Transcription:

Episode 5 – The importance of Life Insurance

Announcer: This is Blue Money. A finance podcast made for cops by cops. With us you know your money safe. Lieutenant Jim Donnelley of the Bensalem Police Department and co-host Kevin McGarry of Valley Financial Group come together to help protect and serve your financial needs. This is Blue Money.

Jim Donnelly: I want to welcome everyone to the Blue Money podcast. This is Jim Donnelley. I’m here with Kevin McGarry.

Kevin McGarry: Jimmy D.

Jim Donnelley: From Valley financial. And today, Kevin, I think this is the most important podcast we had up to this point. And today we be talking about life insurance and it really hit me yesterday about how important life insurance is, especially for law enforcement officers. When I was at Trooper Mac’s funeral yesterday, it just really hit a nerve with me. I was glad we’re having this podcast today.

Kevin McGarry: Yeah. What was it like there yesterday, Jim?

Jim Donnelley: It was tough, Kevin. I mean, I don’t know if you’ve ever been to a police funeral. I’ve been probably too many of them in the 23 years. I’ve been to police law enforcement, but yesterday was, I mean, if there was any positive reflection on yesterday, it was just how many people turned out for the family. And even the community. A lot of people just showed up and just to give you a visual Kev, picture, there were thousands of his lined up shoulder to shoulder. We were salute and we had the helicopter above us, hovering drones, roll up. We had these right in front of me. The honor guard was lined up with the flags, motorcycle guys were next to their bikes with the lights on, the drums were playing, the bagpipes. And the hearse pulls up, Officer Mac’s family’s coming out and you see the coffin it’s draped in the American flag. You see Trooper Mac’s wife standing behind the coffin. You see his two young daughters, they had to be seven or four. I don’t know something young, but they’re all being strong, but it really hit home. And wow, it’s so heartbreaking how young they were. They’re not going to ever know their father. And then Trooper Cisco jumps in my mind and realize that he’s going to have his first child is due in July and he’s never going to even meet that child. So, its really heartbreaking. I mean, I went home. It was very refreshing for me as a parent, just to go home, give my kids a hug, tell them that you love them. My kids could ask me for anything last night, Kevin. Michael asked me — they wanted to go to great adventure. They wanted to buy a dog, whatever it would’ve been Kevin, I would’ve did it last night. But I said, guys, what do you guys want to do? They wanted to go to Rees, took to Rees, they got [inaudible 00:02:18] They were happy. But to me it was just one of those moments that it really makes special being a parent, but it really kicked me like, man, I got to get this word out to here, about how important life insurance is for everyone.

Kevin McGarry: I mean like when you can go home and hug your children, there’s nothing more rewarding. 

Jim Donnelley: No, there’s really not. Kevin know when we are doing a lot of these reviews, what do you think we see most when it comes to law enforcement or anyone in general when it comes to life insurance?

Kevin McGarry: And Jim it’s really shocking. First of all, you got a lot of people that are unprepared for retirement, but the thing that’s even more shocking than that is how many people are unprepared to take care of their families. They’re not protecting their loved ones. They’re underfunded in life insurance. So, it’s not just in law enforcement or any other occupation. It’s American in general, 48% of Americans, Jim don’t have life insurance 50 to 52% that do, they don’t have enough. So, there’s a lot of reasons why when we’re sitting there doing these reviews and you’re trying to figure out, trying to get through to them, why don’t you have more and you need more. Now, what are some of the reasons that you’ve seen in these reviews that law enforcement police officers don’t have enough insurance?

Jim Donnelley: I think at first there are some officers that have insurance, but we don’t stay on top of it. And I’m using me for an example, Kev. When I first had my first child, Olivia she’s turned 11 soon, but when she was born, I went out I got a million dollar life insurance policy. And to me, growing up in Northeast Philly, living in the apartment with my mom and my brother, when I got that life insurance policy and I was 35 at that point. And I thought, wow, I just got a million dollar life insurance policy in case something happens to my kid, I’m fine, man. I want to pay for this. So, everything’s going to be taken care of. Let’s fast forward.

