Thursday, March 13, 2008

The Best Insurance: ROP?

People ask me all the time, "What's best insurance?" I have a couple of answers to that. One is that it's like asking, "What's the best car?" It depends on how you plan to use it, what your budget is, how long you plan to keep it, etc. The best option varies from person to person, and can vary for each individual over the course of a life time. When I was 17, my 1975 Mercury Monarch (AKA "Blue Thunder") was the best option because could afford to pay cash for it, it had a rocking Pioneer AM/FM/cassette with Jensen coaxial speakers, and it ran. When I was in college and delivering pizzas, my 1981 Dodge O24 (AKA "Sherry")was my best option because it got great mileage and the black vinyl seats and carpet showed little of the spilled pop, pizza sauce, etc. My 2004 Dodge Dakota 4 door 4x4 I'm driving now (I'm so old and boring I don't even have a nickname for it) is my best option now because I can afford the payments more than I can afford to not be able to get to a client's home if I need to in the middle of a blizzard. It also works great for taking my family to my sons' out of town hockey and wrestling tournaments no matter what the weather. And no matter where I go I can always get "Outlaw Country" or "Hair Nation" or "Blue Collar Comedy" for myself, "'80's Pop" for my wife or "Radio Disney" for the kids on my Sirius satelite radio. But when the kids are gone, I'll probably be driving something much smaller that gets better mileage. So when asked about the best insurance, I first have to get to know the person, find out what they need, want, and can afford, then formulate the best plan to meet those wants and needs at the best possible price.

My other answer to, "What's the best insurance?" is the old cliche, "Whatever is in force when you need it." Even though that sounds like kind of a glib answer, it's true. Which is why I usually recommend a return of premium (ROP) if it's available. People keep it, so it's there when they need it.

ROP is most commonly used for life insurance. It's available on other products, but for this discussion I'm focussing on life. The principles apply to other types, however. This is a bit of an oversimplification, but basically how a ROP policy works is that you take out a policy for a set amount of time (term). If you keep making the payments until the end of the term, at the end the insurance company gives you the money back that you paid in. The premium cost is significantly higher than a straight term policy. They make their money on interest earned and by people cancelling before the end of the term.

On paper, there are several ways one can argue that other products are a better deal than ROP. However, I usually recommend ROP, because just like Communism and "friends with benefits" relationships, the concept and the way the real world works are completely different. I can show on paper that if you purchase a straight term life insurance policy, then take the difference in premium and invest it, the money you would have at the end of the term could be more if you hit the right investments, etc. However, in the real world, nobody does that. Instead of investing the difference, it gets spent here and there. Or in the rare cases it does get invested, it doesn't stay there. It gets pulled out to buy new tires for the car, Christmas presents, etc. Either way, at the end of the term, there's rarely a significant amount of money there. The same happens with loans and withdrawls when a person has a whole life or universal life policy. With ROP, you get a good chunk of money back at the end because you don't have access to the money until then.

Another advantage of the ROP is that you keep it even when times are tough. On a straight term policy, it's easy to let it lapse if you run across a tight spot. With a UL or whole life it's easy to let the cash value pay the premium, which causes the policy to "blow up" in later years. With ROP, you will keep it until the end of the term because you don't want to lose all the money you've put into it. Then it's there for the death protection, the real reason for buying a policy.

ROP is especially beneficial for those who aren't the best insurance risks. Yes, they are going to get charged a higher rate, but that also means they will get more back in the end. Instead of taking a trip to Chicago with the money they get back at the end of the term, they can go to Hawaii or Jamaica. It works especially well for those of us who say, "I know I need the insurance, but I'm going to wait until "someday" when I've lose 30 pounds and can get preferred rates. Unfortunately, as John Fogarty said, "Someday never comes".

If you haven't ever considered ROP, your action item is to call now to set an appointment to discuss "the best insurance".

Tuesday, March 11, 2008

D-Cup Finals

Other than my agency sponsoring my team, this has nothing to do with insurance. Sunday March 16 at 7 p.m., my underdog 11 to 7 Insurance team will be taking on the regular season champion team sponsored by my friend Matt Johnson's coffee shop/comic book store, Cup O' Kryptonite. I'm seeking the dubious honor of being the 1st ever repeat winner of the Trainer's Trophy (AKA "D-Cup"). I say it's a dubious honor because everyone else in the picture above has improved their skills, taken off the training wheels, and moved up from the D-league to the C-league since a year ago when my Silver Bullets team won the inaugural D-Cup.
Please accept this invitation to come cheer us on at 7:00 Sunday, West Rink of MISF, 5100 NW 72nd St, Urbandale, IA 50322.

Monday, March 10, 2008

Generic of Fosamax Approved!

Good news! The FDA has approved a generic version of Fosamax (alendronate sodium). Since it was just approved on February 6, 2008, not all the insurance companies have their formularies updated. Call me (515 457 3112 or 888 207 3525) to check on a particular company.

Fosamax is used to treat osteoporosis, most common in women after menopause. The normal Fosamax dose is one pill per week, with a retail price of about $80 for a one month supply of 4 pills. Most insurance companies currently have it on the 2nd tier of a 4 tier formulary which is made up mostly of name brand drugs on the less expensive end of name brands. As they add the generic version to be an approved level 1 drug, don't be surprised to see them also move the brand-name Fosamax to their 3rd tier with a higher copayment in order to encourage use of the generic instead.

As always, an ounce of prevention is worth a pound of cure. The two main things a person should do to build bone mass so as to not need this drug is to get plenty of calcium (dairy products, some vegetables such as broccoli, supplemental pills and drinks that contain added calcium such as some orange juice and Propel Fitness Water), and to do regular weight-bearing exercise.

Doing that sure beats compression fractures of the spine and broken hips that commonly result from osteoporosis.

If you are an insurance nerd like me and want to read the FDA's release regarding this approval, it is online at

Friday, March 7, 2008

Exsanguination Insurance

When I heard the word "exsanguination" on one of the numerous versions of CSI awhile back, I knew what I meant. I guess my $400+ monthly student loan payment for that English degree is worth it!

If you didn't spend a semester in "Greek and Latin for vocabulary building", exsanguination basically means to bleed to death. After seeing what happened to Richard Zednick of the Florida Panthers and then going back and watching a similar thing happen to Clint Malarchuk back in the 80's, I started thinking about the odds of something similar happening to me. (If you read this blog regularly, you'll find that I'll jump at every chance I get to try to write about both hockey and insurance together.) Realistically, the odds of it happening are pretty small. But at the same time, so was the price of a neck guard. I picked one up at Alien Hockey for about $16. The knock I hear on neck guards is that they're uncomfortable. This one was, straight out of the package, because it's designed for up to a 17" neck and I buy my dress shirts with a 17 1/2" neck. However, all it took was sewing an additional 2" piece of Velcro on it, and now I don't even know it's there when I play. I've even discovered that it has the unexpected benefit of helping me stay warmer when playing on the east rink of MISF where they only turn the heat on during the 3 months I had off back when I was a teacher.

As far as I know, no one offers an insurance policy to specifically cover exsanguination, just life insurance. There's one minor drawback, though: you have to die to collect! Make that two drawbacks. Somebody else gets the money, too. Just like my fire insurance on my house and my theft insurance on my truck, I'll probably never need it, but my $16 exsanguination policy is money well-spent.