Disability Insurance -- for a "thinking" job

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ataloss
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Post by ataloss »

The only scare tactic that they are referring to is the inflating of the statistics. Notice that in this entire thread, no statistics are used.
True enough, this thread has scary stories w/o statistics. It looks like the odds of becoming disabled are low.

I thought it was interesting that the article mentions that physicians buy a lot of disability insurance but tend to file more claims.
dhodson
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Post by dhodson »

as a physician, i find it interesting as well. I graduated med school about 15 years ago and only can think of two physicians ive met who were disabled for more than a month (thus these others didnt collect anything). One developed MS (sadly his symptoms occurred before finishing med school and thus had very low coverage since u can only cover money you are currently making and not money u think u will make later) and the other developed cancer and died within a few years. The cynical part of me feels these numbers are like other ones quoted above and are exagerated to some degree and used to scare physicians since they have the money to pay these rates. Ive not met any physician who ive felt has dodged the system to get a free ride (the only two above seem legit to me). Considering the most physicians can get from one company is 15k per month, 180k per year, which likely would be roughly around 240k pretax (not exact by any means), it seems to me a ton of work to try and fake an illness or even stretch it. Seems like a lot lying and loops would be necessary. You would have to really hate your job which is also relatively uncommon in my personal interactions with physicians although im personally in a happier field of medicine. I imagine historically with some occasional changes in medicine and previous insurance policies that there may have been times when some people did at least stretch it if not completely game the system and ill be curious with obama care if that might happen since few physicians think it will increase their revenue or make their job easier.
Oneanddone
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Post by Oneanddone »

ataloss wrote:
The only scare tactic that they are referring to is the inflating of the statistics. Notice that in this entire thread, no statistics are used.
True enough, this thread has scary stories w/o statistics. It looks like the odds of becoming disabled are low.

I thought it was interesting that the article mentions that physicians buy a lot of disability insurance but tend to file more claims.
The more likely that one is to file a claim, the more expensive that their policy will be. That is why physicians are more expensive than attorneys and women are more expensive than men.

I have a strong dislike for the use of statistics when it comes to insurance decisions on the part of an individual. Insurance is based upon the law of large numbers. It is critical for an insurance company to know that if they have 1000 people of your age in your profession what sort of claims that they will have. They need to know whether this will translate into 5 claims or 50 claims or 100 claims or 300 claims and whether the average claim will cost them $100, $1,000, $10,000, or $100,000.

However, an individual isn't a large number. The individual will either become disabled or they won't. Let's assume that the odds of you becoming disabled are rather low. That's probably an accurate assessment. Even if the odds are low, disability isn't some crazy event that we know will never happen to us. If that was the case, you wouldn't have purchased your association policy.

It just seems to me that if one is concerned that they might become disabled, it makes sense to get a policy that will cover them if they do.

As a guess, your association policy probably costs 1/4 of what a good individual policy will cost. This is because the contract is written so that they'll only pay out 1/4th of the claims that a strongly written contract will pay.

Another good analogy for association/group policies in comparison to individual policies is with life insurance comparing accidental death policies to regular policies.

"I know that if I become disabled I will become disabled in a way that will allow me to collect the full benefit on my Association plan." I know that if I die prematurely, it will be by accident."

With insurance, one should know that they'll be ok if something happens. Group/Association plans don't do this for disability. Accidental death policies don't do this for death.

I'm not saying, Ataloss, that you need individual coverage. I am saying that if you do need coverage it may make sense to pay for a stronger policy.
Last edited by Oneanddone on Wed Mar 23, 2011 7:58 am, edited 1 time in total.
Oneanddone
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Post by Oneanddone »

VictoriaF wrote:What disabilities qualify for collecting a "thinking" job disability insurance? Substance abuse? Addition to the Web? Presence on Facebook?

