Disability Insurance

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biscuit
Posts: 102
Joined: Thu Dec 12, 2013 1:33 pm

Disability Insurance

Post by biscuit »

Both are a dual income family and it would be hard if one of us gets disabled. Thanks to BH, we are in the process of getting a life insurance.

Reg disability insurance, my company offers disability insurance and both my employer and I will share the cost. Unfortunately, I missed the cut off date. should I wait till October and enroll it or go for a private one ?

TIA!
Rupert
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Joined: Fri Aug 17, 2012 12:01 pm

Re: Disability Insurance

Post by Rupert »

It depends on the employer-provided insurance: How good is it, and, importantly, are the policies portable (meaning can you keep them if you change employers)? The general rule is that you should have private coverage to supplement whatever group policy your employer offers, but you need to give us more information about the policies your employers offer before we can give you advice about how to proceed.
Topic Author
biscuit
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Re: Disability Insurance

Post by biscuit »

Rupert wrote:It depends on the employer-provided insurance: How good is it, and, importantly, are the policies portable (meaning can you keep them if you change employers)? The general rule is that you should have private coverage to supplement whatever group policy your employer offers, but you need to give us more information about the policies your employers offer before we can give you advice about how to proceed.
Below is the plan details:

The LTD Plan ensures benefits equal to 60% (less taxes) of your Daily Earnings are paid to you, up to a maximum benefit of $10,000 a month. You are considered totally disabled under the LTD Plan if, because of illness or injury, you are unable to perform all the material duties of your job.

The LTD Plan is designed to begin paying benefits when your disability continues beyond the later of 180 days or the date your STD payments end. Benefits will continue as long as you remain disabled, up to 24 months. If, after 24 months, you are unable to perform the material duties of any job you could reasonably be expected to perform based on your experience, training and education, benefits can continue to age 65.

The policies are not portable
Kencufc
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Re: Disability Insurance

Post by Kencufc »

I think individual policies are the way to go. Group policies will increase every year. Once your FI, just cancel it.
Topic Author
biscuit
Posts: 102
Joined: Thu Dec 12, 2013 1:33 pm

Re: Disability Insurance

Post by biscuit »

Kencufc wrote:I think individual policies are the way to go. Group policies will increase every year. Once your FI, just cancel it.
Thanks. Where and how can I shop for disability insurance?
pangea33
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Re: Disability Insurance

Post by pangea33 »

biscuit wrote:Thanks. Where and how can I shop for disability insurance?
I'd suggest checking with whoever provides your homeowner insurance. I got a nice discount when insuring my vehicles through the same company. Then I asked for a quote on term life insurance and was persuaded to move my policy there as well, for more great rates. Now I've reached out about disability insurance myself.

If I don't feel comfortable putting several eggs in a single insurer's basket, perhaps I'm insured through the wrong company.
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Kenkat
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Re: Disability Insurance

Post by Kenkat »

You should look at what extent your employer subsidizes the cost of the LTD they provide. If they subsidize a large portion of the cost, you would want to take advantage of that. My employer covers the cost of a LTD plan similar to what you describe, so I take advantage of that and then added a supplemental individual DI policy that covers another 25% of salary.
wfrobinette
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Re: Disability Insurance

Post by wfrobinette »

biscuit wrote:
Kencufc wrote:I think individual policies are the way to go. Group policies will increase every year. Once your FI, just cancel it.
Thanks. Where and how can I shop for disability insurance?
Search online. The key is to get a same occupation rider.

Guardian, Metlife are two that I looked at.
Rupert
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Re: Disability Insurance

Post by Rupert »

biscuit wrote:Where and how can I shop for disability insurance?
Guardian is pretty widely regarded as the best, at least for certain professionals. Metlife and Principal are also big in disability insurance. You'll probably need to go through a broker. I always advocate the use of independent brokers, i.e., one not captive to a particular insurance company.

