October 2026 Financial Planning Update:
The Coverage That Protected You Then
May Be Costing You Now

Insurance for most people is meant to serve as an income replacement tool. Death or disability when you are in your “income-earning years” prevents the family from doing some or many of the things they would have been able to. We buy life and disability insurance to fill the gap.

The coverage bought during the accumulation years was designed for a specific set of risks: income replacement, dependents to protect and a portfolio not yet large enough to absorb a major loss.

As those conditions change, the insurance should too. Premiums renew automatically and unexamined policies can have coverage that made clear sense at 40 but has now quietly become redundant or misaligned. These could be dollars going toward your bucket list items!

Whether You Need It Is Only Half the Question

The more important question, one that gets far less attention, is how your coverage is structured. If something happened to you tomorrow, would your family actually receive what you think they would?

If you became disabled, would the disability benefits be enough, or would a portion disappear to taxes depending on who paid the premiums?

When did someone last look at whether your permanent life policy is actually performing the way it was sold to you? Many purchased decades ago have significantly underperformed their original projections and now require additional premiums to avoid lapsing.

When Insurance Changes Jobs

Not every policy that outlives its original purpose should be cancelled. For some households, life insurance doesn’t become irrelevant as wealth grows. It changes jobs. A permanent policy can function as a tax-efficient wealth transfer tool, passing a death benefit income-tax-free to heirs in a way few other strategies can match.

Other times, it may no longer be needed for your plan. When a policy no longer fits, surrendering it for cash is rarely the best exit. A life settlement allows you to sell an unwanted policy to a third party for more than its surrender value. A 1035 exchange allows you to move the accumulated value inside an old policy into a new one, or into an annuity, without triggering a tax event. What many policyholders don’t realize is that a 1035 exchange can also be used to convert an old life insurance policy directly into a long-term care or hybrid life and long-term care policy. This effectively redirects coverage that was bought to protect against one risk into coverage that protects against another. For clients sitting on an old whole life policy that no longer serves its original purpose, this is often the most tax-efficient path forward and one of the least discussed options available.

For business owners, one additional gap is worth flagging here. Personal disability insurance replaces your income, but not your payroll, your lease or your operating obligations. Business overhead expense insurance covers those costs, and many business owners don’t carry it.

The Coverage That Gets More Important In Time

Long-term care is the exception among insurance types that runs in the opposite direction. Memory care, assisted living, and skilled nursing facilities can cost $8,000 to $15,000 per month or more. This risk doesn’t always shrink as the portfolio grows. For a couple with $3 million in investable assets, a single spouse entering memory care at $10,000 per month consumes $600,000 over five years before accounting for inflation. Dementia-related care often runs longer.

Two assumptions tend to create a false sense of security around it. The first is that Medicare will cover it. Medicare covers short-term skilled nursing after a hospital stay, not the custodial care that most long-term care actually involves. The second is that Medicaid serves as a backstop. Medicaid won’t step in until assets are nearly fully depleted and any transfers made in the prior five years are clawed back in the eligibility calculation.

Inflation riders compound the risk further. A $5,000 monthly benefit purchased at 55 can cover a fraction of actual costs at 80 without a compound inflation rider. Coverage becomes meaningfully more expensive and harder to qualify for every year. This makes purchasing a policy in your early to mid-50s the optimal time period.

What the Review Is Really About

A useful insurance review isn’t a premium audit. It’s a purpose audit.

Ask whether each policy still protects against an actual risk and whether it’s structured in a way that delivers what you think it does. Insurance planned strategically can be a very powerful tool in a financial plan. Insurance left unexamined is one of the most reliable ways to overpay for protection you may not need and underestimate the risks you do.

Cheers,