Frees Advice: Health Insurance

The Future of Insurance – Pt. II

Information storage occurs in bytes. First there were bytes, then kilobytes. Now? We have moved through terabytes and exabytes and we now measure data storage in yottabytes. What does all of this mean for insurance? Insurance loves the science of actuary. Actuary is the theory of large numbers. Give an actuary a sample with 1 million or more records, and they can reasonably predict things. They can tell you how many people will die, how many people will be in car accidents, and how many fires will occur. Historically, the theory of large numbers could tell you how many of these events would occur, but not to whom they would occur. Enter data storage and actuaries have more data around to plumb and review. They have determined new factors about traits we possess to better predict not only what will happen, but to whom.

When I first started to drive, car insurance was based on my age, where I lived, what I drove, and what my motor vehicle report looked like. Those are still important factors, but all of this additional data that can be mined allows carriers to understand characteristics that will make me more, or less, likely to have a loss. I call these “stability factors.’ The longer I go without a claim, the less likely I am to have a claim. This allows for carriers to provide “safe driver” and “accident forgiveness.” Some carriers provide renewal discounts the longer you are with them. Changing insurance carriers? Some carriers give discounts for the time you were with you prior carrier. Insurance companies love stability. Some give discounts if you review your insurance more than 8 days before the policy renews. Why? People who handle things before they are due are the same people who service their cars regularly, change the windshield wipers regularly, and that all translates to fewer claims and fewer claims means a lower premium.

Some carriers use credit while others use education. The average credit score has 350 unique aspects to it. Approximately 10 of those unique aspects tell whether I pay my bills on time. Paying your bills on time indicates stability and stability indicates the possibility of being involved in fewer accidents. On the other hand, some of these don’t make sense to me. I do not understand how I drive changes on whether I went to college. (Some of the brightest people I know didn’t go to college. Some of the dumbest people I know went to college.)

In the end, what we pay gets determined by an ever changing set of “underwriting” characteristics. The more we know about people, the more accurately what we pay will become. Prior to figuring out that smoking causes cancer, life insurance rates were all the same. Once they figured out the impact of smoking, non-smoker rates fell and smoker rates climbed. Those same things will continue as insurance companies continue to gather, store, and utilize all of the information that is available to them.

Stay tuned for the next installment that will deal with the smart house and accident avoidance technologies.

Continue to Part III

The Rogue Death Wave

In boating, there is a term called the rogue wave. This is a huge destructive wave that comes out of nowhere with disastrous effects. Death can do the same thing. As we all know, death comes too soon. We all die too soon.

It was Franklin that said “Only two things are certain; Death and taxes.” It is just as important to be prepared for both. Accountants, tax preparers, and financial consultants spend time trying to help all of us prepare for taxes. Few, if any spend any time preparing for death.

The topic is awkward, frightening, and very emotional. Ignoring the consequences of dying too soon can make things more awkward, more frightening, and much more emotional. What can you do about it?

The purpose of this information is to provide a guideline, or frame work, in which you can begin this process of reviewing your legal documents, your asset protection, access to passwords, and simply where all of the paper work is located. If you care about those around you then you need to spend time getting your affairs in order. Addressing all aspects of this eventual problem will hopefully reduce the burden on those left behind to handle your affairs.

“Show me the money.”  Jerry Maguire

What happens to your income when you die?  Unless you are planning to be dead for only a short period of time, the cash influx stops. You need to think about how things get paid for once the payroll deposits stop.  Make sure that you have a conversation with an insurance professional to determine how much you need. This can be based on simply replacing income, covering liabilities, or buying what your budget allows.

Life insurance should be purchased because you NEED it or because you WANT it. If you have children, you need coverage. If you are older, you may WANT it to provide education for grand children or to leave a gift to your favorite charity.

“The only disability in life is a bad attitude.”  Scott Hamilton

There are always motivational stories about the human triumph over adversity. We should all hope that we have the internal fortitude to overcome these challenges should we ever face them. It will be much easier facing these physical and mental challenges if you have addressed the financial end of being disabled.

Like life insurance, this coverage is designed to handle the financial consequences of not being able to do our job. Life insurance pays if you have the good fortune of being dead. Being disabled means that not only are you not bringing in your pay check, you continue to cause costs to be incurred.