There are many prior Bogleheads threads on DI. There was one recently (within the past month or so) that discussed all the optional riders that are available, how to prioritize them, etc. You should do a search for those threads.
Kencufc
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Re: Disability Insurance

Post by Kencufc »

biscuit wrote:
Kencufc wrote:I think individual policies are the way to go. Group policies will increase every year. Once your FI, just cancel it.
Thanks. Where and how can I shop for disability insurance?
The most efficient way is to apply through an independent insurance broker. You can check with individual companies but that will take a lot of time. An independent broker can quote you from multiple companies. I use a company called MDFinancial. They specialize in physician disability but they might be able to help you out.
There are multiple companies similar to this though.
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LadyGeek
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Re: Disability Insurance

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (insurance).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Maxdog
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Re: Disability Insurance

Post by Maxdog »

Guardian and Mass Mutual had good policies when I got mine several years ago.

I agree with other poster who mentioned going through a broker. They can shop policies and give you guidance.

Keep in mind if the employer policy isn't portable...if you develop a condition that doesn't cause you to be disabled presently, it will likely be excluded from a future policy should you switch jobs and need to purchase disability insurance later. I liked knowing that once I bought my policy, I was covered and any conditions I developed that may lead to a disability would be covered.

The employer policy will likely not be a Cadillac policy and may not come with many riders. Think Cost of Living Adjustment. True Own Occupation coverage. Retireguard (Mass Mutual's version of a retirement plan for you in case you become disabled--when you are using your monthly benefits to pay for medical expenses etc...Mass Mutual funds a retirement plan on your behalf if you have "Retireguard." I know Guardian has something similar and am sure others do as well. Catastrophic Ryder--if you are catastrophically disabled (think motor vehicle accident), you will receive a large supplemental monthly payment in addition to your policy's usual monthly benefit. The list goes on...

Another thing to consider about getting your own policy vs taking an employer's policy is the after tax value of the benefits. If you pay for the policy yourself, then the benefits come to you income tax free. If your employer provides you the policy as a benefit and pays the premiums, then the benefits will be taxed.

Price:
If you can get several folks together to get policies at same time, you may get a reduced rate. I had several friends do this and they got a nice discount.

Consider making the waiting period prior to which you are labeled disabled longer. Rather than a 90 day 180 day waiting period, consider longer depending on the size of your emergency fund. The purpose of my policy is to protect against years of disability. My emergency fund covers the gap. You can get a Cadillac policy at a reduced price by making the waiting period longer. It's like having a higher deductible on your homeowners insurance.

My policy pays till I'm 65yo. Some policies have shorter duration. I figured if my policy is replacing income, it might as well do so for my working years till 65. That & retireguard has my family covered.

Anyway, I look at my policies as just the cost of doing business. If I had a company that was going to spin of tons of cash each year and I could insure it for a reasonable price, it would just be a business expense.
BruDude
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Location: Las Vegas

Re: Disability Insurance

Post by BruDude »

biscuit wrote:Both are a dual income family and it would be hard if one of us gets disabled. Thanks to BH, we are in the process of getting a life insurance.

Reg disability insurance, my company offers disability insurance and both my employer and I will share the cost. Unfortunately, I missed the cut off date. should I wait till October and enroll it or go for a private one ?

TIA!
Group disability and individual disability insurance are apples and oranges. They are sort of the same thing, but the benefits are usually worlds apart. There are a number of drawbacks to group plans:

1. Premiums are not guaranteed and can be changed at any time
2. Benefits are not guaranteed and can be changed at any time
3. The insurance company can terminate the group altogether, or the employer can terminate the plan. If the plan is terminated, you may be given a conversion option to an individual policy, but it will be very expensive and you may not be happy with the benefits that are offered. Similarly, if the employer changes insurance companies, the benefits from the new one may not be as good as what the old one offered and you can't do anything about it.
4. Most group plans only have true own-occupation definition of disability for 2 years, then the definition changes to a less favorable one for the remainder of the claim.
5. Most group plans do not have COLA and many have no partial/residual disability benefits, or very limited partial/residual benefits.
6. If you leave the employer, you will lose your coverage or be given the option of the expensive conversion coverage. Most people don't work for the same employer for 30+ years these days.
7. Premiums often increase in 5-year age bands instead of remaining level
8. Group coverage usually can't be continued past age 65, individual policies can
9. Individual policies are easily portable between employers and occupations. You don't have to do anything, the coverage just stays the same.
BruDude
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Location: Las Vegas

