Financial guru Stephen Pollan, whose clear-eyed best-sellers "Die Broke" and "Live Rich" turned traditional financial planning on its head, is bullish on insurance.
Rather than predicate financial planning on amassing wealth to pass on to the kids, Pollan sees the overall benefit to families, and society in general, to spend it while you can. Underpinning his four-part manifesto -- "Quit today, pay cash, don't retire and die broke" -- is the strategic use of insurance to mitigate the risk of running out of money before you run out of time.
Not all insurance, mind you -- just the ones you actually need to protect your livelihood while you're here and your loved ones when you're gone.
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Bankrate spoke to the 78-year-old Pollan for a wide-ranging chat about the insurance landscape.
Most people view insurance strictly as an expenditure. But you're a big proponent of insurance, right?
Yes, I am a proponent of insurance, but special products. For example, for most people, their most important financial possession is their stream of income, meaning their job. Now wouldn't it be nice if there was insurance to cover that? And there is -- disability insurance. Disability insurance saved my life. When I was 48, I came down with tuberculosis and the insurance company started delivering to me $3,000 a month, which was a lot of money then, and it came tax-free. For the first couple of checks, a man came to deliver them; maybe he wanted to make sure I was laid up or something. But I'm a huge believer in disability insurance.
Many people confuse a disability policy with the disability coverage they have through their employer.
Yes, they get disability insurance from the company, but that's always limited. I believe that people should have their own disability policy, and that it should be "own occ," meaning it's your own occupation. You cannot do the profession that was interrupted. If a dentist becomes disabled, he shouldn't have to go to a restaurant and become a waiter. I believe that the policy waiting period (before you make the claim) should be a significant length of time. There are waiting periods of 30, 60, 90 and 120 days. The longer the waiting period, the lower the premium. It's like a deductible. You are generally limited to 60 percent of your salary in the amount you can apply for. And when you pay for your own disability insurance, the money you receive is not taxable to you, where the money you receive from your company's disability policy is taxable to you if the company is paying for it. The number-one star insurance is disability.