Kevin McGarry: I mean, you got a million dollar life insurance on there. 

Jim Donnelley: I thought that was big time back then

Kevin McGarry: They thought a scam was coming up soon. 

Jim Donnelley: I thought it was big time. But think about it. Now you look at it. I got three kids, I got a house I’m paying for education. I going to have weddings so much going on, that million dollars is nothing anymore. It’s really not. So, I had to re-upped it. Now, the only thing I re-upped is because I saw all these officers getting hurt, getting killed. Some of my good friends got cancer. So, it made me reevaluate my life and why I got it. So, I think that was one reason we just don’t stay on top of it. Another reason I think is because one thing that kills the law enforcement Kev is complacency. It really happens. That’s the number one killer in law enforcement is complacency. It doesn’t matter if it’s car stops, a domestic call, complacency will kill officers. We think it’s the same routine. So, we always think it’s not going to happen to us. Same thing we don’t ever think we’re going to get killed in a line of duty. However, we were speaking earlier today, Kev, we can name five or six cops that we know personally easy that either got killed in a line of duty or got shot in a line of duty. And we just talked about some of our friends that had cancer at a young age. People, we just lost a lot of friends over the years. Some had life insurance, some didn’t right. And it’s just really scary that way. And I know there’s a cop out there right now, listening, and he’s going, oh man, listen, I’m might die. We’re not going to die in line of duty. And you’re right. The probability is you’re not going to die in the line of duty if you had to play the odds, I get it. You’re right. But let’s talk about some other factors. I mean, in 2021, there was about 32,000 people killing car accidents, cancer, everyone was so horrible. Cancer is there was almost 2 million new cases of cancer in 2021.

Kevin McGarry: That’s terrible.

Jim Donnelley: With that, 21% were under the age of 54. That’s 400,000. So, just picture that picture, if you’re 46 and you try to get life insurance and you got cancer, you’re not going to get it. 

Kevin McGarry: I get it. 

Jim Donnelley: So, it’s just so important to get it now, why you got your health and there’s so many other ways that people are getting hurt out there.

Kevin McGarry: Yeah. I mean, when we’re doing these reviews and everything you just said Jim, like there’s so many reasons they give you why they don’t have insurance or enough. And the other thing is Jim, you’ll say like, well you have a hundred thousand dollars’ worth of life insurance. Why you have that much? What do they say?

Jim Donnelley: They have no idea Kevin. The things that we always get, well, some they have a 200 or a hundred, like you said, they, like, I thought I just needed to cover my mortgage. 

Kevin McGarry: And my dad told me…

Jim Donnelley: My dad told me, I read it somewhere. They’ve really have no substance of where they got that number.

Kevin McGarry: They have none. And I think the big thing is just trying to figure out how. But before we dive into that Jim, like the one thing I’m always shocked about is when they come in and they have their group insurance through their job, like, how does it work? How much it is. They don’t…

Jim Donnelley: So, that’s why individual contracts. So, say at Bensalem Township, they have a policy, a life insurance policy for each of us. It’s 85,000, which is not that much at all. That’s it. That’s what we have coverage through the township.

Kevin McGarry: But half of them to come and don’t even know that.

Jim Donnelley: They don’t even know that. I mean, listen, granted, there’s other perks that we’ll get, not perks benefits if we’re killed in the line of duty and some are important care. Most officers don’t know him. I didn’t know it till a few years ago when I start really looking into it saying, what kind of color will my guys have? If God forbid something happens to Bensalem. I mean, first there’s a state death benefit. That’s like a lump sum that we get. That’s $164,000. It’s either going to go to your spouse. If you don’t have a spouse will go to your children. If you don’t have a spouse for children, it’ll go to your parent. So, that’s a lump sum for the state. The state also gives you Act 51, which is killed in service benefit. It’s called a kiss benefit. And basically what that is, it’s just a monthly supplement of what you are making. So, basically you’re going to cover your salary. And that’s going to get passed on to your wife if you have a spouse. If she remarries, you’re going to lose that. So, it’s tough for the spouse too. I mean, she doesn’t might never get remarried again. She won’t lose that benefit. Now the feds jump in, they give you benefit. That’s PSOB here that stands for the public safety officer benefit. That’s also another lump sum, that lump sum is 389,000. So, it’s a pretty big number. Then there’s also education benefits. So, through PAs, from the general assembly, the house bill was 2024, basically provides education gratuity for any child of a police officer that was killed, especially if it’s a community college or state owned that that person will have to apply for financial aid, whatever they don’t get it’s covered. But there’s also other organizations out there that step up like bucks county hero scholarship fund. They they’ll cover education cost. Philadelphia has a survivor’s fund. So, there’s other agencies out there that step up and cover education. Now when it comes to medical insurance that usually gets kicked back to your township or the city you work at. Bensalem, my spouse would be covered for the rest of her life or until she got remarried. That’s how that works.

