November 28, 2009

What happens during a paramedical exam for life insurance?

When you apply for life insurance, your health (both medical and financial) gets evaluated. This process starts with data gathering.

What's needed depends on your age and the amount of coverage. The requirements usually show on the life insurance projection you signed when you applied. Depending on your answers and test results, more investigations may be required.

The Nurse
A nurse came to my home at the appointed time to conduct the tests. She was pleasant, efficient and experienced. She also works at a hospital. She asked many questions throughout. The process took about 40 minutes.

Sometimes, the insurer requires that your examination be conducted by a doctor of their choosing. To prevent conflicts of interest, you can't use your own doctor.

The Requirements
As with a normal medical checkup, the nurse collected the basics
  • measures your height
  • checks your weight on her scale
  • checks your blood pressure
  • asks about your use of alcohol, tobacco and drugs
  • asks about you use of prescription medication
  • asks about changes in your health
In addition, I provided blood and urine samples which go all the way to Kansas City for analysis. Why there? Who knows. You'd think local testing would be faster and cheaper.

I also gave
  • proof of identity with my driver's license, which has a photo
  • the name/address of my doctor
Past health affects future health. So you're asked many questions about yourself and some about your family.
Tip: When answering questions, pretend you're on the witness stand or at border security. Be truthful. Be concise. Be quiet. You gain nothing by continuing to yak.
A final question asks if any relevant information was not provided. Clever.

An EKG was also required because of the amount of coverage I was requesting. This does not take a visit to a clinic for testing with a huge machine. Now a small device the size of a paperback novel suffices. Ten electrodes were connected over my chest. I sat comfortably with my feet resting on a chair. The results were converted to sound and communicated to the analysis centre by telephone. The squeals reminded me of dial-up modems connecting. Or R2D2 in a foul mood.

Had the EKG identified problems, the test would have been repeated.

Ouch! The EKG sensors attach to your body like bandages with metal probes on the back. The application is easy but removal stings if you have a hairy body like mine. The nurse asked me to remove the three most toughest probes.

Initial Results
The initial results look good and mirror my executive physical four months ago. If the insurance underwriters don't agree, you face
  • more tests, or
  • higher premiums (a poor health rating costs you just as a poor credit rating does), or
  • no offer of insurance (you're uninsurable)
There's no charge for the examinations to you or your advisor. The insurer covers the entire cost even if you are declined for coverage or you decline to purchase the coverage.

Each party loses if you don't get insured. You don't get the protection you wanted. Your advisor doesn't get paid. The insurer doesn't get revenue to cover the costs incurred. Even so, the insurer would rather lose a small amount now than to pay out a large death benefit for which you paid too little. (See why insurers won't insure you.)

If the underwriting process uncovers medical issues, your advisor never gets the details. To protect your privacy, the results go only to your doctor and you. You can then see if you can take steps to restore your health through treatment or changes in lifestyle.

Podcast Episode 45 (4:48)

direct download | Internet Archive page

November 21, 2009

Get Results with the Process System for Planning Simply

Is it a process?
Is it a system?
It's the Process System!

Unless you love details, planning quickly gets boring. Especially as you dive down into the depths and turn the murky details into visible steps.

Planning can feel like a treadmill, but guess what? The better exercise treadmills have Quick Start buttons. You can get moving without selecting a program, confessing your age or admitting your weight. Why? Because moving forward matters most. The fine-tuning is not essential to start. A shark must keep moving to keep breathing. We must keep breathing to keep moving.

Enter the Process System for Planning Simply (PSPS). I've it used again and again year after year for many purposes. Don't take the name too seriously or worry about complexity. All you need is a blank page and a pencil. There's nothing to buy and no one to pay. We'll look at two examples: weight loss and saving for retirement.

Three Simple Steps
With the Process System, you answer three questions.
  1. What do you want?
  2. Where are you now?
  3. How do you get there?
These questions are great for consultants because they can be used in many situations. Let's dive deeper into each.

1. What Do You Want?
You start with your goal. In The Seven Habits of Highly Effective People, Stephen Covey calls this Habit 2: Begin with the end in mind.

Here's the dilemma: you can't know what you want until you know what's available (i.e., what's possible, even if it doesn't currently exist). For now, let's assume you know or can easily find out what you want.