Disability. You are 7 times more likely to be disabled than you are to die. While less than 1% of all term life insurance policies pay, the possibility of being disabled is significantly greater. The solution? Speak with an insurance professional to understand what coverage should be in place.

“I hope I die before I get old.”  The Who

We are living longer than ever before. There is only one thing worse than dying too soon and that would be living too long. What happens when you are no longer capable of taking care of yourself? Whether you need someone to stop and help with household affairs or help you get into your wheel chair, seven out of 10 people will need this assistance. How do you handle this potentially devastating financial burden? Long Term Care.

At an average daily cost of $200 a day, life in a nursing home gets very expensive very quickly. $200 a day means $6000 a month. $6,000 a month means $72,000 a year. The average stay in a care facility is four years which means almost $300,000. How many couples have an extra $300,000 lying around? What happens to the surviving spouse once the $300,000 is expended?

Speak with an insurance professional to better understand the exposure and the costs of securing vital protection for asset preservation.

“No job is finished until the paper work is done.”  Anonymous

I am sure you are not surprised that information from an insurance professional would start with all of the insurance options to address problems. These coverages are just a part of the process of protecting yourself against the rogue death wave. The next section that we will address are the important legal documents that will help assure your intentions once you are dead and give those left to handle your affairs a better understanding of your intentions. I will address the documents needed in the event you don’t die or you are stuck between life and death.

There are three vital documents that everyone over 18 should execute. They include a Durable Power of Attorney, an Advanced Directive, and a Will. (I am not an attorney and this is not intended to be legal advice. As with the financial vehicles mentioned above, you should consult an attorney on the specific drafting of these vital documents.) These documents should be stored in a safe, but accessible place. Keeping them in your safe deposit box is a bad idea as the POA would need the documents in order to access the box.

The Durable Power of Attorney.

As I understand this, it is a document that will allow the person I appoint to handle my affairs in the event I am unable to do so. This can be something as simple as picking up a piece of registered mail for me at the Post Office to handling the sale of real estate if I am incapacitated. Executing this before it is necessary or needed is important. Once you are unable to understand the concept of this power of attorney, it may be too late to get one.

The Advanced Directive.

This is also called a living will. It tells your loved ones what efforts you want then to take to keep you alive. Do you want all measures utilized? Do you want them to be able to disconnect the machines if it is only the machines that are keeping you alive? This is a document that allows you to advise decision makers, in advance, of your desire. It relieves them of the pressure of trying to guess what you would want to happen.

The Will.

This directs your appointed representative to handle the affairs of your estate. Simple or complex, someone needs to know what you want done with your assets once you have passed.

Now that we have dealt with the various insurance coverages that are available for protecting your assets from death, disability, or a stay in a care facility, and the important legal documents that will provide for direction , you should spend time organizing all of this.

I have a series of binders called “Robb’s Death Books.” As harsh as that sounds, they are designed to provide an organized arrangement for all the important paperwork in life. In my case, there are three books.

The first book contains all important documents. This includes car titles, birth certificates, banking documents, social security cards, and marriage licenses. This should be stored in a place that is safe but accessible. In addition to the storage of actual documents, this should also include user names and passwords for all electronic portals. (In addition to the list, I recommend that families use the same apps for password and user names storage. Make sure you use the same app and use a family password that everyone knows.)

All of the legal documents make up Book 2 in the Robb’s Death Book trilogy. This books includes all of the wills, POA’s and advanced directives for ALL family members. Remember, the oldest person doesn’t always die first.

The final book contains all of the insurance policies. This includes car insurance, home insurance, umbrella policies, life insurance, disability policies, and the Long Term Care coverage. Anyone in our family knows exactly where this information is located in the event it is needed at any time.

Other documents to be kept in a safe or safe place.

In the day and age of digital storage, many believe the keeping important documents electronically is a good idea. It is a good idea if there is electricity and internet access. All of that goes out the window after a hurricane or severe storm that knocks out power for days or weeks. You should be sure to keep original, or copies, close at hand of the following


  • Social Security Cards
  • Drivers Licenses
  • Wedding Licenses
  • Birth Certificates
  • Copies of medications
  • Car titles and registrations
  • Jewelry appraisals
  • Deeds
  • Insurance policies- car, home, umbrella, life, disability, long term care, etc.
  • Wills, Powers of Attorney, Advanced Directives, Trusts, etc
  • Updates lists of User names and passwords for online accounts