Financial Planner Learnings and Insurance

[SustainableHappiness]

DW and I recently got wrapped up into a meeting with a financial planner. It was actually a very interesting meeting, however my conclusion was, "this guy could be a good asset for most other people, but not for us". Probably a problem to do with wheaton levels. E.g. he couldn't comprehend why we would willingly enter into an arrangement where our net cashflow was $0 or just above $0, maybe even eating some of our cash savings in a month for a period of years, even if it meant dropping to 12-15 hrs per week, or why we aren't really looking into buying a house with so much cash in the bank.

However, we did learn a few new things that I checked out and either squashed or acted on.

New things:
Segregated funds - an insurance companies take on mutual funds, guaranteed principal, massive MERs, blah blah blah. Squashed, not worth it.

Critical Illness insurance - For our kids. $64 a month, at age 25, 75% of the premiums get returned if insurance is not used, at age 75 the rest of the premiums get returned if not used. Pays out $100K for roughly 30 different diagnoses. Debating, however leaning towards squashed.

Mint.com and financial aggregators like that - voids your banks security guarantee if sign up for one of these sites! This is true (for all canadian banks for sure anyways) and made me never want to use them even though they are tempting for simplicity! Acted on.

The question of life insurance also got raised again, however with no mortgage and >10 years saved up, I don't feel like insurance is necessary, as the other parent will be able to hopefully get life sorted out within 10 years of death (horrible to think about, but I'm confident in DW and myself).


Anyways, the reason for this post is to hear your opinion on the topic of life, disability and critical illness insurances. Do you do it? What circumstances would cause you to stop it/start it? Particularly disability and critical illness for kids as described above.

Note, I'm Canadian and I don't know how US health insurance would factor into these things...

[SavingWithBabies]

I'm at > 10 years of expenses saved and paying for life insurance. It stings because my BMI was high (which about doubled my rate) but I dropped a bunch of weight to get down into the normal category. I have to wait 6 months for my insurer to supposedly drop the rate. I'm sitting here wondering if I should just get a quote from a competitor and switch today but I'm half way there so I'll wait -- if the rate doesn't drop appropriately, then back on the market I go.

I'd prefer to self insure too however there is a big income disparity between my wife and I (teacher vs software developer). So I think we'll get up to at least 15-17x yeas of expenses before we drop it. I've talked it through with my wife a couple of times. We don't have a paid off house though so that is something we'll have to think about.

I don't have any disability or critical illness insurance.

[prognastat]

Well we aren't the target audience for most financial planners as we fall so far from the norm.

I currently have health insurance through work, though do plan on decreasing the additional services to it and cancelling life insurance when open enrolment comes around due to divorcing.

Don't have kids so don't know about the critical illness, but it would seem to me barring some genetic/hereditary problems the odds of your children experiencing a critical illness to be quite low and wouldn't healthcare cover most things anyway?

[jennypenny]

Critical Illness insurance - For our kids. $64 a month ... Pays out $100K for roughly 30 different diagnoses. Debating, however leaning towards squashed.

Do you already have kids? (sorry, I don't recall) If you already have kids, you could do a 23 and me thing to check for red flags that your pediatrician hasn't already checked for (or discuss the situation with your pediatrician and get them to order tests to rule out as much as possible).

Just fyi ... $100K is nothing. We've had single years with bills that high, even with insurance (DS has cystic fibrosis). You would most likely use it to cover specialists or hospitals that are out of network, tests the insurance company deems unnecessary, and treatments that are considered experimental or off-label in some way. I don't know if that makes the insurance worth it, just pointing out that it's not as much as it sounds like.

[arcyallen]

I think insurance is great for when you can't afford the possible bill, or can't sleep knowing you might have to pay it. I don't insure my cars for collision because I'm comfortable taking the risk and replacing it if necessary out of pocket. I would be pissed, however, if I didn't insure my house and it burned down. So it's insured. The thing to keep in mind is ultimately you're buying peace of mind - financially, the odds are you'll pay out more than you'll receive for benefits. If that peace of mind is worth it, great. If not, skip it. And for what it's worth the odds of you using disability insurance is actually pretty decent - something like there's a 50% chance you'd use it if you had it.

[SustainableHappiness]

Thanks for the feedback. We've decided no life insurance unless we decide to get a mortgage in the future while our kids are young (only 1 kid so far). Critical illness, there isn't a history of any of the listed illnesses, so we've decided against it.

A big part of the discussion was, well, one of us could go back to full-time work, and/or if we have a disability that prevents working Full-Time, there are numerous gov't programs to aid with this, plus we can reduce our expenses to a FI situation if necessary. The worst worst case is expenses go up due to disability of 1 family member + neither of us can work full-time while 1 watching kids + our parents or 4 siblings don't allow us to move into their houses until we get it figured out + gov't programs to support this type of thing fully collapse. I guess I am optimistic that won't all happen at once and although it may be harder than our current "easy" mode, we'll figure it out.

Thanks again. I also found the idea of insurance as a wealth transfer from low-risk to high-risk individuals an interesting take on the discussion.