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The downside to life, disability insurance

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One huge downside to life and disability insurance is that it requires “insurability” to obtain it. This means you have to pass underwriting which could include medical exams, lab work, and with disability insurance financial documentation proving earned income.

Life and disability insurance policies must be purchased and in force before a death or disability, happens — not after. Yet people often put it off until it’s too late. They either die or become disabled without it, or their health deteriorates and they cannot qualify. Simply put, they waited too long. Life and disability insurance should not be purchased when it’s convenient or when you feel like getting around to it — it should be purchased as early as possible, with a sense of urgency.

No one has a lease on life or good health and things can change in an instant and being able to obtain either life or disability insurance is not something to be taken lightly or for granted. You can be insurable on a Monday and get “Preferred Plus,” the lowest life insurance rates possible, and survive a heart attack on Tuesday and become uninsurable overnight. People get declined all the time or have policies issued that are “rated,” i.e. come with extra high premiums due to an insurance company having to take more risk in tougher cases.

Conversely, other purchases such as stocks, bonds, mutual funds, IRAs and other investments or even purchases like cars and mattresses are always on sale. If you have the money, they will sell them to you. In fact, when is a mattress or a car NOT on sale, right?

These other purchases that don’t require insurability can lull us into complacency if we are not careful. They can give us the false illusion that everything we ever want to buy will always be there, that they will always be available, will always be on sale. This is absolutely not the case with life and disability insurance. Despite what some people would like to think, life and disability insurance is a “seller’s market” not a “buyer’s” one. An insurance company is at risk of having to pay out a huge claim. The purchaser is only at risk of paying some premium which is relatively miniscule to what could be paid in claims. The company is going to think longer and harder about whether they want to take on a new risk, more so than whether you are willing to part with your premium dollars.

Let’s face it, no one wants to think about dying prematurely or getting disabled without any way to earn an income, leaving themselves or their loved ones in a financially catastrophic situation — but life happens. It’s much more exciting to think about getting a new home, or new furniture, or a new car. Everyone loves that “new car smell.” Consequently, we tend to push these things to the back burner in our mind.

When I visit with clients about helping them with life and disability insurance and retirement planning, I tell them to think like a doctor. Use triage. Trauma surgeons have a saying, “Priority is your patient.” They treat the most life threatening severe things first and work their way down the list. Similarly, the same thing should occur with life and disability insurance and savings and investments. Due to the miracles of modern medicine, your odds of getting disabled are astronomically higher than that of dying prematurely, so if you or others rely on your earned income, disability insurance should come first. Next is life insurance, then building liquid cash savings for emergencies, then last should be retirement and investment planning. Sadly for many, this is not what happens. They skip over the life and disability insurance and head right into getting that IRA or some exciting new stock.

So remember the main disadvantage to life and disability insurance is that it may not be ready and available to you when you want to buy it. Don’t put it off. Get with a qualified, knowledgeable expert, someone who specializes in life and disability insurance and get your protection in place. Lock-in your age and health. Then rest easy, knowing you are covered, and take your time about getting other things that might interest you.

 

Todd Radwick, president of Radwick Financial Group LLC, of Winthrop, Wash., is an insurance and financial adviser and 23 year industry veteran. He can be reached at 509-996-3425 or through his website at www.radwickfinancial.com todd@radwickfinancial.com