In my networking circles, I have many friends that are in the financial planning business. It's always amazing to me the role that insurance plays in what many of them do. Being in the healthcare business, insurance always strikes a chord with me. My natural response is "Is insurance a buffer against loss or is it really someone betting against themselves?"
When I was younger, I was constantly being approached by insurance agents telling me I needed a whole life insurance policy. The thinking was that while I was protecting my assets (and my family) against loss in the event of my death I was also building an investment in the future. Made sense to me. Then a guy named A.L Williams came along and said "Buy term and invest the rest", which made sense to me and millions of other buyers of life insurance. Needless to say, he revolutionized the life insurance business.
These days, many of the financial planners I know are selling Long-term care insurance. The premise of long-term care insurance is that you buy this coverage so that in your final years you can pay a nursing home to take care of you when you can't do for yourself. I understand the concept. But, have you been to a nursing home lately? Is THAT how you want to spend the last few years of your life? And, will long-term care end up like all other forms of insurance: too expensive to afford, insufficient to do the job right, managed by bean counters instead of those providing the care, and virtually impossible for the insured to manage without a lawyer?
I wonder. What kind of wealth could you amass by investing what you would normally spend on long-term care insurance? And if you compared that wealth with what long-term care insurance could be expected to pay given the same investment, what would be your best bet? Ask your financial advisor to compare what you would have if you invested the equivalent long-term care premium in a mutual (or index) fund from now until the age you'd expect to need a nursing home with the benefit you'd receive from your policy. Unless you're in your late fifties or sixties, my guess is your investments would be the better bet. Is it smart to bet against yourself?
The same goes with so-called health insurance. Do you carry health insurance through your employer? Does it cover everything and have low deductibles and copays? If so, you might be wasting a lot of money that could be invested in your future and not just potential sickness and infirmity. Most employers these days offer "flexible spending accounts" that allow you to pay typical out-of-pocket expenses and services not typically covered by your "health insurance" policy. These flexible spending accounts are deducted from your pay before taxes making them a great investment IF you use them.
If you don't, you lose the benefit. Many folks either don't have or don't qualify for flexible spending accounts but may use something similar called "health savings accounts" that work something like your traditional IRA. Contributions to a certain level are tax-deductible and the part you don't use for current healthcare expenses are invested and grow on a tax-deferred basis until you reach the point in your life when you begin to spend more money on your own health care. The beauty of both the "flexible spending accounts" and "health savings accounts" is that they allow you spend less each month on "health disaster insurance" while investing more in your own wealth.
Here's the exciting part. By investing in your wealth instead of your death and demise, you build wealth that could help you weather any storm with more certainty and more present and future rewards, as well.
To make certain you actually get to enjoy the wealth you're now building, I want you to be building your health at the same time. If you've been awake at all over the last few decades, you pretty much know how to do that. Exercise, drink lots of water, eat right, learn to deal effectively with stress and maintain healthy nerve function. It's funny that the things that keep you healthy, your "health insurance" hardly ever pays for, like health clubs, smoking cessation, nutritional counseling, life coaching, wellness care lie chiropractic and massage, as well as stress management. Yet, by including these strategies in your life now, you'll have to rely less on your "sick insurance" to get you through the maze AND keep you healthy enough to actually ENJOY the wealth you built in your youth.
What a shame to spend your youth making a living only to spend it on a nursing home in your later years. Why not build health and wealth together and enjoy your twilight years without fear of sickness, infirmity or bankruptcy.
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Build Health Keep Your Wealth