2. Where Are You Now?
This is easy to answer because you look at cold, concrete facts. Example
  • for weight loss: factors like weight, blood pressure, cholesterol
  • for finances: factors like assets/liabilities, income/expenses
3. How Do You Get There?
This is the toughest part. The steps may look simple
  • reduce calories by a specified amount per week
  • increase savings by a specified amount each month
Knowing and doing are very different. This is where the nasty details enter. This is where discipline becomes required. You may be able to act on your own but getting support from a coach or others often helps.

When you're sailing, conditions change and you make adjustments to reach your goal. You do with the Process System too. Change is simpler when you're already in motion. How do you plan? Could the Process System help you?

Podcast Episode 44 (3:26)

November 14, 2009


Wed, Nov 11: Remembrance Day
Thu, Nov 12: unemployed

Fri Nov 13: Friday the 13th
Sat Nov 14: pack up and depart forever

On November 11, we look back to past heroes. On Friday the 13th we worry about bad luck. So what happens on Thursday, November 12? We look to the future and hope for good luck. Even if newly unemployed.

November 12
The day started early in Cambridge, about an hour west of Toronto. The Benefit Guys were hosting a half day seminar on The 21st Century Consumer. I was presenting How To Succeed With Entrepreneurs Part 1. I left early, skipped lunch and raced through highway/city traffic for 70 minutes to get to my downtown Toronto office for a must-attend meeting on the annual retirement roadshow. Since I have no involvement with retirement products, I didn't know why I was needed. Minutes later, I found out.

Shortly after 1pm, a Senior Vice President led me to the Rogers Room just next to the President's office. In this cosy room with a gorgeous view north to the Ontario Parliament Buildings, sat a representative from Human Resources. Uh oh ...

I was reminded that sales through National Accounts were low, expenses were high and profitability was poor. There were no prospects for a quick turnaround. So I was losing my job effective immediately. I asked if anyone else was affected but they would not say. I figured I was the only one, which was not a pleasant feeling.

National Accounts have offices across the country and include the places most people bank and invest. I spent most of my time supporting independent regional firms but was part of the National Account support team.
I was left with the HR representative to review a two page summary of statutory benefits and additional severance. The package looked reasonable for 18 years and 5 months of employment. After she left, an outplacement consultant came in to explain the services they would provide.

My emotions were jumbled but I felt optimistic about the future. Although I didn't pick the timing, I was glad to have a financial cushion while searching for new opportunities.

Then There Were None
I went back to my office to pack up. That's when I learned the whole National Accounts division was shutting down. [Update on Nov 18: officially, these are structural changes and the division continues to exist] The 1pm meeting time allowed synchronized terminations from coast to coast. In my office alone, five people --- including my boss --- lost their jobs. In a strange way, it's comforting to know that others are going through the same thing.

Unaffected employees were being told the news in a meeting. I was advised to leave before returned. I did. In the confusion, I forgot to bring my package with me. I tried phoning home but my Blackberry had been wiped clean and disabled. That's efficient.

What You Think
A lot goes through your mind when an unexpected shock hits. Deep down, I was optimistic about the future since I've invested in learning and honing portable skills. We are in the information age and knowledge age are we not?

Leaving forever isn't easy for practical reasons. If you work in a corporate environment you face the challenge of extracting your personal information from your office, computer and smartphone. Thing like
  • files
  • contacts
  • calendars
  • emails
  • subscriptions to print publications
Since you're likely required to leave corporate equipment when you exit the building, plan ahead. The company probably has a backup of all your files. That helps them but not you. In my case, my company notebook computer was in my car and I took it home without thinking. What a blessing.

Getting Personal Files Off Your Work Computer
As a precaution, I already had backups of my personal files on a portable hard drive and home LAN. Each day, I followed a multistep synchronization process: work computer to portable hard drive to home computer to home LAN. And vice versa. At most, I'd lose one day's files.

Online offsite backups are worthwhile too. I have yet to investigate options but will soon.

If you have a desktop computer, a USB memory key works well (unless it's blocked). Ideally, you'd keep no personal files on company equipment. That was a key reason for getting a netbook computer recently.

You can probably find instructions for copying personal information by searching online. However, you should already have a scheduled backup strategy in place.

Backup Your Contacts
As I left the meeting, my Blackberry had already been reset. The contacts, calendar and emails were all wiped out. The phone still worked but I didn't realize this until the next day.

