People take risks every day. Some of them are more obvious like driving a car, but we forget the less obvious ones such as falling in the shower. There are four things you can do to help mitigate your exposure to risk, including financial risk, (although that won’t help with the sore backside).
You can abstain from risky things. Though that may not sound ideal or even feasible, it is an option. Some families won’t drive when it is dark outside. My wife and I used to enjoy riding our Harley Davidson. We still miss it, but drivers don't pay attention any more (texting and driving), so the danger is not worth buying a new Harley Davidson.
You can reduce risk by putting down a bath mat in the shower or putting on a helmet when you ride your motorcycle. Reducing risk is really the best option for many situations.
You can accept the risk and head out on the motorcycle or dance wildly in the bathtub. Sadly, every time we drive, we recognize that distracted drivers surround us.
The final thing you can do to address financial risk is to transfer that risk to another party. Usually, this occurs with insurance products. You have health insurance for the fall, liability insurance for the accident, and even life insurance for the extreme situation.
A common fear among American retirees is the expense of living in a nursing facility later in their life. We have all heard the horror stories of losing assets and being forced to leave homes. My personal experience is this is overstated, but it is a risk, nonetheless.
Health insurance companies developed long-term care policies that were written in the past. That industry cannot typically adjust premiums individually, but they can do it by class. If for instance, the claims-paying experience was increased, the companies can and did raise the premiums in many cases. This made the payments unaffordable for some senior citizens years down the road.
You can’t be mad at the insurers. This is no different than raising premiums on your house or car as they become more expensive to replace. The policies, in my opinion, had challenges from the point of inception. That is in no way an endorsement by me that you should cancel a contract if you have already purchased it, but do be aware of the situation.
Recently, the life insurance industry (which cannot raise premiums) has created a hybrid policy that covers long-term care and your life insurance.
If you have plenty of resources for retirement, are concerned with long-term care expenses and have beneficiaries that matter to your legacy plan, this is a possible solution. According to the Wall Street Journal, there were 66,000 traditional policies purchased last year compared to 240,000 for the hybrid.
There are many products that we have investigated and even recommend the purchase for families that fall in the right financial scenario.
Joseph “Big Joe” Clark, whose column is published Sundays, is a certified financial planner. He can be reached at firstname.lastname@example.org or 765-640-1524.