Protecting
Your Income
If you are in business, you probably insure the
components of your business against loss beyond your control. You
insure your premises against fire, accidental injury, and theft
of property. Your equipment is probably insured. You probably have
business interruption insurance to compensate you if your property
is rendered unusable due to accidental damage. Whether or not you
own a business, you probably insure your car so you can be sure
that you’ll always have the means to get to work. You probably
insure your dwelling so you can be sure that there will be a roof
over your head in the event of a catastrophe.
Life, homeowners, and other types of insurance policies
provide important kinds of coverage, but they will not safeguard
you from financial impact if a disability prevents you from working.
The stark reality is that without disability income insurance, a
serious injury or illness could be financially devastating to you
and your family.
You may believe you’re less likely to become
disabled than to die prematurely, but statistics show exactly the
opposite is true. According to tables prepared by the Society of
Actuaries in 1985, at any given time in your career, the chance
that a long-term disability will occur is several times the likelihood
of death. For example, at age 37, the odds of a long-term disability
vs.death is 3.3 to 1. At age 42, the odds are 3.5 to 1, at age 47,
they are 2.8 to 1, and at age 52, they are 2.2 to 1.
Before you read further, please get a piece of blank
paper and a writing utensil. On the paper, write the names of 20
people that know each other. Some examples are members of your family
or members of a club, service, or religious organization. Once you
have finished, circle the ones who have had a disability lasting
90 days or longer. My experience has shown that more than 90 percent
of you will have circled at least 1 name on your lists.
If you earn $50,000 per year, in 20 years you will
have earned 1 million dollars. Without you in it, will your car
earn you that kind of money? Will any of the other things you insured
enable you to continue receiving your income? Disability income
insurance, also known as disability income replacement insurance,
is an important vehicle that will help replace a portion of your
income in the event that you become disabled due to accident or
illness.
The opinions expressed in this article are for general
information only and are not intended to provide specific advice
or recommendations for any individual. We suggest that you consult
your representative, attorney, or accountant with regard to your
individual situation.
*Like most insurance policies, Disability Income
Insurance policies contain exclusions, limitations, reductions of
benefits and terms for keeping them in-force. Your agent or financial
representative can provide you with costs and complete details.
Creating a Personal
Safety Net- Published 10/18/06
The disappearance of some traditional safety nets
from both the public and private sector has forced the American
public to shoulder more of the burden for their financial well being.
Today, many people realize that because the government and employers
are less able to provide financial security, they must create their
own personal safety net.
To do so, individuals need and want help identifying
and addressing the risks within their control. However, financial
products are getting more complicated, so people are looking for
help in navigating through the maze of choices in order to make
the best decisions for their circumstances.
And who better to explain those needs than a financial
services representative? Based on MetLife’s consumer research,
individuals eventually see agents as collaborators, but the road
is a long one. The worst part of the process is getting started.
Many people have feelings of unease, worry or concern. But those
same people report feeling better than expected during the process
and positive feelings of security, relief and satisfaction immediately
following meetings with financial services representative. And feelings
get even more positive with the passage of time. Rather than feeling
buyer’s remorse, these individuals feel that meeting with
a financial services representative was the right thing to do.
Isolating the need to collaborate with a financial
services representative is an important first step. Close to follow
should be the realization that good insurance coverage can improve
an individual’s quality of life. Most people associate insurance
coverage with benefits for one’s family more strongly than
with benefits for themselves (especially true with women and established
families) -- taking care of one’s family is the most important
emotional end benefit.
Constructing a personal safety net requires thinking,
in broad terms, about the life events that could trigger financial
adversity and taking the requisite steps to prepare for those uncertainties.
While it is impossible to predict all of life’s uncertainties,
it’s possible to group them into a few common categories.
They include:
• Morbidity Risk – In our low-savings,
high-debt society, medical expenses for an acute injury or illness
fall outside the reach of many Americans. Moreover, a chronic disability
requiring long-term care could be financially devastating. There
are many insurance solutions that can help defray the cost of medical
and dental emergencies.
• Mortality Risk – Life insurance allows
an individual to insure against premature death. It is viewed by
many as the foundation of their family’s safety net. Without
life insurance, the premature death of a primary breadwinner can
be financially devastating. However, in 2004, one third of adults
still carried no life insurance at all, similar to the 30 percent
of adults without coverage in 1960, according to the Life Insurance
Marketing Research Association. Regardless of your current financial
situation, life insurance should be an integral part of your personal
safety net.
