Question About Long Term Disability Insurance

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caffeinefree
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Joined: Sat Mar 23, 2013 10:17 am

Question About Long Term Disability Insurance

Post by caffeinefree »

If you don't want to read through everything I've written, my question really boils down to whether anyone knows if Northwestern Mutual is a reputable provider of long term disability insurance (LTDI).

The full story is that I met with a financial adviser from Northwestern Mutual last month to see if he had anything to offer me. It was a free consultation and he came highly recommended by friends (albeit not friends that are as financially together as I am), so I figured why not. We talked about a lot of things, and while I decided not to use him as a financial adviser because I feel I have everything well in hand, I did take his recommendation to look into my LTDI plan at work. I realized I needed to upgrade to a better plan after reading through some threads here on Bogleheads, so I agreed to have him look into a few options for me.

Yesterday I met with him and he opened with a claim that he was going to suggest a Northwestern Mutual product even though he (supposedly) gets a smaller cut for recommending it than other products (like Guardian or MetLife). He said the NM LTDI plan has more stringent qualifications (i.e. you have to be healthier to qualify) and is customer-owned, which makes it a cheaper product, plus he could offer me a discount because he's has so many clients from my employer.

I looked over the plan, and it has everything from this list: http://www.bogleheads.org/wiki/Disabili ... ten_policy with the exception of no limits of mental/nervous disorders (there is a 2-year limit on those). It seems reasonably priced for my age and income - in fact it's about the same price as my incredibly crummy policy through my employer. Overall, it seems almost too good to be true.

In general, LTDI is not a popular product, so a Google search of NM products has produced next to nothing useful. I am hoping that someone here can tell me whether I'm having the wool pulled over my eyes or not. I really don't want to mess around with something that I plan to keep for the next 30+ years. (I am 27, if that makes any difference.)
SeattleCPA
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Re: Question About Long Term Disability Insurance

Post by SeattleCPA »

For what it's worth: I like long-term disability insurance (premiums paid directly by you so any benefits you might receive are tax-free).

You don't say what your premium is and of course that'll tie to your benefit amount which probably connects to your income... but I'll share this. I pay a few hundred bucks a year (for years I think it was around $200 or so) for a policy from my industry group, the AICPA, that paid/pays $3000 or $4000 a month starting after six months of disability and going to either age 65 or end of life depending on when disability occurred.

I'm a very "light" buyer of insurance. But I always thought this sort of cheap LTD was a good deal. I think a long-term disability on part of breadwinner is often a bigger risk than the bread winner dying.
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neurosphere
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Re: Question About Long Term Disability Insurance

Post by neurosphere »

The only way to know whether it's a good deal or not is to get quotes from other carriers. It should take him a matter of minutes, I would guess, to get you actual quotes from Met Life, Guardian, etc. Ask him to show you the quotes, and then have him explain any differences in the policies. In fact, the only way he could have told you in the first place that NWM was cheaper was to compare the numbers, so he's already done the work. Why don't you just have him send you the quotes from the other carriers he looked at? If nothing else, to educate yourself about DI insurance and also the peace of mind that you made the right decision. For example, Guardian might have a policy which does NOT have a 2-year limit on mental disorders, and perhaps it's more expensive, but only slightly. Maybe you'd be willing to pay for full mental health coverage. The nice thing about working with an agent is that you don't have to take his word for anything, because all of the insurance companies are VERY willing to make their quotes easily available for both you and him to review.
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SnapShots
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Re: Question About Long Term Disability Insurance

Post by SnapShots »

DH, the primary breadwinner, paid for LTDI for 35 years. We never thought we would use it and as he got older, the more expensive it got.

He was forced into retirement the middle of 2008 and you know what happened a few months later. Fortunately, we had disability income for four years to see us through those difficult years, which kept us from having to live off savings that had dramatically dropped.

There were times he thought about dropping it. Never drop your disability insurance and get enough to survive on if you should ever need it.
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Topic Author
caffeinefree
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Re: Question About Long Term Disability Insurance

Post by caffeinefree »

SeattleCPA wrote:You don't say what your premium is and of course that'll tie to your benefit amount which probably connects to your income... but I'll share this. I pay a few hundred bucks a year (for years I think it was around $200 or so) for a policy from my industry group, the AICPA, that paid/pays $3000 or $4000 a month starting after six months of disability and going to either age 65 or end of life depending on when disability occurred.
I am looking at a quote of $430/year for $3000/month of coverage. For reference, the employer-offered LTDI I'm currently on is the same price for about half the coverage (and has about a million exclusions), so this seems like a good deal to me.

I took neurosphere's advice and requested quotes from the other carriers, though. The agent said he'd get them to me by next week.
BruDude
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Re: Question About Long Term Disability Insurance

Post by BruDude »

he opened with a claim that he was going to suggest a Northwestern Mutual product even though he (supposedly) gets a smaller cut for recommending it than other products (like Guardian or MetLife)
That sounds like a flat-out lie. NWM agents get paid bonuses for selling NWM products. I would be amazed if he was getting paid more by Guardian or MetLife than NWM.
He said the NM LTDI plan has more stringent qualifications (i.e. you have to be healthier to qualify) and is customer-owned, which makes it a cheaper product,
NWM does have more stringent underwriting just like Guardian and any other mutual companies will. You don't want a "cheap" DI product. You generally get what you pay for when it comes to DI.

If this policy is $400/year, something is missing unless you have a pretty low income. Sounds like there are no riders on the policy at that price. A good DI policy should cost 2-4% of your income depending on occupation, gender, smoker status, and age.

There are a lot of differences between NWM's policy and the stronger ones from Guardian, MetLife, and Standard (Principal also has a very good policy). I made a post somewhere on this forum with the differences between NWM and Guardian, will see if I can dig it up later.
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