Life Insurance, Long Term Care & Disability Policies

This month featured Nick Lotfey of Lotfey Dennett Insurance.  Nick has been my insurance broker for years and has helped me get coverage across all areas of my business(es).  Many of you heard him speak last year, where he focused on types of property insurance and certain components of a policy that are crucial for landlords (many even switched to him as their broker after hearing him speak and have been very happy ever since!).  

This meetup was focused on other types of insurance, including life insurance, long term care, disability, etc. (Nick also does business policies for non-real estate businesses, but we have not covered that topic yet). 

To be honest, I have never thought much about these insurance types and never knew if they were helpful or a waste of money.  Lately, as my husband and I have been doing a bit of a reorganization/estate planning/updating our wills, I’ve realized that having some sort of life insurance policy is an important part of estate planning for us.  Especially if something happened to both Ed & I, having a life insurance policy with enough coverage to pay off our mortgages is a way to ensure that whoever is taking care of our son will have the funds available to provide for him. 

Limiting our debt will also create flexibility so that assets can be held onto or sold in a way that is best for our immediate family taking care of things after we are gone.  Additionally, since we each have a policy in our name, if something happens to Ed (or vice versa), there is money available to take care of business while we pick up the pieces left. Since we are self-employed (and both pretty crucial to the day to day operations!) having one of us not here will be a huge shift and any way we can remove pressure and stress seems like it’s worth doing.  We are still going through the process, but especially because we aren’t quite 40-years-old, 30 year term policies seem pretty cheap (in theory our mortgages will be paid off by then plus our kid(s) will be adults so if they expire it’s ok).  A few hundred bucks every month for peace of mind and knowing our family is taken care of seems like a pretty great trade off.  

There are two types of life insurance policies to consider; Whole Life and Term Policy.  A Whole Life Insurance Policy is a policy that will provide lifelong coverage (so long as you pay the premium), it does not expire and remains active throughout your life while a Term Policy is for a specific period of time (around 20 or 30 years).  In both situations, these premiums are fixed (and the earlier you purchase, typically the cheaper they are).  Whole Life Insurance has a “cash value” that grows over time, at a set rate (typically lower than what you would see on average in the stock market).  Whole Life was a great way for our grandparents, who didn’t have as easy access to investing, to create something to leave behind to their children.  You can also borrow against and withdraw parts of this policy (there are some people who use this within real estate investing, although I don’t have any experience on that so can’t speak to pros and cons).  Some Whole Life policies will also pay dividends.  Finally, with Whole Life has a Death Benefit, which is an additional amount paid out at the policy holder's death.  Term Policies, on the other hand, don’t offer any of these additional benefits; it’s a set premium, for a set amount of coverage, to be paid out at death.  Because they are simpler and don’t offer as much, they are typically significantly cheaper than Whole Life policies.  

Another important component of estate planning is the pros and cons of obtaining a long term care insurance or disability policy. Nick does not personally do LT care, but does have a referral partner he highly recommends for LT and disability.  He noted that the average age of purchase is late 50s (likely when it starts to be needed), but the earlier you purchase, the cheaper it will be (although of course you are paying longer).  

If you would like more information, or a free consultation to discuss your insurance needs, Nick can be reached at ‭(207) 370-6773‬ or nick@ldibrokers.com.  Lotfey Dennett is also a contributor to 1% Back to Maine, a non-profit that I am a founding member of.  Nick donates 10% of his profits from all business that comes from Portside agents (so this includes our group since I work for Portside!).  It’s nice to work with people are good and do good, and I highly recommend you have a conversation with him.  

Next month our meetup will feature Derek Hall of Dakers Hall; he is an excellent accountant and will give us some tips for end of year tax planning and other tax strategies.  Join us Wednesday, November 20, from 5-6:30. 

As always, a reminder that I am not a professional in this arena, and this is my recap based on our conversations.  Please consult professionals when making decisions!