• Longevity Risk – First the good news:
people are living longer than ever thanks to modern advances in
healthcare and medicine. But as pensions are replaced by personal
savings plans such as 401(k)s and IRAs, and Social Security lingers
on the brink of a boomer overload, outliving one’s savings
is more possible than ever. Most insurers offer solutions to help
individuals maintain an income stream after they retire. Deferred
annuities, for example, can be a great tool for one’s portfolio,
as they enable people to save money now, on a tax-deferred basis,
for use down the road. Immediate annuities, on the other hand, allow
an individual to immediately receive a guaranteed stream of income
for as long as he or she lives. Individuals should work closely
with their advisors and insurers to develop a customized income
plan for retirement.
Both fisherman and tightrope walkers can testify
to the importance of a strong net; a weak net could mean significant
losses for both. Similarly a financial safety net is only as strong
as the company that provides it. Individuals should make sure that
they are working with a strong, stable insurer that can guarantee
coverage when it counts.
Now, more than ever, insurers are in the position
to help offset the erosion of traditional social support structures
by leveraging vast asset pools and economies of scale. Most people
should consult their insurer and financial services representative
to develop a portfolio that will prepare them for both the possibilities
and uncertainties they face throughout their lives – the “ifs”
in life.
Diversification:
Composing Your Financial Symphony- Published 9/20/06
Any classical music composer will tell you that
creating a symphony requires a delicate balance of sounds, melodies,
and harmonies. Each instrument creates unique sounds and vibrations
which, when heard alone, may not be particularly compelling. However,
when the orchestra plays in unison, the end result can be a masterful
composition. Hence, the true art of creating a masterpiece—arranging
melodies and blending sounds. In this respect, composers and investors
share some similarities. Successful investing typically combines
a number of different investments in order to create a portfolio
that is “in tune” with the investor’s goals and
objectives. It’s no coincidence that such a technique is the
foundation for one of the most basic financial investment principles—diversification.
Diversification is the process of attempting to
decrease financial risk by investing monies in different asset categories.
To effectively diversify, many financial professionals recommend
investing in at least three different asset classes. The major asset
categories include: stocks; bonds; and cash (saving and checking
accounts, certificates of deposit, money market accounts, and Treasury
securities). Mutual funds often represent a combination of asset
categories, but may consist of just one asset category, such as
a bond fund.
Overall, diversification may help reduce investment
risk while achieving potentially higher returns. That’s because
different categories of investments react differently to changes
in the economy. For example, while stock values might be plummeting,
bond values may be rising or remaining level. With a well-diversified
portfolio, you can ultimately come to own many asset categories,
thus potentially reducing the impact market volatility may have
on your total investments.
Creating Your Own Ensemble
Before deciding where to invest, you should review
your personal financial goals and ask yourself the following questions:
o What are my goals for my money?
o How can I keep inflation from eroding my purchasing
power?
o How much risk am I willing to take with my money?
o Will I be comfortable holding investments with
daily price fluctuations?
Many investors use diversification as the foundation
of their portfolios. However, it is essential to realize that diversification
does not eliminate risk or guarantee a profitable investment return.
To reduce risk, your financial portfolio should
reflect your own personal financial goals and investment style.
Among other factors, your age, income, expenses, family responsibilities,
temperament (are you a risk-taker or do you prefer to play it safe?),
can influence how you should build your portfolio.
Arranging a Masterpiece
One of the biggest challenges facing the average
investor is deciding how to allocate personal savings or retirement
assets. Naturally, most individuals hope to create an investment
portfolio that is consistent with their personal objectives and
risk tolerance level. However, the lure of potentially high rates
of return can easily skew an investor’s objectivity, resulting
in unrealistic expectations and unnecessary exposure to risk. Thus,
it is important to adhere to a diversified investment strategy that
conforms with your short- and long-range goals. With a little bit
of patience, your future may bring music to your ears.
Metropolitan Life Insurance Company, One Madison
Avenue, New York, NY 10010 and New England Life Insurance Company,
501 Boylston Street, Boston, MA 02116
L0309ATY3(exp0907)ENT-LD
Copyright © 2005, Liberty Publishing, Inc.,
Beverly, MA, Reprinted with permission. Before implementing any
strategy discussed herein, you should consult with your own financial,
tax, and/or legal advisors to determine its applicability in light
of your own situation. Diversification does not guarantee a profit
nor does it protect against a loss.
All columns appear courtesy of Lisa Moyer. Lisa
is a Registered Representative offering securities through MetLife
affiliated broker/dealers including Metropolitan Life Insurance
Company (member NASD) or MetLife Securities, Inc. (member NASD/SIPC).
Insurance and annuities offered through Metropolitan Life Insurance
Company. She focuses on meeting the individual insurance and financial
services needs of people in the Slate Belt area. You can reach Lisa
at the office at East Penn Financial Group, 4905 W. Tilghman Street,
Allentown, PA 18104. Her direct phone number is 610.573.5616.
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Your
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