During an episode of “Ask KT and Suze Anything,” personal finance expert Suze Orman criticized a 72-year-old caller’s financial advisor for bad advice about switching insurance policies. Here’s what happened during the podcast.
Orman is a celebrated author and financial advisor known for her blunt but fair advice. During an episode of the “Ask KT and Suze Anything” podcast, which deals with all things money, Orman received a call from a 72-year-old woman named Judy, who has been retired for two years.
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Judy revealed that she’s doing OK financially and is paying her bills without problems. Just recently, she met with her financial advisor. Judy told her financial advisor that she had paid up her MetLife policy, valued at $16,000, with a death benefit of $26,000. Judy explained that she told her financial advisor that she had no long-term insurance. In response, her financial advisor told her she could trade in her policy with some additional money to help cover the cost of a long-term care policy. Judy told Orman she was confused about what to do because she had always thought the policy would be used for burial. Judy asked, “Is it better to have long-term care? I’ve never heard about insurance policy conversion before to long-term care.” Judy wanted to know if these policies were legitimate.
Orman answered Judy’s question, “They’re legit for a whole lot of money, Judy,” and explained her thoughts on Judy’s situation. Orman pointed out that doing one of these policy conversions is expensive. Orman asked Judy, “Did he (her financial advisor) tell you how much extra money? Did he tell you how much extra per month to keep it going?” Orman added, “The older you get, the more expensive a long-term care policy is because the average age of entry into a nursing home is 84.” Because Judy wanted her current policy to be used for burial, Orman pointed out that this meant that Judy wouldn’t have enough money saved elsewhere to pay for her burial if she changed the policy.
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Another potential problem that Judy may run into when converting her MetLife policy to a long-term care insurance policy is that she could risk losing the premiums she’s paid over the years. Policy conversion can sometimes come with hidden costs. Orman explained, “So normally, once you’re in your seventies, most people can’t even afford long-term care. And many of those policies today, and people know this who are listening to this, they are getting serious increases on their long-term care policies.”
So, what should she do?
Orman told Judy that she should not follow her financial advisor’s advice. Orman felt that Judy would most likely qualify for Medicaid if she went into a nursing home because she probably didn’t have that much money, so she’d meet the qualifying criteria. Paying extra money monthly on a policy you won’t need is pointless. Orman criticized Judy’s financial advisor and told her, “Do not do this, do not do this. Do not do this on any level. Maybe in a different situation.”
Orman also gave Judy some additional advice and told her that if the facts were different, she should visit the “Women & Money” app to speak with Phyllis Shelton before making any final decisions about her policies. According to Orman, Shelton is an expert on long-term care insurance, and “Truthfully, I personally would never be buying a long-term care insurance policy unless I talked to Phyllis Shelton first.”
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