Victoria
Victoria, can you please rephrase your question. I'll be glad to answer, but I'm not quite sure what exactly you are asking.
Oneanddone
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Post by Oneanddone »

dhodson wrote:as a physician, i find it interesting as well. I graduated med school about 15 years ago and only can think of two physicians ive met who were disabled for more than a month (thus these others didnt collect anything). One developed MS (sadly his symptoms occurred before finishing med school and thus had very low coverage since u can only cover money you are currently making and not money u think u will make later) and the other developed cancer and died within a few years. The cynical part of me feels these numbers are like other ones quoted above and are exagerated to some degree and used to scare physicians since they have the money to pay these rates. Ive not met any physician who ive felt has dodged the system to get a free ride (the only two above seem legit to me). Considering the most physicians can get from one company is 15k per month, 180k per year, which likely would be roughly around 240k pretax (not exact by any means), it seems to me a ton of work to try and fake an illness or even stretch it. Seems like a lot lying and loops would be necessary. You would have to really hate your job which is also relatively uncommon in my personal interactions with physicians although im personally in a happier field of medicine. I imagine historically with some occasional changes in medicine and previous insurance policies that there may have been times when some people did at least stretch it if not completely game the system and ill be curious with obama care if that might happen since few physicians think it will increase their revenue or make their job easier.
I think that the statistics are B.S. Well, that's not quite true, but the one's used are meaningless. For instance, I often hear that the odds of becoming disabled for 90 days or longer is 30%. I think that if we change it to white collar, the odds are much lower than that. Additionally, so what if someone is disabled for 180 days or 360 days? I mean that isn't really the big concern. Long term disability is needed if someone is disabled for years. I'd imagine that the odds are low, but they are still high enough that coverage is important.

Physicians used to be the top occupation class. That is no longer the case. Insurance companies were collecting less in premiums than they were paying in claims.

A physician making top bucks can get $20,000 of monthly coverage spread out over 2 companies. They can also have their retirement plan contributions protected.

A physician just starting out can get coverage that is greater than their income. They also should buy a guaranteed purchase option that will allow them to buy more coverage once their income increases with no medical questions.
mikep
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Post by mikep »

Oneanddone wrote:
VictoriaF wrote:What disabilities qualify for collecting a "thinking" job disability insurance? Substance abuse? Addition to the Web? Presence on Facebook?

Victoria
Victoria, can you please rephrase your question. I'll be glad to answer, but I'm not quite sure what exactly you are asking.
That was already answered plenty in this thread starting on page 1.
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VictoriaF
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Post by VictoriaF »

mikep wrote:
Oneanddone wrote:
VictoriaF wrote:What disabilities qualify for collecting a "thinking" job disability insurance? Substance abuse? Addition to the Web? Presence on Facebook?

Victoria
Victoria, can you please rephrase your question. I'll be glad to answer, but I'm not quite sure what exactly you are asking.
That was already answered plenty in this thread starting on page 1.
Mike,

You are right. I read the initial pages when they first came out but did not review them before posting this question. Thus, I want to withdraw my question.

Victoria
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Sekar
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Post by Sekar »

Sekar
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Post by Sekar »

More statistics from E.F. Moody who is a PhD, RIA and has all sorts of credentials:

http://www.efmoody.com/insurance/disabi ... stics.html

I'll go alone with "One" on this. Statistics are just a bunch of numbers that don't apply to individual situations. If you are the person who has a long term disability, you probably are not concerned with the other 99% who don't.

Also, did you know that the average human is half man and half woman. Average success is as far from the top as it is from the bottom. The average person will live till they die. You get the picture.
ataloss
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Post by ataloss »

Nice links Sekar

I got a 15% risk of disability from age 25 using this site:

http://www.disabilitycanhappen.org/chan ... ty/pdq.asp

When I put in current age (55) I get 13% (disability > 3 months)

This is a little higher than the 8-11% risk of > 1 year disability from the table at the (excellent) EF Moody link.
I'll go alone with "One" on this. Statistics are just a bunch of numbers that don't apply to individual situations. If you are the person who has a long term disability, you probably are not concerned with the other 99% who don't.
I understand. If you become disabled you would wish you had coverage. On the other hand, if the risk was 1% would it be reasonable to spend 3% of your income on disability insurance? Don't forget that your life insurance agent thinks that you should spend several percent of your income on his product.

Dhodson. I wouldn't think that many physicians would be likely engage in fraud to get disability payments. On the other hand, with a low rate of disability it might only take a few to skew the numbers. Physicians would probably have better insight into what type of disability would be difficult to disprove. I notice that the efmoody site mentions limitations on stress related claims have been imposed.
Oneanddone
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Post by Oneanddone »

What your life insurance agent thinks you should spend on life insurance seems to be pretty irrelevant to the subject of disability insurance. If you are spending several % of your income on life insurance, it is probably permanent insurance which is an asset.

