Postponing Financial Decisions Can Be Costly, with No “Do-Overs”

MassMutual policyholders offer advice, share consequences

(Springfield, MA) - When the Strunck family of Charlotte, North Carolina, recently sought to update their financial plans, they discovered that the intervening years and changes in their medical histories had limited their planning choices and increased their challenges.

For the Struncks, whose need for planning is heightened by their son having autism, the lesson was clear: “Don’t put these decisions off, because your family’s well-being could be at risk,” said Mike Strunck.

“Thank goodness we were proactive with our early planning,” he added. “Given some recent health issues, if we had waited, we might not have been able to put in place the plan that we did. We probably would have had to pay more for the policies we obtained, or not have been able to obtain them at all. We’re grateful we got started when we did, and now we’re even more grateful given our ability to tap the cash value of our whole life insurance policy* as the result of a recent job relocation and inability to sell our home.”

Despite such cautionary tales, many people put off making important financial decisions without realizing that stalling and procrastination can put them in harm’s way.

“The worst thing that can happen is for you to look back in hindsight and say, ‘I should have taken care of that,’ because, needless to say, we don’t get do-overs,” said Tara Reynolds, corporate vice president, Massachusetts Mutual Life Insurance Company (MassMutual).

A delay in purchasing life insurance can ‘cost’ a consumer in one of at least three ways, according to Reynolds:

1. As you get older, the cost of purchasing a life insurance policy increases. “Putting off the purchase of life insurance for even one year could cost tens of thousands of dollars more over the life of the policy,” said Reynolds.

2. If you develop health problems, a new life insurance policy can cost you even more, as premiums reflect your deteriorating health.

3. If your health condition is serious or life threatening, you could be denied life insurance coverage altogether.

The same is true for disability income and long term care insurance. In fact, a study conducted by the American Association for Long Term Care Insurance in 2008 found that 70 percent of submitted life/long term care insurance combo policy applications by individuals between the ages of 45 and 54 were accepted by insurers, compared to around 61 percent of applicants between ages 65 and 74.

“Many people neglect to think about one ‘hidden’ consequence of losing or changing a job,” said Reynolds. “Most people may think about health insurance, but forget that life insurance and even disability insurance coverage may end the minute they walk out the door. If their employer-provided coverage is all that they have to rely on, they may be left exposed. Planning ahead with permanent insurance solutions can help solve for this and provide options.”

Health problems that crop up while waiting to begin or refresh planning can also create difficulties. When it came time to develop his family’s financial plans, another MassMutual policyholder (who asked that his full name not be used for privacy purposes) shared that one of the important decisions was purchasing life insurance to provide for his wife and two children. Convertible term life insurance made the most sense at the time so that he could convert his temporary coverage to permanent as his needs and budget changed. He and his financial professional had the foresight to include a safeguard: a waiver of premium rider** should he become disabled and unable to pay for the premiums for his policy.

Years later, the policyholder was diagnosed with a degenerative eye disorder, the kind of health change that many Americans undergo but one that, once diagnosed, can make obtaining insurance more costly or – in the worst cases – impossible.

“I hate to think of the difficult spot we’d be in today if we had put off our planning,” he said. “The choices my wife and I made just a few short years ago helped make sure our family has a permanent safety net, regardless of how my eye condition progresses, and that’s incredibly important as our family grows.”

People often put off planning because they don’t know where or how to begin, or they don’t believe they can afford to implement the plan. Working with a Financial Professional can clarify options and help with decision-making. “You cannot afford to avoid or neglect planning. That’s not an option, especially today,” said Reynolds. “If nothing else, our current economy has taught many people that they need to be proactive in setting up safety nets to protect what they have, and to take control over what they can control for their financial health today and tomorrow.”

Because health and life circumstances can change abruptly and without warning, choosing permanent insurance, such as whole life insurance, can be a smart choice. As long as policyholders pay their premiums, the insurance coverage remains in force, creating a permanent yet flexible base for a long-range plan that includes guarantees of cash value growth, ability to earn dividends,*** and a generally tax-free death benefit.

To hear from other MassMutual policyholders or if you are a policyholder and would like to tell us your story, visit www.massmutual.com/customervoices.


* Distributions under a policy (including cash dividends, withdrawals and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (the cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty. Access to cash values through borrowing, withdrawals or partial surrenders can reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

** Riders are available at an additional cost.

*** Dividends are not guaranteed.