each child):
short-term (6-12 weeks),
Long-term (12+ weeks) disability/surgery/injury/illness
Long-term Care in an assisted living, skilled care nursing facility or memory care facility
Then think through not just health and medical coverage, but also loss of income too.
If the answer to any of these questions is “I don’t know” or “I don’t have that in savings”, then talking to an insurance broker in your area is critical in forming a complete plan with your coverages to insure the risk of loss in the case of a major incident.
The hard truth is that NO ONE likes to answer these questions OR think through worst case scenarios. It’s unpleasant and feels morose. But each of us know of incidents were the family didn’t have enough coverage for burial or to cover a massive illness and then is at the mercy of whatever the struggle-bus blows in next. Taking a few uncomfortable minutes to think this through with reputable advisors can relieve huge burdens if life offers something gone sideways.
I’d love to hear your thoughts on some other things to consider. Please feel free to send me an email or a comment!