As to your question of whether one should spend 3% of their income on something that has a 1% chance of happening, that is an indvidual decision. I think that the reality is that it is less than 3% and the chance is greater than 1%.

It seems to me that if someone can afford the premium and a disability would wipe them out, it is important to buy coverage. Even if the odds are low, they certainly aren't microscopic.

When I talk about a cost of 2%, I'm usually talking about someone who doesn't have coverage through work and who is getting the most that they can get. There are some ways to make the cost less. These ways are not appropriate for all situations.

1)Often, we are just supplementing coverage through work. When we do this, it is usually in the $50-$60/month range instead of 2% of income.

2)The maximum isn't always necessary. Ex. Jim qualifies for $7,000/month. He can be comfortable with $4,000/month. He can buy a policy for $4,000/month and save about 43%.

3)A benefit to age 65 isn't always a necessity. Ex. Jim and his wife have young children. His wife is a stay at home mom. She is well educated and has just as much earning power at Jim. Jim can buy a 5 year benefit and it gives the family 5 years to adjust if something happens to him. This will save about 50%.

4)A policy can be integrated with social security. This can save very roughly about 10% (depends on lots of factors).

Ex. Jim has a $5,000 policy with $1350 of it being integrated with SS. He becomes totally disabled. If SS pays him nothing, his policy will pay $5,000. If SS pays him $1350 or more, his policy will pay $3750. If SS pays him less than $1350, his policy will pay the difference between $5,000 and SS. Without integration, his policy will pay $5,000 regardless of what SS does.

One piece of advice that I often read is to go with a longer waiting period. I think that this advice is usually given by people without much knowledge in the field. It sounds good since a longer benefit period should be less expensive. The reality though is that going from a 90 day to a 180 day waiting period saves too little for it to make sense. There is a huge price difference between 60 and 90 days. Thus, almost all LTD policies are sold with a 90 day wait. The sometimes exception is if someone has shortterm disability that pays 180 days. This may force a person to use a 180 day wait.

Inflation protection can sometimes be skipped depending upon the situation.

The one thing that should never be done to save money is to go with an inferior contract. If the money is needed, a claim needs to be paid and this brings us right back to this whole topic of group/association vs. individual policies.
dhodson
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Post by dhodson »

well let me use some simple math to come up with what must be closer to the real percent. this math has holes in it but as i mentioned it costs about $650 per month to cover 15k worth of benefit for me and im in the best rating for my class. Another way of looking at that would be that it takes the premium of 23 people to equal 15k. 1 out of 23 is between 4 and 4.5%. This doesnt take into account any commission which ive been told, but really have no idea if it is true, is around 40-50% of the premiums or any other overhead although there could be gains on investments of the insurance company as well. Additionally some people would be collecting disability for a few months and go back to work in these numbers and i personally dont care about that situation, im only personally concerned about being disabled long term. I then assume the risk is closer to 2% for a serious long term disability. as ive mentioned before i consider DI like my iphone, its expensive but to some its worth it and to others it isnt.
Oneanddone
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Post by Oneanddone »

My guess is that your answer is in the correct ballpark.

Commissions are much smaller than they appear. Commissions are heaped and most are paid in the first year. If you pay premiums for the next 20 years, commissions should equal around 5% of your premiums.

Commissions will only account for 50% of your premium if you cancel the policy after 1 year.
BruDude
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Post by BruDude »

dhodson wrote:well let me use some simple math to come up with what must be closer to the real percent. this math has holes in it but as i mentioned it costs about $650 per month to cover 15k worth of benefit for me and im in the best rating for my class. Another way of looking at that would be that it takes the premium of 23 people to equal 15k. 1 out of 23 is between 4 and 4.5%. This doesnt take into account any commission which ive been told, but really have no idea if it is true, is around 40-50% of the premiums or any other overhead although there could be gains on investments of the insurance company as well. Additionally some people would be collecting disability for a few months and go back to work in these numbers and i personally dont care about that situation, im only personally concerned about being disabled long term. I then assume the risk is closer to 2% for a serious long term disability. as ive mentioned before i consider DI like my iphone, its expensive but to some its worth it and to others it isnt.
Don't forget that your $15k/month benefit probably has a 3% or 5% COLA rider in there...
dhodson
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Post by dhodson »

yes but wouldnt that be a wash with the investments they make

the real issue with my math presentation is that it doesnt matter what the percent is if u are that one but not everybody can easily afford this so they need to make an educated guess.

