Disability insurance for teacher

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Disability insurance for teacher

Postby AustenNut » Fri May 03, 2013 7:03 pm

I am a 32 year old female teacher looking to get my own individual disability insurance policy. I currently have group LTD, but will drop it to get it privately (after reading the contract, I realize there are a lot of holes in it). Though I tried to find someone, there was no one good all-around agent for me to deal with, so I have numerous quotes from various individuals with different companies.

There are a few factors affecting the amount I can get. My teaching W-2 was for $51k, but I am currently vested in our retirement system which offers a disability pension for full disability (we do not participate in Social Security). Currently that benefit would be about $900/month. We have some rental income, but rather negligible for DI purposes. But everything was disclosed. Here’s what was offered:

Guardian: $1050monthly benefit for $545/year (own-occ to 67, COLA of up to 3% based on CPI, 24-month mental health, residual/partial disability, & catastrophic disability of $650/month)

Mass Mutual: $1700 monthly benefit for $1185/year (modified own-occ to 67, COLA up 3% compounded annually, mental health limited to 24-months AT A TIME, a generous partial/residual rider w/15% minimum, & catastrophic disability of $1200/month). Has dividends after five years, but rather minimal.

MetLife: $2500 monthly benefit for $2128/year (modified own-occ to 67, COLA of 3% simple annually, no mental health limitation that I found, residual/partial disability, & catastrophic disability of $750/month)

Northwestern: $2717 monthly benefit for $1819/year (modified own-occ to 70, COLA of up to 3% based on CPI, but could play catch-up if some years went over, but others under; 24-month mental health, residual/partial disability,...realized there is no catastrophic disability included, oops). Has dividends returning after three years, which would reduce the annual cost, in the long run. As a frame of reference, $2000/benefit would be $1359.

Standard: $750 monthly benefit for $861.52/year (own-occ to 67, COLA of up to 3% based on CPI, appears to have no restriction on mental health, residual/partial disability, & $750/month catastrophic disability coverage)

I listed everyone as a frame of reference for people interested in DI costs, as well as to see other companies considered (I had an Assurity quote, but it there were so many holes in it I didn't feel it was much better than my group LTD policy).

Standard is out because there is so little benefit offered. I liked the Guardian definitions best (and that it did not exclude war unless you were a soldier, unlike the other companies which exclude acts of war, which I'm assuming would be what would be told to disabled survivors of 9/11), but they'll only offer a $1050 of coverage, and I'm not really sure if that's enough, especially if my state retirement system doesn't consider me disabled, or if I become partially disabled. But is there a flaw in my thinking?

I'm probably leaning between Mass Mutaul and Northwestern, but Met Life is still in the running. Any thoughts on reasons why I should go with one or not the other? I could make do with $1700/month, but really would prefer at least $2000. Also, how much catastrophic disability is good? Any guidance you Boglehead experts could give on this subject would be greatly appreciated.
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Re: Disability insurance for teacher

Postby dm200 » Fri May 03, 2013 8:06 pm

I don't know any details at all about your employer-based LTD plan, but back at several previous employers (I am collecting SS and working part time now), I recall that the employer-based LTD plans seemed the way to go, if at all possible. Often, they have some sort of employer subsidy and/or discount for the number of employees covered. Are you confident that these individual plans you are considering are better, at least for your needs, than the employer offered plan?
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Re: Disability insurance for teacher

Postby anonenigma » Fri May 03, 2013 8:12 pm

If you're a public school teacher, you may be covered through your retirement system. That's the case in California.
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Re: Disability insurance for teacher

Postby BruDude » Fri May 03, 2013 9:16 pm

Are you a public school teacher? If so you will have to deal with the retirement system's DI benefits offsetting the amount you're eligible for on individual coverage. I'm not sure how you have Standard and Guardian offering a $750-1050/mo benefit and MetLife and NWM offering $2500-2700/mo, that's a pretty big difference so it seems they must be using different calculations. The Guardian policy you were quoted is also their Provider Plus Limited policy which is not as good their flagship Provider Plus policy.
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Re: Disability insurance for teacher

Postby AustenNut » Fri May 03, 2013 10:21 pm

Thanks for the replies so far. Maybe it wasn't clear from my first post, but because I am a teacher vested in the retirement system, I would qualify for a disability benefit. Currently that is $900/month. I would not be eligible for Social Security disability payments. If I became disabled, I would not want to live off of $900/month for the rest of my life, hence the reason why I would want to get additional disability insurance.

Among the holes in my group LTD policy is that after two years, it becomes an any occupation policy. So if I can work as a greeter at Wal-Mart, I'd have to do that and lose my disability benefit. And there's a big pay difference between my salary and that of the Wal-Mart greeter. Also, the group LTD policy would be decreased by the amount of my state teacher retirement disability amount, so again, we're talking about a significant drop in income. And my employer does not subsidize any part of the group policy.