Synchronizing contacts was a bigger problem because the Outlook Import/Export feature was disabled. It only seems to work when connected to the corporate LAN. I found this out when exporting my contacts to LinkedIn months earlier. Luckily, I routinely scan business cards and store them in PersonalBrain (reviewed earlier).

Backup Your Calendar
Calendars are a problem. Mine are entirely electronic, which meant no paper backups. While Outlook synchronizes with my Blackberry, that's of no use when you leave your equipment behind. Luckily, Google Calendar Sync can help if you use Gmail.

Change Your Contact Information
Your contact and employer information is probably in more places than you recall. Here are some:
  • LinkedIn
  • Facebook
  • professional directories
  • groups and associations
  • email mailing lists (if you can remember which they are)
When you're ready, post a quick status update to let your connections know you're now self-employed. For dramatic effect, I waited until the next day, Friday the 13th.

Since all my future work commitments were now cancelled, I alerted the parties affected in the near future. Why not make your exit easier on them too?

Now it's time for a sabbatical before deciding on a future direction.

Podcast Episode 43 (7:26)

direct download | Internet Archive page

November 7, 2009

Three Reasons Why Financial Literacy Eludes Us

Although I am almost illiterate mathematically, I grasped very early in life that anyone who can count to ten can count upward indefinitely if he is fool enough to do so.
--- Robertson Davies

Yes, we want to make good financial decisions. Yes, we have the capability. However, universal financial literacy remains beyond our grasp for three reasons
  1. trouble reading
  2. trouble perceiving
  3. human frailty
Let's examine them.

Trouble Reading
About one in seven Americans can't read. About 40% of Canadian adults can't read at the level of a high school graduate. Of this group, 15% have serious problems dealing with any printed materials. Maybe they can handle Dr. Seuss, but that won't get them far in life.
Do not worry about your problems with mathematics. I assure you mine are far greater.
--- Albert Einstein
While literacy result are bad, numeracy is even worse. According to the 2003 International Adult Literacy and Skills Survey (IALLS), 55% of Canadians have inadequate math skills. Other countries have issues too. BusinessWeek reports that "Americans are functionally illiterate". The University of Michigan found that only 18% of boomers could solve a simple question involving compound interest. Unfortunately, I can't find that question to share with you.

Even if you're comfortable with words and numbers, you may make the wrong decisions.

Trouble Perceiving
Let's look at snack food and fast food. You're overwhelmed with layers of flavours and sensations: smooth/crunchy, sweet/bitter, hot/cold, hard/soft. This makes food harder to resist. We eat based on the size of the plate. If it's on the plate, we think it'll fit in our bellies. Our bellies expand to accommodate us.

Financial products are hard to compare, which complicates our decisions. What is the cost of a floating rate mortgage compared with a fixed rate mortgage? How much does your credit card really charge you in a year: annual fees, surcharges on exchange rates, interest penalties for late payments? How would this compare with other credit cards? I met someone who pays annual fee of $400 for a credit card because of perceived rewards.

We're better at perceiving change that's linear than geometric. The pattern 1, 2, 3, 4, ... makes more sense than 1, 2, 4, 8, 16, ... but the latter is closer to real life. Compounding interest works for us when saving and against us when borrowing. An interest rate of 1% compounding monthly is higher than 12% a year.

If a mutual fund earns 9% over a year and charges a Management Expense Ratio (MER) of 2%, you'd expect a net return of 7%. You'll get something different because the fund value fluctuates daily and the MER is typically deducted daily a compounding effect).

Try these challenges from earlier posts
Human Frailty
Businesses make money from our weaknesses. Naturally, they propose their products as the solutions. Napoleon Hill identified our six basic fears in 1937 and they're still with us.

Education helps us fight temptation. Discipline keeps us on track.

Financial planning involves immediate pain for long term gain. We feel the pain of saving now but have difficulty visualizing the benefits of secure retirement income decades later. We think we can start saving later, which means we lose the substantial benefits of compounding growth.

Get Smart
Ontario students will learn financial literacy from grades 4-12 starting in 2011. That's great since habits start young. However, we can change at any age. This video from accountants gives helpful basics.

You can also learn from financial bloggers, your advisors and others you trust. You just need the spark of desire to start.

Podcast Episode 42 (5:41)

direct download | Internet Archive page