from a percent stand point only the insur companies know what the real overhead costs are and they arent going to release that info.
ResNullius
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Post by ResNullius »

Disability insurance is expensive, particularly for those who have to pay the premiums themselves. I used to be an attorney, having fully retired for health reasons last summer. I left my firm about 11 years previously in order to do some specialized things for a single client. I worked from home, but I traveled a lot. Last summer at age 60, I was diagnosed with a very bad health issue that forced me to give up practicing law. I had not carried private disability coverage since leaving my firm. I'm now on SS disability and living off our portfolio. We have plenty of money, so that's not an issue, but private disability insurance does have a place, particularly if you don't have enough saved up to take care of you and your family over the long haul.
Oneanddone
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Post by Oneanddone »

dhodson wrote:yes but wouldnt that be a wash with the investments they make

the real issue with my math presentation is that it doesnt matter what the percent is if u are that one but not everybody can easily afford this so they need to make an educated guess.

from a percent stand point only the insur companies know what the real overhead costs are and they arent going to release that info.
I know that I've seen the numbers in the past, but it's been awhile. At the time, companies were mostly losing small amounts of money or making small amounts. This is when they lowered the occupation class of doctors and started with more limitations of lifetime benefits and mental health issues. From a common sense point of view, it makes sense that it isn't all that profitable. I say this because if it was, there would be more than just a handful of companies in the market.
Oneanddone
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Post by Oneanddone »

ResNullius wrote:Disability insurance is expensive, particularly for those who have to pay the premiums themselves. I used to be an attorney, having fully retired for health reasons last summer. I left my firm about 11 years previously in order to do some specialized things for a single client. I worked from home, but I traveled a lot. Last summer at age 60, I was diagnosed with a very bad health issue that forced me to give up practicing law. I had not carried private disability coverage since leaving my firm. I'm now on SS disability and living off our portfolio. We have plenty of money, so that's not an issue, but private disability insurance does have a place, particularly if you don't have enough saved up to take care of you and your family over the long haul.
One of the things that I try to get across to clients is that this isn't something that is always needed. If a person needs their income, their income needs to be protected. It is this income that allows them to do everything else. However, once a person gets to the point that they no longer need the income and they are working because they want to work, there is no need to keep the policy.

The biggest catch-22 with disability coverage is that the more difficult it is to afford the premium, the more important the coverage is. In other words, someone who can't figure out how to afford their disability coverage is the one who can least afford to lose any income.
Sekar
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Post by Sekar »

ataloss wrote:Nice links Sekar

I got a 15% risk of disability from age 25 using this site:

http://www.disabilitycanhappen.org/chan ... ty/pdq.asp

When I put in current age (55) I get 13% (disability > 3 months)

This is a little higher than the 8-11% risk of > 1 year disability from the table at the (excellent) EF Moody link.
I'll go alone with "One" on this. Statistics are just a bunch of numbers that don't apply to individual situations. If you are the person who has a long term disability, you probably are not concerned with the other 99% who don't.
I understand. If you become disabled you would wish you had coverage. On the other hand, if the risk was 1% would it be reasonable to spend 3% of your income on disability insurance? Don't forget that your life insurance agent thinks that you should spend several percent of your income on his product.

Dhodson. I wouldn't think that many physicians would be likely engage in fraud to get disability payments. On the other hand, with a low rate of disability it might only take a few to skew the numbers. Physicians would probably have better insight into what type of disability would be difficult to disprove. I notice that the efmoody site mentions limitations on stress related claims have been imposed.
Thank you ataloss. Glad you found a link helpful. Personally, I look at insurance statistics then I look at my individual situation and decide if I want to cover that potential loss. I also look closely at cost as I own a lot of insurance contracts. Homeowners and Auto insurance are no brainers as we have to have them. Even so, I keep the cost down with high deductibles but carry high liability limits on auto.

On disability, the statistics tell me that the probability of being disabled to age 65 or for life is not high, but it is simply a potential risk that I must cover to have piece of mind. My primary policy is group LTD which is very inexpensive. I now supplements it witha private policy for the percentage of income that group won't cover. I am satisfied that I am reasonably covered based on my unique occupation. If I could afford and obtain private own-occ DI I would have that instead.

