How Railroaders Should Evaluate Their Insurance Needs

Transcript:

Let me suggest the way that Railroaders should be thinking about their insurance. Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors, and today I want to talk about a great planning subject that's really important to complete the planning process, it's insurance. It's necessary. It's not great, but it's necessary. And you have to start thinking about these topics because there's a lot of risk on the table and there's a lot going on. So I just want to give you a way to think about insurance, some ways to evaluate it. It's five rules or guidelines to think about. So the first one, insurance companies are in the business to make money. Well, no shocker there. They have costs, commissions, pay outs, all those things, claims I guess is the word they use, they have to factor that in. So when they write up your premium, all those things are factored in.

But the way you want to think about insurance, well, it's just money you can afford to lose. I hate to use the word lose, but in return, you are getting protection. It's not an investment so let's not think of insurance as an investment. The purpose of insurance is to protect wealth, which is very true. And when you talk about wealth, you could say, "Well, your house, you have property and casual," but it's also a human capital, especially if you're in your mid-career through disability or life insurance, which protects your family, all those types of things. So that's the purpose of it, to protect the wealth. And then third, some insurance become less important and others become more important, so that depends upon where you are in the stage of life. So early in your career, the disability insurance, to give you an example, is very, very, very important. And then as, let's say, you're growing wealth, maybe your property and casual becomes very important. Longterm care becomes more important.

So there's all these different things that depending upon your stage of life you want to have the necessary insurance for that. And then the fourth one, certain types provide better deals earlier than deals later. So take disability, for example, disability insurance, that's great early on, because you're young and if something happens to you, you have a greater coverage. And let's say term life insurance is better deal later, let's say you have a 25 year term life policy, the premiums are much better deal on years 21 through 25 versus year zero through five, because you're older now and you're getting a much better deal on that. So, that's a way to think about. That's the important part, is you've got to review your insurance policies and see where you are. It's very important. And then the other thing is, the final one is, stop paying for insurance you don't need. People keep the paying insurance just because, "Every year I've got to write that check, write that check."

So to give you an example, let's say, if you're retired and the kids are out of the house and you have these insurance policies, well, what are you really insuring? Maybe the house is paid off. Your investments are done. You have the retirement. And now, why are you still paying disability insurance or term life insurance? So those are the things that you want to be doing annually. That's things that I do with my clients, is just review their insurance policies annually and say, "Hey, you need this. You don't need that." And like I say, other things come up in life that you have to start thinking about. So I hope this was helpful. It was to give you an idea about your insurance needs, things to think about. Reach out to me if you want to discuss this. I'm more than willing to help you out. Please share this video with other Railroaders. It's been going great. The videos have been doing really well. I do appreciate everyone sharing them. Until the next time, everyone, please stay safe, stay on track, and take care. So long, everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.from Highball Advisors, and all rights are reserved.