As far as the differences in what the DI companies are willing to give out, yeah, it's pretty amazing. I gave all the agents the same info, and this is what I got back. It turns out that the comapanies deal with my teacher disability pension differently. Some consider it as insurance and others don't (that's the general gist I've gotten). It did decrease the amount of coverage I was able to get, as I had started to get quotes before learning about the state disability pension, and had to contact the agents again to have quotes that reflected the new information. But it does affect which company I'll end up applying with.

In regards to the Guardian insurance, the Guardian Plus Limited definitions seemed pretty good. Why whould I want the flagship series over the limited one?
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Re: Disability insurance for teacher

Postby dm200 » Sat May 04, 2013 8:58 am

While this would not address your total disability needs, I suggest getting (or at least consider) disability coverage on any loans you have, or get in the future. Credit unions, especially, often offer very good coverage, if you choose to pay for it. Typically, the pre-existing conditions exclusion, is not very severe, as long as you are working more than 25 hours a week. Details vary, but many or most have a six month look back and ahead for such pre-existing conditions. You do not, normally, need to get any type of Physician certification for such credit union consumer loans. One exclusion, that is common for credit union offered disability is disability due to normal pregnancy. Mortgage loans are probably a bit different, but I would look at those options as well.

I think you are very wise to be concerned about disability, which can often be a much more severe financial drain on you and the family than death.

I know a family (parents and two daughters) that was a model of the "American dream". Parents are immigrants from Latin America, both working and living a nice, but modest, lifestyle. Both incomes were needed to support that lifestyle, as is now very common. The wife came down with cancer, and can not work, and is extremely ill. Unfortunately, she did not have any kind of disability benefits from her job -- and now, the family is financially devastated, in addition to the other challenges of a wife/mother with a life-threatening illness.

Financial advisor Ric Edelman often stresses the importance of Disability Insurance. When some counter that it is expensive, he answers that it is expensive because it is so important. I can't find an article about that, but this is his web site and I believe he discusses that in some of his articles and publications http://www.ricedelman.com/

Another possible resource (don't know) might be teacher/educational groups that might offer products that fit teachers.
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Re: Disability insurance for teacher

Postby AustenNut » Mon May 06, 2013 4:22 pm

Thanks for the advice on the loans. Our only loan is our mortgage though. I'm not in the union, so I don't have access to whatever disability insurer they recommend.

So the options I presented in my first post are what I have. Which of those do you think I should take? If it came down to Mass Mutual or Northwestern, which way do you think I should go? Why?
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Re: Disability insurance for teacher

Postby BruDude » Mon May 06, 2013 4:47 pm

AustenNut wrote:Thanks for the replies so far. Maybe it wasn't clear from my first post, but because I am a teacher vested in the retirement system, I would qualify for a disability benefit. Currently that is $900/month. I would not be eligible for Social Security disability payments. If I became disabled, I would not want to live off of $900/month for the rest of my life, hence the reason why I would want to get additional disability insurance.

Among the holes in my group LTD policy is that after two years, it becomes an any occupation policy. So if I can work as a greeter at Wal-Mart, I'd have to do that and lose my disability benefit. And there's a big pay difference between my salary and that of the Wal-Mart greeter. Also, the group LTD policy would be decreased by the amount of my state teacher retirement disability amount, so again, we're talking about a significant drop in income. And my employer does not subsidize any part of the group policy.

As far as the differences in what the DI companies are willing to give out, yeah, it's pretty amazing. I gave all the agents the same info, and this is what I got back. It turns out that the comapanies deal with my teacher disability pension differently. Some consider it as insurance and others don't (that's the general gist I've gotten). It did decrease the amount of coverage I was able to get, as I had started to get quotes before learning about the state disability pension, and had to contact the agents again to have quotes that reflected the new information. But it does affect which company I'll end up applying with.


I would make sure that MetLife, MM, and NWM are calculating the benefit amount correctly. Not really sure how NWM came up with a monthly benefit of $2717 since the amounts are usually even numbers. Let's see if I can get this straight:

1. You have a retirement disability program in place which you cannot opt out of
2. You have a group LTD policy which you can opt out of

If that is correct, are you opting out of the group LTD to get the benefit amounts that you were quoted? Or is this in addition to both of those programs?

In regards to the Guardian insurance, the Guardian Plus Limited definitions seemed pretty good. Why whould I want the flagship series over the limited one?


The differences between the two policies are as follows:

-Definition of disability with PP Limited is a “modified own-occupation” definition. The “true own-occupation” definition can be included for an additional charge. The modified definition is as follows: “Solely due to Injury or Sickness, You are not able to perform the material and substantial duties of Your Occupation and You are not Gainfully Employed” while the true own-occ definition is “Solely due to Injury or Sickness, You are not able to perform the material and substantial duties of Your Occupation. You will be Totally Disabled even if You are Gainfully Employed in another occupation so long as, solely due to Injury or Sickness, You are not able to work in Your Occupation. If you have limited Your Occupation to the performance of the material and substantial duties of a single medical specialty or to a single dental specialty, We will deem that specialty to be Your Occupation”

