This is the 4th in a series of 10 “fragments” articles.
To the prairie chicken man, the extra $34 per month for the lower deductible has a cost of $34, just that and nothing more. The prairie chicken man can only perceive the present moment or the present month.
To the eagle man, the extra $34 per month for the lower deductible has an actual cost of over $1,250,000. The eagle man perceives the cost of any regular payment as being the loss of the future wealth that would have accumulated if the payment had been fed into an investment stream throughout the entire working life.
To the prairie chicken man, the $39 a year for Discover Chargegard costs exactly that, just $39 a year.
To the eagle man, the cost of taking Discover Chargegard is over $100,000. This is the total amount lost because of not investing the piddling $39 a year in an aggressive manner throughout the eagle's entire working life.
Here we list several potential survival crutches. Each of these may or may not be a survival crutch with the circumstances that exist in your financial life. In "The Debt Destruction Engine," I discuss how to decide whether or not a suggested item really is an unnecessary survival crutch. I also recommend, no, I actually insist that you read chapter 5 of "The Wealthy Barber" by David Chilton before you make any changes to your life insurance coverage. Chilton explains how to decide what kind of coverage you need and how much coverage you need.
Here is the list of potential survival crutches:
Paying more money for a lower deductible on any insurance policy
Charge Guard Protection (You can cancel this coverage at any time.)
Credit Life Insurance (Pays off a loan in event of death, which is an eventuality more efficiently taken care of by term life insurance. You can cancel this coverage at any time during the term of the loan.)
Supplemental Accident Policies (Eventuality more efficiently covered by your regular term life policy.)
Full coverage on old vehicles with low book value (You can change coverage to liability only, when book value drops to a very low amount.)
Death, Dismemberment, Loss of Sight Coverage on Auto Insurance (You can call your agent and drop this inefficient add-on coverage.)
Medical Insurance on Auto Insurance (You can call your agent and drop this inefficient add-on coverage. Your regular medical policy covers you whether you are in a car or not.)
Insurance Policies on Children with High Death Benefits (It is wise, generally speaking, to carry no more than $20,000 on each child. You want to invest in the life of the child more than you want to guarantee that you will receive a large payment if the child does not survive.)
Taking Whole Life or Universal Life rather than Term Life Insurance
Cash per Day of Hospitalization Policies
AFLAC-type Coverages (Unless completely free through work)
School Accident Policies (Eventuality more efficiently covered by regular medical coverage.)
Towing Coverage on Auto Insurance (It is, generally speaking, more efficient, over the long run, to save the amount that this would add to the premium and pay for the towing yourself. As you get much older, this is less likely to be a true survival crutch.)
Car Phone/Audio Equipment Coverage on Auto Insurance
Monthly Premiums for Optometrist and Chiropractic Discount Plans
Mortgage Protection Insurance (It is, generally speaking, more efficient to pay off the mortgage with the death benefit of the term insurance policy. It is, generally, more efficient to increase term insurance coverage for this purpose, if necessary, rather than taking mortgage protection insurance.}
Credit Disability Insurance (Pays off a loan in event of disability. You can cancel this inefficient coverage at any time during the term of the loan.)
Cancer Policies
Extended Warranties (It is, generally, more efficient, in the long run, to save the money you would pay for this coverage and just pay for the covered repairs yourself. You can usually cancel this coverage at any time.)
Burial Policies (It is more efficient to take a term life insurance policy.)
Repair Contracts (It is, generally speaking, more efficient, in the long run, to save the money you would pay for this coverage and just pay for the repairs yourself.)
Dental Insurance (Assess this one carefully. For most people in most situations, this is a survival crutch. For some, it will not be an inefficient crutch. You have to size up your own situation.)
Prescription Card Programs
Rental Car Reimbursement Coverage on Auto Insurance (See "Wealth without Risk" by Givens.)
Allowing the government to "store" your money by intentionally having too much withheld for income tax
Any Policy that Covers Deductibles
Any Policy Where You Pay More in Premiums Than You Can Collect in Benefits
Using Credit When A Way Can Be Found To Use Cash
There is a book I would like to recommend that will help you understand the survival crutches, but I have to give a loud and stern warning to protect you and to protect me (from liability).
Do not, I repeat, do not just "haul off" and cancel your life insurance coverage!!!!!!! Read chapter 5 of "The Wealthy Barber," talk to several knowledgeable advisers about life insurance, and make sure you understand what it is that you are going to do.!!!!!
If you decide that you want to replace your whole life insurance or universal life insurance with a term life insurance policy:
(1) obtain the term life insurance policy
(2) from a company with a solid financial rating
(3) in the appropriate amount as explained in the "The Wealthy Barber"
(4) and have the documentation in hand that proves that the insurance on you is in force
Before
You cancel the old whole life policy or cancel the old universal life policy!!!!!!!!!!!
With this understanding, I can recommend "Wealth without Risk" by Charles S. Givens. You will understand the survival crutch concept much more clearly after looking through the strategies in Givens' book. I usually get this book for about $4.50 at Half Price Books to give it away to people to help them understand the idea of the survival crutch. Please bear in mind that "Wealth without Risk" was written in the 1980's and the information within it is not completely up to date today, but floodlights will turn on in your mind as you read it. Your wealth is, indeed, hidden in the fragments of your life.
No comments:
Post a Comment