The Stewardology Podcast

063: Life Insurance & Long Term Care Insurance

December 07, 2021 The Stewardology Podcast Season 1
The Stewardology Podcast
063: Life Insurance & Long Term Care Insurance
Show Notes Transcript

Join Financial Advisor Tim Russell, CFP® and Rev. Drew Gysi as they discuss Life Insurance, Long Term Care Insurance, and whether or not you might need it.

See the show notes here!

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Life Financial Group, Inc.
Wealth Management from a Biblical Worldview

Ben Franklin once said, "Nothing is certain but death and taxes." I believe that if Ben Franklin was alive today he would add a third certainty: Insurance.

This is one of those love-hate relationships that many of us have...

  • We totally dislike having to get certain insurances, which some are required by law to have (car insurance as one).
  • We dislike the cost of certain insurances.
  • Insurance seems like it is an ongoing expense that will never end.
  • However, we love when there needs to be a claim and the insurance company upholds their end and makes payment for repairs or settlement.

Insurance is, sadly, a needed and necessary item for many of us today. One of the questions that we get on a regular basis in our Life Institute Stewardship Lifestyle Seminar is “what insurances do I need and why?” Today we will not be able to cover all the insurances that you should be looking into, but we will look at two key insurance policies that you should at the minimum investigate or just outright get, especially if you are married, to care for and protect your family.

Why bring up the topic of insurance?  Well, in being a good steward of what the Lord has put into our care, insurance to provide for and protect your family in your absence is a good and right thing to have. Now, in Biblical days they did not have the Geico Gecko or the Aflac Duck, so insurance as we know it was not a thing in those days. But, if there was one family that should have had life insurance in the Bible, it would be the Widow that Elisha did a miracle for.

 

2 Kings 4:1-7 ESV - Elisha and the Widow’s Oil

“Now the wife of one of the sons of the prophets cried to Elisha, “Your servant, my husband, is dead, and you know that your servant feared the LORD, but the creditor has come to take my two children to be his slaves.” And Elisha said to her, “What shall I do for you? Tell me; what have you in the house?” And she said, “Your servant has nothing in the house except a jar of oil.” Then he said, “Go outside, borrow vessels from all your neighbors, empty vessels and not too few. Then go in and shut the door behind yourself and your sons and pour into all these vessels. And when one is full, set it aside.” So she went from him and shut the door behind herself and her sons. And as she poured they brought the vessels to her. When the vessels were full, she said to her son, “Bring me another vessel.” And he said to her, “There is not another.” Then the oil stopped flowing. She came and told the man of God, and he said, “Go, sell the oil and pay your debts, and you and your sons can live on the rest.”

  • She was a widow with minimal to no income.
  • She had substantial debt. 
  • There was fear that her children would be taken away by the creditor to become slaves.
  • She had NO WAY to make repayment of the debt.
  • She was desperate!
  • Elisha enters the picture and we see the vessels filled with oil. Then, she is commanded to sell that oil, pay her debt, and live wisely off the rest.

In this situation, the husband died and the wife was left destitute. To be clear, Elisha is not saying that you need life insurance. But his commands to for the widow fulfills the same purpose as our modern day life insurance.

 

1 Timothy 5:8 ESV

“But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.”There is a key word that is here in this verse: PROVIDE.  This word has a unique meaning from the Greek language.

προνοέω: to care for or look after, with the implication of continuous responsibility—‘to look after, to take care of, to see to.’

It is ONGOING. There is not a statement of ending (until death).

 

LIFE INSURANCE

  1. Primary Purpose for Life Insurance
    • Replace Income: Life Insurance can help supplement lost income when the insured passes away. This is vital if debt is not paid off and/or invested assets are insufficient to replace needed income. 
    • Buy time: Life insurance buys the time you need to pay down your debts while you grow your assets. There may come a time when you reduce your debts and build your invested assets to the point that you no longer need as much (or any) life insurance.  

 

How would your family survive with the loss of your income due to death?

  • Farm the kids out while your spouse goes back to work full time?
  • Put an ad in the church bulletin looking for a spouse? 
  • Move in with adult children?
  • OR - Invest cash from life insurance to generate income?

 

  1.    Types of Life Insurance
  • Permanent - Whole Life, Universal Life, Variable Universal Life, etc.
    • As long as the policyholder pays the necessary premiums, the policy will continue for the insured’s entire lifetime.  At death, the insurance proceeds are paid to the beneficiary(ies). 
    • These policies generally build cash value (excess premiums) which can earn interest annually. After many years, the cash value may grow large enough for the interest or dividends it earns to pay the policy premiums. 
    • These policies cost much more than Term Insurance but should continue until death, guaranteeing your heirs needed cash.
  • Temporary - Term Life Insurance
    • Policy will last for a stated period of time, typically 10, 15, 20, or 30 years provided premiums are paid as required. In the event of the death of the insured while the policy is in-force, the insurance proceeds are paid to the beneficiary(ies). 
    • These policies do not build cash value and at the end of the term, the insurance protection either ends or premiums jump significantly (dependent on the particulars of the policy). 
    • Term Insurance is the most economical way to purchase the necessary amount of life insurance to “buy time.” 
    • One potential downside to term insurance is not being able to requalify due to health problems when the policy term expires.  

 

  1.    How much Life Insurance do you need?
  • Rule of thumb - For every $1,000 of monthly income that is needed to be replaced, we suggest purchasing at least $250,000 of life insurance. 
  • For example, if you want to replace $4,000 of monthly income, you would need $1,000,000 in term life insurance. 

 

LONG TERM CARE INSURANCE (NURSING HOME)

3 Options to Pay for Long Term Care

  1. Self insure - This is when you have enough in savings or investments to provide for the cost of nursing care not covered by Medicare or MedSup. This option should not be considered if your estate is less than $3,000,000. Do not make a decision to self-insure without consulting with a financial professional.
  2. Buy a Traditional policy - The majority of long term care policies require monthly or annual premium payments. These policies have seen large premium increases from year to year. If you never need the benefits from the policy, there is nothing left to you or your estate upon death.  
  3. Buy a Limited Pay policy - These policies require a lump sum purchase (all at once or over the course of a few years). Technically, they are a whole life insurance policy with a long term care rider. The benefit is that if you don’t use it, you won’t lose it. In other words, if you don’t end up needing the long term care benefit, your estate can receive the death benefit when you pass away. These require a large amount of non-IRA money up-front to fund the policy. If you have the means, this option may be the best as it protects from future rate increases. 

Crisis Planning - Protecting assets for the community spouse (healthy spouse) to avoid becoming destitute. You may benefit from working with an Elder Care Attorney along with your financial advisor. For more information or to get help finding an attorney, call 800-688-5800. 

 

STEWARDSHIP APPLICATION

Being a good steward of what the Lord has put into our care, is our Biblical responsibility!  To take care of our family, both today, and in our incapacity or absence,  is still our responsibility (remember “PROVIDE - CONTINUAL PROVISION”). Look ahead and see whatever potential problems that may come your way. It would be good and right (and even Biblical) to make sure that you have your financial house in order so that if something does happen to either spouse, that there will be the needed funds to take care of the remaining spouse along with any kids still in the home.

God can, and does still do miracles today, but should we rely on that?  Shall we wait and delay and just trust God that He will step in to take care of our family in our incapacity or absence? Absolutely! We can trust God. But we should not presume upon miracles. We need to be proactive as we plan and provide for our spouse and family in case future issues and problems come our way. Be a good steward. Speak to someone that can assess your situation and help you put a plan of action together that will care for and provide for your family in your absence.

 

Next Steps

 

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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