Regarding life insurance, the statistics say I am likely to live to age 78 or so. Even so, I will not allow my family to take the risk and I own a lot of insurance. It is mostly term as that is what I can afford, but my wife and I have some whole life insurance our parents bought for us. I am reading up on various forms of permanent insurance to see if I should own some more of that product.
ResNullius
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Post by ResNullius »

<i>The biggest catch-22 with disability coverage is that the more difficult it is to afford the premium, the more important the coverage is. In other words, someone who can't figure out how to afford their disability coverage is the one who can least afford to lose any income.</i>

Interesting comment. I don't usually care for comments from supporters of the insurance industry, but you're probably right this time. I know many professionals who had trouble getting their claims honored, but then the claims probably weren't legit anyway. People need to read the fine print very closely when they buy disability insurance. There are many pitfalls. On the other hand, if you need it, then you should do what you can to get it.
Oneanddone
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Post by Oneanddone »

Unfortunately, I think that people look at disability insurance like they look at life insurance. They have coverage or they don't. They don't seem to comprehend that with life insurance one is alive or dead. If they are dead with one contract, they are dead with all contracts.

On the other hand with disability, there is no standard definition of "disability". One must understand their contracts. In general, the cheaper the contract, the harder it is to meet the definition and/or for the same thing the payment will be less.

I think that insurance sales people deserve much more abuse than insurance companies when it comes to individual life and DI policies. The companies make good on their promises and always do what is guaranteed or better.
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PaddyMac
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Post by PaddyMac »

Interesting thread. Does the annual fee cost a lot more for someone who is 50 than for someone who is 35 or 40? We are in good health.
Oneanddone
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Post by Oneanddone »

Yes, the cost will be more expensive as you get older. Although the insurance company will be on the hook for less money, they will be collecting premiums for a shorter amount of time. The older that you are, the greater the risk of a disability.
ataloss
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Post by ataloss »

What your life insurance agent thinks you should spend on life insurance seems to be pretty irrelevant to the subject of disability insurance. If you are spending several % of your income on life insurance, it is probably permanent insurance which is an asset.
I guess my point is you have to decide what percent of you income you want to spend on yourself and family, save, and devote to insurance. I got the 2-3% number from this thread.

ResNullius, sorry to hear about your health problems.

Sekar, I used group ltd but dropped it when my net worth rose to the point where I thought I could cover expenses from investments. Keeping expenses low relative to income was part of my plan to build assets. Dropped all the term life too. Disabling conditions occur but I think that disability insurance is mostly held by folks with low risk. :wink:
ataloss
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Post by ataloss »

I think this may be the organization that provided insurance services to my professional group

http://www.agia.com/

It looks like they act as a middle man between insurance companies and member organizations or businesses providing insurance access to members or employees. All the paper work had the professional organization's name and logo so I can't be sure.

I think a lot of the cost differential between group and individual policies is due to sales commissions. These are front loaded and supposedly insignificant over the decades you might be expected to hold the policy. On the other hand, I imagine that the commissions might be 100-125% of the first year premiums as is the case for whole life. Much of the so called "permanent" life insurance is cancelled within a few years by the buyer.

I have no reason to believe that the group coverage is substantially inferior to individual coverage. Specifically there is no evidence that the group premium is 25% of the cost of the individual policy because only 25% of the claims are paid. Much of the information about disability insurance comes from the industry.

My professional association has been affiliated with the group disability provider for 25 years that I know of. I would think that if claims weren't being paid appropriately the association would have distanced themselves from the service.
redfishbluefish
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Re: Disability Insurance -- for a "thinking" job

Post by redfishbluefish »

In the case where your company pays for group disability with a capped benefit, is there a chance that you can buy supplemental coverage from one of the major insurers?

Example: group DI has cap of $15,000, covers 2/3 of income.

Some other questions:
1. How do future purchase options work? Is it just an arbitrary option that you can take at any time or is it income capped? How does it work if you're buying supplemental insurance and you leave your job (meaning you no longer have group coverage eating into your maximum)? Is that a compelling case for purchasing an option?
2. Does "income" in a group plan typically just refer to salary or does it include stock compensation as well? How do insurance companies even consider stock compensation, if at all.
Big Heart
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Re: Disability Insurance -- for a "thinking" job

Post by Big Heart »

I found this thread from the wiki page.

