Financial Catastrophe Insurance
At some point in their lives, most successful people have a changeover in their financial objectives from “I need to accumulate more assets” to “I have to protect the assets I have accumulated.”
That changeover usually comes when individuals realize that if they lose a substantial amount of their assets they won’t have the time, or the opportunity, to recoup them. The result is that a lifetime of hard work can be destroyed without any hope of it being replaced.
A substantial – and irrevocable – loss of assets can be caused by any number of unforeseen events such as a bear market, a bad investment, an unexpected legal liability, and by just plain bad luck.
Another – and often overlooked – cause of the loss of substantial assets are the costs arising from a serious injury or stroke, or from illnesses such as Parkinson’s, multiple sclerosis, cancer and Alzheimer’s.
These costs have a number of common characteristics:
- They can run into the millions of dollars because the events that cause the need for extended health care can last for years.
- They have been increasing at the rate of about 5% a year.
- They are not reimbursable, to any meaningful extent, by Medicare or personal health insurance.
Surprisingly enough, relatively few affluent people have transferred these million dollar risks to insurance companies. As a result, by default, they have transferred the risk to their families because every dollar spent on health care costs will be a dollar less for that family.
Making one’s family the ultimate insurer of multi-million dollar risks is completely counterproductive to the individual’s estate and tax planning efforts.
It is also completely unnecessary in the light of creative insurance solutions to the extended health care cost problem. These solutions, in the form of innovative new policies, can often be significantly subsidized by tax savings and credits – and will refund all of their premiums if benefits are never paid from them.
In addition, it is now possible to purchase multi-million dollar extended health care protection in the form of disability insurance contracts that pay benefits regardless of the actual costs incurred.
In other words, for individuals who now want to make certain their assets are protected against unforeseen catastrophes, the time has come for them to give serious consideration to this new form of catastrophe protection.