-30-day and 60-day elimination periods not available with PP Limited (a 90-day EP is still most common though given the pricing)
-Residual disability with PP Limited requires a 20% loss of income and a loss of time or duties, while the regular PP only requires a 15% loss of income
-Recovery benefit under the residual benefit for PP limited requires 20% loss of income, regular PP only requires 15% loss of income
-COLA with PP Limited is tied to the change in the Consumer Price Index with a maximum of 3% compounded per year, while COLA with regular PP is 3% compounded regardless of CPI change
-PP Limited has a 24-month limitation on mental/nervous benefits, regular PP is unlimited. Mental/nervous claims are about 9% of all disability claims.
-PP Limited has a “Benefit Purchase Rider” instead of the Future Increase Option rider that is available with regular PP. The FIO rider allows you to add more coverage regardless of health when your income qualifies and is available at each policy anniversary. The Benefit Purchase Rider allows you to add more coverage every 3 years instead. Since the premium for increases is based on the age at which you exercise them, having to wait 3 years to add more benefits could cost you more over the life of the policy.
-Graded Lifetime Benefit rider and Lump Sum Disability rider are not available on PP Limited.

The Provider Plus policy costs 20-30% more than Provider Plus Limited.
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Re: Disability insurance for teacher

Postby AustenNut » Wed Jul 24, 2013 5:55 pm

I ended up getting in contact with a DI agent from a different state who works with all the major companies. I applied for Guardian Plus insurance

Applied for:
$2270/month benefit
to age 67
$1080/month for catastrophic disability
$1329.79 annual premium


Guardian's offer after underwriting:
$2270/month benefit
10 year benefit period
no catastrophic disability
$1177.16 annual premium

I was given a 50% rating because in 2006 I had a stroke-like episode (lots of tests run but nothing found), a protein S deficiency, and two years ago had a prescription for 10 diazepam (and still have 8 of the pills). The insurance agent is going to see if he can get them to reduce the rating, especially if no other stroke-like episodes occur for a certain amount of time, or if we can put a restriction on mental health for the diazepam.

So now I'm trying to figure out what to do:

1) Accept Guardian's offer, but only have 10 years of benefit. It is true own-occ. If the state considers me disabled I would have $3170/month to live off (Guardian + teacher disability pension) until the 10 years were up. Cost: $1177.16/year

2) Keep my work LTD. It's current benefit would be $2227.45/month, offset by my retirement disability. It is modified own-occ for two years, and then any-occ after that. They guarantee to pay at least $928, regardless of offsets. So I would live off of $2227.45/month until age 65, assuming I'm so disabled I can't work as a Wal-Mart greeter. The verbiage is not clear on whether the reduction in pay would be compensated. Cost: $42/month ($504/year)


Because of some misunderstandings on their part, Guardian made an exception and offered a higher monthly benefit than it normally would have. So if I turn this offer down, I would probably only qualify for $1050/month benefit if I decide to apply again in the future. And my insurance agent thinks that other companies will assess my risks in the same way, and that I'd likely only get a 5-year benefit period since most don't do 10-year benefit periods.

The other thing in favor of Guardian is that it's portable no matter what happens with my job. With the changes going on in education today, I no longer feel the same level of job security as I did when I entered the field nine years ago.

BUT...it's only 10 years of benefit and it's much more expensive. Advice?
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Re: Disability insurance for teacher

Postby bluemarlin08 » Wed Jul 24, 2013 7:29 pm

Consider that in most situations your group benefit will be taxable versus non taxable with individual coverage.
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Re: Disability insurance for teacher

Postby AustenNut » Thu Jul 25, 2013 11:00 am

The LTD from my work (the $500/year plan with lots of holes) is out of my own pocket, after-tax, so I would not have to pay taxes on it. I have to make a decision on the Guardian policy soon, and would appreciate any additional feedback.

Here's some additional info on my work LTD:
There would be offsets for the disability pension from the state. But the DI policy says that I would receive a minimum of 25% of my salary from them, regardless of offsets (so $928). There are also offsets for any income brought it while on disability (in the first 24 months, so long as DI + earnings = less than my original salary there is no offset of the earnings, after two years it's offset by 50% of the earnings).

And here's their definitions of Disability/Disabled
"You are considered Disabled if, solely because of Injury or Sickness, you are:
1. unable to perform the material duties of your Regular Occupation; and
2. unable to earn 80% or more of your Indexed Earnings from working in your Regular Occupation.

After Disability Benefits have been payable for 24 months, you are considered Disable if, solely due to Injury or Sickness, you are:
1. unable to perform the material duties of any occupation for which you are, or may reasonably become, qualified based on education, training or experience; and
2. unable to earn 80% or more of your Indexed Earnings."

Recommendations?
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Re: Disability insurance for teacher

Postby BruDude » Thu Jul 25, 2013 12:13 pm

I would take the Guardian policy and then see if you can get a better offer from a different company. MetLife's new Income Guard DI product is very similar to Guardian, the rates are good, and their underwriting might be a little more lenient. Principal's underwriting is usually a little more favorable than Guardian too.
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Re: Disability insurance for teacher

Postby AustenNut » Sun Jul 28, 2013 8:55 pm

Following the advice here, I've purchased the Guardian policy, but am having my insurance agent check out other options to see if any will be more favorable.
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