Kevin McGarry: So, there’s a lot of coverage out there.

Jim Donnelley: Yeah, Kevin, I mean there’s coverage. So, there’s going to get the monthly income and you’re going to get, what’s that about 550,000, if they invest it. It’s not that bad. It’s not. And [crosstalk 00:08:46] can survive however, there’s just going to be uncharted water.

Kevin McGarry: And where can they find this information, Jim?

Jim Donnelley: Well, if something ever happens to you, who’s ever in charge or ahead of your organization’s going to have this information, but we always work closely with the FOPS. The FPS has all this information but if you just wanted to look up yourself and tell your spouse or a loved one that if something happens to me, reach out to concern for police survivor incorporated. It’s called COPs. It’s a national nonprofit organization that provides assistance to surviving families of law enforcement. You can look it right online. There’s a phone number. There’s a database. It’s really just a pure support organization really out there. But if something happens to you, some of your organizations will the FOPs are going to help you, but there are the agencies out there that will help you.

Kevin McGarry: And we’ll put this in the show notes, Jim. 

Jim Donnelley: So, we’ll do that. We’ll definitely put that right as soon as we’re done here. So Kevin, let’s just dive in and we’re talking about doing case review, portfolio reviews, and we’re talking about term and whole life. Can you just break that down for us a little bit, Kev? 

Kevin McGarry: Yeah. Jim, there’s two things we focus on here is, is when we’re looking at two questions. We ask people how much income does your family need to replace is something happens to you. And then the other question we ask, is what other expenses like paying off the house or sending your kids to the school, do you need to cover? And we try to figure that number out. Everyone’s different, Jim. Then we see what type of coverage they need and how long that coverage needs to be. And there’s a big difference between term and whole life. What’s the difference. So with term, covers you for a specific period of time, 10, 20, 30 years, whereas whole life, hence the name it’s whole life, Jim. And then you look at the differences with premiums. The premiums term are a lot cheaper, allows you to get a bigger amount of coverage versus whole life at a lower cost. And we typically lean to term because of this. Term life doesn’t build up cash value where whole life does because y typically in whole life, you are investing, you get protection, but you are investing, which allows you to take loans and take income off of. Once your term’s over at term life, the policy’s over unless you any up. But those premiums are going to be a lot higher but with whole life it’s for the rest of the life, those prices are typically fixed. For our clients nine out of 10 times, we’re looking at terms because we’re focused on protecting your family, the dependents, making sure the mortgage is covered, making sure there’s any debts. Whereas whole life it’s more estate planning and high net worth people that are using whole life policies. So, that’s where the difference is. But the thing is like, how do we figure how much insurance, what formulas and or strategies do we use here to figure out how much coverage they need, Jim?

