Do I need to keep my private disability and life insurance?

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Topic Author
bubbadog
Posts: 868
Joined: Wed Mar 26, 2014 9:17 pm
Location: Cincinnati,Ohio

Do I need to keep my private disability and life insurance?

Post by bubbadog » Tue Aug 16, 2016 10:28 am

I am trying to decide if I want to keep my private disability and life insurance. I would appreciate any thoughts from others. I obtained these policies twenty years ago and I also have disability and life provided by my employer which should stay in place for the foreseeable future.

Background details:

50 years old
Family of four (stay at home wife, two kids ages 18 and 15)
No health problems and on no meds.
Base salary $240,000
Monthly expenses $6,000/month
Employer provides life insurance of $480,000 (2x base salary)
Employer provides disability insurance of 60% of base salary ($144,000/year)

Private life insurance of $1,000,000 with an annual premium of $2,136
Private disability policy with a benefit of $4,327/month and an annual premium of $3,268

Assets of approx. 2.3 million (1.9 taxable and tax deferred accounts, 400k home value-no mortgage)

I spend about $5,400 a year for these two policies and I am starting to wonder if they are necessary to maintain.

I still need to assist my children with their education and the oldest starts college this fall. We are spending about $20,000/year for his education. We are paying this out of our current cash flow and do not have a separate college savings account.

My job seems fairly stable (physician) and I would like to keep my current position for 10 more years and retire at age 60.

My wife and I feel comfortable that we could easily maintain our lifestyle on a $6,000/month after tax income if I were no longer employed (health insurance costs excluded)

Do I still have a need for these policies at the cost of $450/month?

Thanks

invst65
Posts: 644
Joined: Thu Nov 27, 2014 11:04 am

Re: Do I need to keep my private disability and life insurance?

Post by invst65 » Thu Aug 18, 2016 7:45 pm

No you don't.

Dontridetheindexdown
Posts: 91
Joined: Sat Feb 14, 2015 10:08 pm

Re: Do I need to keep my private disability and life insurance?

Post by Dontridetheindexdown » Thu Aug 18, 2016 8:27 pm

The private life insurance appears to be a very good deal - low premium, high payout.

The private disability insurance may not be all it appears to be.

Typically, the highest disability insurance you can receive is 60% of base salary, and the insurer will reduce payout if you are receiving other disability insurance (including Social Security disability).

Personally, I would drop the private disability insurance, and keep the private life insurance (0.2% annual premium) until the annual premium rises by a significant factor.

If the life insurance premium rises to $20,000/year, it is still a good deal.

You would need to invest a lot more than $20,000/year to add $1 million to your estate.

Just my perspective, for what it's worth.

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mephistophles
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Joined: Tue Mar 27, 2007 2:34 am

Re: Do I need to keep my private disability and life insurance?

Post by mephistophles » Fri Aug 19, 2016 12:12 am

Your private disability insurance may be superior to your group DI in definition of diability and other areas. Tell us more about the policy specifics to get decent advice here.

Same with life insurance. We don't have enough information to advise you properly.

Topic Author
bubbadog
Posts: 868
Joined: Wed Mar 26, 2014 9:17 pm
Location: Cincinnati,Ohio

Re: Do I need to keep my private disability and life insurance?

Post by bubbadog » Fri Aug 19, 2016 9:20 am

Thank you for your input. I am leaning towards keeping the life and dropping the disability.

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mephistophles
Posts: 3110
Joined: Tue Mar 27, 2007 2:34 am

Re: Do I need to keep my private disability and life insurance?

Post by mephistophles » Fri Aug 19, 2016 2:49 pm

bubbadog wrote:Thank you for your input. I am leaning towards keeping the life and dropping the disability.
Dropping your private disability insurance could be a huge mistake, particularly if it is non-cancellable and guaranteed-renewable, has an own-occ disability definition, favorable riders and other features. Good DI is not cheap but will do the job when you can't do yours.
ole meph, insurance broker

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