I'm wondering about this:

"Coverage past the age of 65 or money that goes into a trust for retirement"

It's on a list as a basic feature we should look for in pricing a quality disability plan.

The policies I am pricing do not have this feature. I've not seen it discussed in other conversations.

Can anyone illuminate what this is referring to?

Thanks so much to posters for sharing your insight.
runninginvestor
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Re: Disability Insurance -- for a "thinking" job

Post by runninginvestor »

Big Heart wrote: Wed Jan 11, 2023 3:18 pm I found this thread from the wiki page.

I'm wondering about this:

"Coverage past the age of 65 or money that goes into a trust for retirement"

[...]
Some plans will provide coverage in the event of a disability up until ages beyond 65. Commonly 67, sometimes 70.

Additionally, some plans will provide an extra benefit rider that helps make up for retirement savings. If you are disabled and unable to work, the only retirement space you have is IRA. Additionally, since you're only replacing about 60% of your predisability earnings, you may not have a lot left over to save. So the retirement savings rider can help with that.
Big Heart
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Re: Disability Insurance -- for a "thinking" job

Post by Big Heart »

Thank you.
Rex66
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Re: Disability Insurance -- for a "thinking" job

Post by Rex66 »

Retirement riders are not as useful as maximizing the own occ disability insurance. The riders are not own occ and the trust has costs as well as crappy insurance investments within it.

Keep in mind own occ disability insurance if paid with post tax money is tax free benefits so it doesn’t need to be 100% of your income protection.
runninginvestor
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Re: Disability Insurance -- for a "thinking" job

Post by runninginvestor »

Big Heart wrote: Wed Jan 11, 2023 3:30 pm Thank you.
You're welcome, as an example of the ret savings, Guardian's explanation of their rider (not a suggestion for carrier, but Guardian is rec'd a lot):
https://www.guardianlife.com/disability ... nce/riders

"Retirement Protection Plus (5(0

Protects retirement savings by replacing the contributions you would have made to your defined contribution plan while totally disabled. Some insurance carries also compensate you for matching contributions that would have come from your employer, such as Guardian’s Retirement Protection Plus rider.

(5) Retirement Protection Plus is not a pension plan, qualified retirement plan or qualified individual retirement account or a substitute for one."
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ResearchMed
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Re: Disability Insurance -- for a "thinking" job

Post by ResearchMed »

runninginvestor wrote: Wed Jan 11, 2023 3:23 pm
Big Heart wrote: Wed Jan 11, 2023 3:18 pm I found this thread from the wiki page.

I'm wondering about this:

"Coverage past the age of 65 or money that goes into a trust for retirement"

[...]
Some plans will provide coverage in the event of a disability up until ages beyond 65. Commonly 67, sometimes 70.

Additionally, some plans will provide an extra benefit rider that helps make up for retirement savings. If you are disabled and unable to work, the only retirement space you have is IRA. Additionally, since you're only replacing about 60% of your predisability earnings, you may not have a lot left over to save. So the retirement savings rider can help with that.

This is something that used to make me wonder... all disability insurances either of us have seen will pay until age 65, presumably because that's when one would have retired and stopped working anyway.
[Yes, as discussed on another thread currently, some work well beyond age 65, but that's a different issue, for the most part.]

The problem is that no Social Security taxes were paid, so it's not at all the same as a "regular retirement".
Is there ever any type of disability insurance that would cover those "retirement years" that had a shortfall because of years on disability, sort of the SS income IF the person had been paying SS?
And the reason that most disability only pays something like 2/3 of salary is presumably because taxes are not taken... but that includes SS taxes not paid.

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runninginvestor
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Re: Disability Insurance -- for a "thinking" job

Post by runninginvestor »

ResearchMed wrote: Wed Jan 11, 2023 3:46 pm
runninginvestor wrote: Wed Jan 11, 2023 3:23 pm
Big Heart wrote: Wed Jan 11, 2023 3:18 pm I found this thread from the wiki page.

I'm wondering about this:

"Coverage past the age of 65 or money that goes into a trust for retirement"

[...]
Some plans will provide coverage in the event of a disability up until ages beyond 65. Commonly 67, sometimes 70.

Additionally, some plans will provide an extra benefit rider that helps make up for retirement savings. If you are disabled and unable to work, the only retirement space you have is IRA. Additionally, since you're only replacing about 60% of your predisability earnings, you may not have a lot left over to save. So the retirement savings rider can help with that.

