All About Insurance - Questions for Bruce Fear, vice president, Protection Products and Solutions

Additional Content

Bruce Fear

Education: BA in finance, actuarial science, University of Iowa; Chartered Life Underwriter (CLU)
Volunteering/Outreach: Vice president of his homeowners' association

Q: What is your role with Thrivent Financial for Lutherans?
A: Right now, I lead the team that comes up with new life and health insurance products. I’ve had various other jobs with Thrivent Financial over the years, including working directly with members as a financial representative.

Q: Insurance seems complicated. What’s in it for me?
A: We all know we need insurance for our cars and our homes—that seems straightforward to most people. You have a valuable asset, and if you lose it, you don’t want to pay for it all over again. Somehow, we just don’t see the connection as easily when it comes to life or disability income insurance.

Think of it this way: You can buy another house or another car. How are you going to “buy” your ability to earn money if you’re injured? How are you going to “buy” making sure your family is taken care of if you’re not around anymore?

There are three things that could come along and thwart the best-laid plans: death, a long illness or disability, and long-term care expenses. I’ve seen very wealthy people lose most of their savings over the course of a few months in a nursing home. None of us knows what’s going to happen; we just know it can happen.

Q: Realistically, what are my chances of needing either disability income or long-term care insurance?
A: I typically don’t like to use statistics, because we all think the odds don’t apply to us. The real question is: If I don’t protect against the risks, what are the consequences? Reality is, disability occurs, death happens, people go into nursing homes. Research indicates that one-third of people aged 35-65 will suffer a serious disability.* And about one in seven people become disabled for five years or longer.** The loss of income for six months can easily deplete five years of savings and, as a result, can devastate a family’s standard of living.

Q: How can I afford insurance and save for retirement?
A: The real question here is: Can you afford not to do both? What are the consequences for you and your family if you don’t protect your income? If you don’t protect your financial plan, it really isn’t a plan. Meaning, if you focus only on investing and don’t protect your assets, then you could lose much of what you’re saving. If you become disabled and have no income, for example, it doesn’t matter how much you were putting into your Roth IRA or 401(k)—you’re not going to be able to continue to put money into that account. On the other hand, if you only protect your income, you won’t have enough saved for retirement. It’s a matter of finding the right balance between the two—investing and protecting.

Q: Isn’t the disability income insurance I have through my employer enough?
A: It’s something to be thankful for, certainly. However, there are some things you may not realize. First, since your employer is paying for the insurance, the payment you receive is taxable, which means you have less available to pay your regular bills. Second, the amount you receive is likely to cover only 40 percent to 60 percent of your salary, depending on the plan. You have to ask yourself: Can we live on just a portion of our income? Plus, during a disability, there likely will be more medical expenses, in addition to paying your normal expenses. Having your own disability income insurance contract will help fill in these gaps. And the money you receive as a benefit of individual disability income insurance isn’t taxable.

Q: Does life insurance offer advantages beyond a death benefit?
A: You can look at life insurance like a Swiss Army knife. There’s the main blade that provides a death benefit. But then you can use all of the other blades, too. Insurance can provide for immediate and future cash needs; it can be used to supplement retirement income or perhaps even fund early retirement. There’s a whole laundry list of additional things you can do. Your Thrivent Financial representative can help you determine the advantages and disadvantages of the various options.

Q: What should I be looking for in an insurance company?
A: It tends to be a long-term relationship with the company you choose. So first look at the financial stability of the company. Top ratings from agencies such as A.M. Best and Moody’s, usually found online, can be good indicators. You’ll find a number of good companies on those lists. Then look for a company that matches up with your values and principles. For example, visit the company’s Web site and look for their mission and vision statements. While you may not know whether the company is living them, you still can get a feel for the company. This research will take some time and effort, but if you’re serious about the question, it’s worth it.

Q: I’m single and no one else depends on my income. Do I need life insurance?
A: Since no one knows what the future holds, look at it this way: If you get insurance when you’re young and healthy, you’ll have the coverage you need later on if your health or situation changes. And even though no one depends on your income, think about any debt you may have: Do you want to pass that along to anyone else, like your parents? Life insurance can cover those costs. Beyond life insurance, you also may want to consider disability income insurance, because you’re entirely dependent on your own income. There is no one else to help.

Q: So, if I have life and disability income insurance, I’m set, right?
A: Not necessarily. Back to the Swiss Army knife analogy: At different points in your life, you’ll use different blades. As you age, the need for some of the blades decreases but others become more important.

In your income-earning years, starting with your 20s and moving up toward retirement, it’s important to protect your income, which is your most valuable asset. You need adequate disability income insurance, as well as life insurance to cover any final expenses, debt repayment and future expenses in the event you die early.

Then, in your later years, it’s about income replacement and protecting your assets. You might consider long-term care insurance so you don’t have to tap into your retirement savings and think about how you plan to leave a legacy. Do you want to support a favorite charity and leave money to the kids?

In terms of our knife analogy, it’s important to sit down with your Thrivent Financial for Lutherans representative to determine which “blades” you will need to use at the various stages of your life.

Q: At what age should I start looking at long-term care insurance?
A: That’s a tough question. The earlier you look at long-term care insurance, the less expensive it will be and the more likely you will be insurable. So ideally, you should begin to look in your 40s. However, the vast majority of people purchase it in their 60s, which means it’s much more expensive. People in their 40s tend to be raising their families and putting their priorities in other places. When they become empty-nesters in their 50s, that would be the ideal time.

Q: What are the insurance basics I need to consider during the various decades of my life?
A: Assuming that you’ve taken care of insurance for your car, house and medical needs, the No. 1 priority in your 30s is disability income insurance. You depend on your income for everything, so it’s important that you protect it. You then want to look at your life insurance needs. In your 30s, life insurance probably means a small base of permanent insurance and more term insurance.

In your 40s, you continue to need disability income insurance, but you may want to re-address your life insurance needs—converting some term insurance to permanent. Your need for life insurance coverage doesn’t go away, but it could change as you get older.

When you get into your 50s and the first half of your 60s, with your children on their own, it’s time for you to look at long-term care. Also, if you’ve protected your income effectively, it’s time to start looking at ways to efficiently transfer your wealth someday and not leave a tax burden to your spouse and children.

Then, at 65-plus, you start looking at Medicare supplement and Part D prescription drug coverage. It’s extremely complicated and confusing. You have lots of choices, but you don’t have a choice of whether to participate or not.

Q: What’s the greatest misconception people have about the need for life insurance?
A: There are several misconceptions—or myths—that people tend to believe. They may believe that life insurance is out of date or that it’s no longer necessary when you become an empty-nester or when you retire. They also believe that asset accumulation—saving for retirement—is more important than asset protection. Any of these may be true and all of them may be false—it depends on your personal situation. There is no one right formula. Everyone has unique requirements, goals and dreams. By first defining these, it’s easier to see how a protection solution like insurance can help you reach your goals.

*Source: Life Insurance Fact Book, American Council of Life Insurance, 2001.
**Source: Health Insurance Association of America, The New York Times, February 2000.