What is the Asset You Least Want to Lose?

cry

Will this be you?

“By the time I have money to burn, my fire will have burnt out.”
–Unknown

I was speaking with a friend recently, and this friend bet that I would become bored in retirement.

“You’ll go start some other company because you have the entrepreneurial fire burning within you,” my friend said (I paraphrase).

“Nope. I’ll be traveling the world. Wanna bet?” was my response.

Yes, I enjoy what I do as a profession. I enjoy entrepreneurship. I like the challenges and the freedom that both pose for me. I like that I have some say in controlling my destiny.

However, that doesn’t mean that working is what I always want to do. I have other interests, like travel and soccer, that, given my druthers, I’d pursue over working.

I suspect that there are few of you who would choose work over family, travel, the dog, your hobbies, etc.

While you want to enjoy your work so that you’re not in 8-12 hours a day of misery and drudgery, it’s not the absolute #1 item on your list of what’s important to you.

Certainly, I could become an angel investor, which might be intellectually rewarding and stimulating and potentially have some upside beyond what the stock market or real estate investing could offer; however, as we discussed in “Once You’ve Won, Stop Playing the Game,”, there are two primary risks in such a pursuit, or entrepreneurship for that matter, that I want to avoid when I’m done.

The first is the financial risk. While I obviously wouldn’t invest more than my at risk capital, there’d be no real purpose in taking such a risk if I will have already retired with the lifestyle that we want to have in retirement.

However, there’s a second risk which is much more intractable.

The MOST Risky Asset Class You Have

Why Do We Rarely Buy Disability Insurance?

Aleksandr Rou - Kashchey bessmertnyy aka Kashchei the Immortal (1944)

Not even they were immortal!

“The only thing wrong with immortality is that it tends to go on forever.”
–Herb Caen

I remember getting the call from my wife. She was back in Charlottesville spending a week at her home office while I stayed in Texas.

She’d started getting a slight tremor – a tic like she was shaking her head no – about a year before, and I hadn’t really noticed anything. Her mother and her voice teacher saw it and my wife finally asked me if I’d noticed.

Being the dutiful, observant husband, I hadn’t noticed a thing.

So, one night I watched while she read and I noticed it. All along, I’d rationalized that she was just being an active reader and never agreed with anything that she read.

She went to the doctor, who sent her to a neurologist, who sent her to get an MRI.

The MRI results came back when my wife was in Charlottesville. The neurologist saw some things with the MRI that led her to believe that my wife might have multiple sclerosis and needed to get a spinal tap to do further testing.

That’s when I got the call.

Once we got our wits about us and started to prepare in case the diagnosis confirmed that she had MS, we reviewed our financial situation, to include our insurance coverages.

Even as a planner, even though you think that you have everything tied up wire tight, you have that moment of doubt.

The OSM as I have heard it called: the oh **** moment.

Fortunately, my wife had the disability insurance coverages from her employer that she needed in case a) it was MS, and b) the MS eventually caused her to be unable to work.

So, we had the financial piece tied up and could deal with the emotional piece.

Fortunately, what the neurologist had seen on the MRI turned out not to be anything significant, and my wife received the all clear.

However, things could have turned out differently had it turned out to be MS and my wife was not covered under disability insurance.

According to the Council for Disability Awareness, an average, healthy 35 year old female has a 9.1% chance of having a 5 year or more disability that prevents her from working. An average, healthy 35 year old male has an 8.0% chance of having a 5 year or more disability that prevents him from working. See here for more details.

So, we have somewhere between an 8% and 9% chance of being out of work for 5+ years because of disability, but, according to The Hartford, only 44% of Americans carry long-term disability insurance. It doesn’t take a math major to figure out that the ones who don’t have long-term disability insurance are playing Russian Roulette with their financial health.

You have a much higher chance of filing a disability insurance claim than you do a life insurance claim (well, your beneficiaries filing it in the latter case).

But we’re awash in life insurance (relatively speaking…don’t take that to mean that we are overinsured unless you have an indexed universal life (IUL) insurance policy) compared to disability insurance.

Why Aren’t We Purchasers of Disability Insurance?

Once You’ve Won, Stop Playing the Game!

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