This is something that used to make me wonder... all disability insurances either of us have seen will pay until age 65, presumably because that's when one would have retired and stopped working anyway.
[Yes, as discussed on another thread currently, some work well beyond age 65, but that's a different issue, for the most part.]

The problem is that no Social Security taxes were paid, so it's not at all the same as a "regular retirement".
Is there ever any type of disability insurance that would cover those "retirement years" that had a shortfall because of years on disability, sort of the SS income IF the person had been paying SS?
And the reason that most disability only pays something like 2/3 of salary is presumably because taxes are not taken... but that includes SS taxes not paid.

RM
For SS, if you qualified for SSDI, it freezes your record. It converts automatically to regular SS retirement at the full retirement age.

So if you had LTD coverage until age 65, you would receive benefits until 65 leaving you with just SSDI until 67 at which it'd turn into regular SS.

If you didn't qualify for SSDI, then you would just have LTD benefits until 65 and then have to rely on other means for retirement.

So yeah. If you didn't qualify for SSDI, it can be a pickle in retirement if you weren't insured for enough LTD. In that case, you would likely want to find an insurance carrier that replaces closer to 80-90% of predisability earnings, providing you enough income to save on the side. I'm not sure what the max that they allow nowadays is.
secondopinion
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Re: Disability Insurance -- for a "thinking" job

Post by secondopinion »

runninginvestor wrote: Wed Jan 11, 2023 5:20 pm
ResearchMed wrote: Wed Jan 11, 2023 3:46 pm
runninginvestor wrote: Wed Jan 11, 2023 3:23 pm
Big Heart wrote: Wed Jan 11, 2023 3:18 pm I found this thread from the wiki page.

I'm wondering about this:

"Coverage past the age of 65 or money that goes into a trust for retirement"

[...]
Some plans will provide coverage in the event of a disability up until ages beyond 65. Commonly 67, sometimes 70.

Additionally, some plans will provide an extra benefit rider that helps make up for retirement savings. If you are disabled and unable to work, the only retirement space you have is IRA. Additionally, since you're only replacing about 60% of your predisability earnings, you may not have a lot left over to save. So the retirement savings rider can help with that.

This is something that used to make me wonder... all disability insurances either of us have seen will pay until age 65, presumably because that's when one would have retired and stopped working anyway.
[Yes, as discussed on another thread currently, some work well beyond age 65, but that's a different issue, for the most part.]

The problem is that no Social Security taxes were paid, so it's not at all the same as a "regular retirement".
Is there ever any type of disability insurance that would cover those "retirement years" that had a shortfall because of years on disability, sort of the SS income IF the person had been paying SS?
And the reason that most disability only pays something like 2/3 of salary is presumably because taxes are not taken... but that includes SS taxes not paid.

RM
For SS, if you qualified for SSDI, it freezes your record. It converts automatically to regular SS retirement at the full retirement age.

So if you had LTD coverage until age 65, you would receive benefits until 65 leaving you with just SSDI until 67 at which it'd turn into regular SS.

If you didn't qualify for SSDI, then you would just have LTD benefits until 65 and then have to rely on other means for retirement.

So yeah. If you didn't qualify for SSDI, it can be a pickle in retirement if you weren't insured for enough LTD. In that case, you would likely want to find an insurance carrier that replaces closer to 80-90% of predisability earnings, providing you enough income to save on the side. I'm not sure what the max that they allow nowadays is.
Right. I think SSDI is going to be a life saver in this case. It is a great program in my mind because it will cushion the risk of a serious disability (which is high enough risk for me that I cannot get insured :( ).
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Bikes4life
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Re: Disability Insurance -- for a "thinking" job

Post by Bikes4life »

I have been researching DI and Term myself.
I filled out a form online with Guardian and I was contacted by a financial advisor. Is that the only route with them?
Are there options for who you can choose?
Chardo
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Re: Disability Insurance -- for a "thinking" job

Post by Chardo »

Bikes4life wrote: Thu Jan 19, 2023 8:36 am I have been researching DI and Term myself.
I filled out a form online with Guardian and I was contacted by a financial advisor. Is that the only route with them?
Are there options for who you can choose?
You can choose any independent agent. Insurance can only be purchased through an agent, and the service costs you nothing extra. Policies, by law, are priced identically regardless of who you buy through. Even the well known internet sites recommended here are actually agents behind the scenes.
Bikes4life
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Re: Disability Insurance -- for a "thinking" job