Jim Donnelley: So Kevin, the one formula that we use here at Valley Financial, when we’re meeting with clients is the dime formula and the dime formula means debt, income, mortgage, and education. And first with debt, we look at maybe what you owe in your car loan, school loans, your credit cards. The income we recommend it’s 10 to 12 times your salary. So, if you’re making a hundred thousand, this piece of this policy right here should be at least a million. And why we come up with that number is because if you’ve got a million dollar life insurance policy and we’re getting 10% off, that that’s going to be a hundred thousand dollars, that’s going to cover your salary to your loved one and that million’s still going to be there. So, that’s why they always say 10 to 12, 10% returns a high number, but that’s where they get that number at. The next one we’re talking about is mortgage. You got to make sure you have your mortgage covered. So, whatever your mortgage is, make sure it’s covered. The last is the E for education, they say should have a hundred thousand for each dependent child probably should have a little bit more, but at least a hundred. So, if you put that all together, your debt, your income, your mortgage education, you’re going to have a blueprint of how much coverage you need. Now, if you look at that and your premiums are a little higher than you could afford, maybe it’s 150, 175 a month, when you broke that all down and you just can’t afford it. It’s understandable. So, the one other thing that we recommend, then at least do 1%, be part of the 1% club. And what we mean by that is if you’re making a hundred thousand dollars get coverage for at least a thousand dollars, meaning go to insurance broker, let them know I got a thousand dollars. I want term. What can that cover me? If it’s a 15, 20, 30 year term, they’re going to give you a lot of numbers. Look at it, call financial advisor, ask them what do you think I should get? How many years I need? A life insurance person will help you out with that? 

Kevin McGarry: Definitely shop it. Definitely.

Jim Donnelley: So, shop around those. Don’t go to one. We’re going to buy a car you don’t go to one place. Same thing with life insurance shop around, they’re all going to have different prices. You’re going to try to get the cheapest. It’s going to be the same coverage especially with term. So, 1% of your style, if you’re making a hundred thousand, you should be able to come up with a thousand dollars. So Kevin, do you have anything to add with that?

Kevin McGarry: No. I think the most important thing is sit down and review how much coverage you have right now and does it make sense.

Jim Donnelley: So, Kev with that, I want to ask you to let’s recap, the three main things regarding the term life insurance or anything from this podcast, we want everyone take away.

Kevin McGarry: Yeah. The first one’s pretty simple. Number one, be prepared. You don’t think it can happen to you. It can. Number two is have a financial plan. You’ll make sure all the bases are covered all the time and make sure your loved one knows about it. Or someone knows about the plan. And then final one, make sure you have enough life insurance to carry out that plan because nothing can ever replace you to your family, ever replace you to your family, but you want to make sure they’re taken care of. And you’re giving them the peace of mind that the rest of their life, they’re not worried about paying the bills or any big events moving forward.

Jim Donnelley: And I couldn’t agree with you more cash especially in law enforcement. We miss a lot. We miss a lot birthdays, dance recitals, holidays, just big events in our family’s life because sometimes working weekends and holidays, it just happens. However, the one thing that we really need to do is really take care of our family something’s not going to happen. That’s sit down, get the life insurance. I mean, it’s not easy, but you got to do it. Don’t procrastinate. Get it done. 

Kevin McGarry: You’re out there protecting people you don’t know every single day, protect your loved ones. 

Jim Donnelley: Protect ourselves, Kev. These guys wear a vest. They got tasers. You name it. Think about it. We got home insurance. We got car insurance, but a lot of us just don’t have insurance on us. It’s the most important thing.

Kevin McGarry: It is. 

Jim Donnelley: So, with that Kev, I’m going to wrap up this podcast. I hope a lot of people have some questions. Please follow up. I don’t care if 50 to a hundred cops call us Kev, we will sit down. We will go over a financial plan. Will you make sure you have enough life insurance, tell you how much you need. This is really important to what we’re here for guys. This is why we start this podcast. So, if you have any questions, reach out to me and care directly our contact information in the show notes. If you have anything other questions about finance, please look at our website. It’s valleyfinancial.com. Everyone be safe out there guys. 

Kevin McGarry: Be safe.

Announcer: Thanks for listening to Blue Money, to learn more about Jim and Kevin or for a free financial assessment, visit valleyfinancial.com or click on the link in the podcast description or show notes. Until next time safe investing.

This material is intended to be educational in nature and not as a recommendation for any particular strategy approach, product or concept for any particular advisor or client. These materials are not intended for any form of substitute for individualized investment advice. This discussion is general in nature and therefore not intended to recommend or endorse any asset class security or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment clients as well as all other readers are encouraged to consult with their own professional advisors, including investment advisors and tax advisors. Valley Financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.