Post by Bikes4life »

Thanks. I had the same experience with Banner Life. Filled out online and was contacted by whom I thought was a Banner Life direct rep.
I ended up discussing everything with the broker that our businesses use and they suggested Banner for term and Guardian for disability and their quotes for apples to apples came in a few bucks a month cheaper for each. They don't charge us on top of the rates. They get paid from the insurance company, so I guess the difference in what the other reps were quoting is what their commission would be.
Good to know.
Chardo
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Re: Disability Insurance -- for a "thinking" job

Post by Chardo »

Bikes4life wrote: Fri Jan 20, 2023 9:41 am Thanks. I had the same experience with Banner Life. Filled out online and was contacted by whom I thought was a Banner Life direct rep.
I ended up discussing everything with the broker that our businesses use and they suggested Banner for term and Guardian for disability and their quotes for apples to apples came in a few bucks a month cheaper for each. They don't charge us on top of the rates. They get paid from the insurance company, so I guess the difference in what the other reps were quoting is what their commission would be.
Good to know.
No, the difference had to be something like a different rate class. An apples to apples quote will be identical. Agents cannot adjust the rates, commissions have no effect.
Bikes4life
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Re: Disability Insurance -- for a "thinking" job

Post by Bikes4life »

Interesting. They were both same rate class, product, terms, dollar amt, both without additional riders etc. I'll have to look into it. Maybe I missed something.
Chardo
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Re: Disability Insurance -- for a "thinking" job

Post by Chardo »

Bikes4life wrote: Fri Jan 20, 2023 7:27 pm Interesting. They were both same rate class, product, terms, dollar amt, both without additional riders etc. I'll have to look into it. Maybe I missed something.
Feel free to post them or PM to me. I can take a look if you want.
BruDude
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Re: Disability Insurance -- for a "thinking" job

Post by BruDude »

Bikes4life wrote: Fri Jan 20, 2023 7:27 pm Interesting. They were both same rate class, product, terms, dollar amt, both without additional riders etc. I'll have to look into it. Maybe I missed something.
Maybe one of them quoted you the wrong age. There's no way the premiums can be different if the inputs are the same. Agents can't change premiums by adjusting their commissions. The commission is a standard payout from the insurance company with various performance/retention bonuses attached.
highdesert
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Re: Disability Insurance -- for a "thinking" job

Post by highdesert »

White Coat Investor has several good resources for this on his site -- see for example https://www.whitecoatinvestor.com/more- ... insurance/ and https://www.whitecoatinvestor.com/what- ... insurance/. It's physician-focused but the information on true own occupation disability insurance applies pretty broadly. You do have to work with an agent and there are recs on his site. As always the wiki is helpful as well.
Chardo
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Re: Disability Insurance -- for a "thinking" job

Post by Chardo »

BruDude wrote: Sat Jan 21, 2023 10:07 am
Bikes4life wrote: Fri Jan 20, 2023 7:27 pm Interesting. They were both same rate class, product, terms, dollar amt, both without additional riders etc. I'll have to look into it. Maybe I missed something.
Maybe one of them quoted you the wrong age. There's no way the premiums can be different if the inputs are the same. Agents can't change premiums by adjusting their commissions. The commission is a standard payout from the insurance company with various performance/retention bonuses attached.
It's also possible the quotes were run on different dates and there was a rate change in between. It happens.
Bikes4life
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Re: Disability Insurance -- for a "thinking" job

Post by Bikes4life »

thanks for the info, I never knew about how insurance quotes worked.
I will double check to see what I missed. They were quoted within a few days of each other. I can post once I get the 2nd one in writing. It was a quick verbal over the phone for now until she sends me something likely today
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ray.james
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Re: Disability Insurance -- for a "thinking" job

Post by ray.james »

Big Heart wrote: Fri Jan 27, 2023 3:10 pm
Am I missing anything? And - Do you think I found a fair price?
I do not think you are missing anything but a few points of interest. The workplace disability might be taxable while the LTD is not since it is paid with after tax money. There are some interesting quirks like that. Do note the cost does not stay flat depending on riders you have. They will inflation adjust every year - both benefit and policy. Some have additional riders like inflation and income based.
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