Re: Disability Insurance

Post by BruDude »

Rupert wrote:It depends on the employer-provided insurance: How good is it, and, importantly, are the policies portable (meaning can you keep them if you change employers)? The general rule is that you should have private coverage to supplement whatever group policy your employer offers, but you need to give us more information about the policies your employers offer before we can give you advice about how to proceed.
Supplementing a group plan means that you would be eligible for less individual coverage, so I have to disagree with this as a general rule. The good news is that if you buy an individual policy and then go work for a new employer, you can take the group coverage and potentially be paid out on both in the event of a disability.
biscuit wrote:
Rupert wrote:It depends on the employer-provided insurance: How good is it, and, importantly, are the policies portable (meaning can you keep them if you change employers)? The general rule is that you should have private coverage to supplement whatever group policy your employer offers, but you need to give us more information about the policies your employers offer before we can give you advice about how to proceed.
Below is the plan details:

The LTD Plan ensures benefits equal to 60% (less taxes) of your Daily Earnings are paid to you, up to a maximum benefit of $10,000 a month. You are considered totally disabled under the LTD Plan if, because of illness or injury, you are unable to perform all the material duties of your job.

The LTD Plan is designed to begin paying benefits when your disability continues beyond the later of 180 days or the date your STD payments end. Benefits will continue as long as you remain disabled, up to 24 months. If, after 24 months, you are unable to perform the material duties of any job you could reasonably be expected to perform based on your experience, training and education, benefits can continue to age 65.

The policies are not portable
OP, this is a terrible definition of disability if it is word for word as you stated. See here: "You are considered totally disabled under the LTD Plan if, because of illness or injury, you are unable to perform all the material duties of your job."

Notice how it does not say "unable to perform the material duties of your job", it says "unable to perform all the material duties of your job" which is a big difference if you have a claim. The definition after the first 24 months also leaves a lot of gray area as to whether you should be considered disabled or not for various illnesses and injuries.
pangea33 wrote:
biscuit wrote:Thanks. Where and how can I shop for disability insurance?
I'd suggest checking with whoever provides your homeowner insurance. I got a nice discount when insuring my vehicles through the same company. Then I asked for a quote on term life insurance and was persuaded to move my policy there as well, for more great rates. Now I've reached out about disability insurance myself.

If I don't feel comfortable putting several eggs in a single insurer's basket, perhaps I'm insured through the wrong company.
Most companies that sell homeowners insurance do not sell individual disability insurance. Independent broker is the way to go (full disclosure - I am an independent broker, but most people reading this forum know that already).
Kenkat wrote:You should look at what extent your employer subsidizes the cost of the LTD they provide. If they subsidize a large portion of the cost, you would want to take advantage of that. My employer covers the cost of a LTD plan similar to what you describe, so I take advantage of that and then added a supplemental individual DI policy that covers another 25% of salary.
You would only want to take advantage of it if the policy was any good. If the policy sucks and you enroll in it, you are limiting the amount of coverage you can buy on an individual policy, which has much better benefits.
wfrobinette wrote:
biscuit wrote:
Kencufc wrote:I think individual policies are the way to go. Group policies will increase every year. Once your FI, just cancel it.
Thanks. Where and how can I shop for disability insurance?
Search online. The key is to get a same occupation rider.

Guardian, Metlife are two that I looked at.
MetLife stopped selling disability insurance in September 2016. Ohio National came out with a new product that is very competitive and effectively took MetLife's place in the market, they are often the lowest price now for a very good policy. Depends on occupation/gender/etc.

The best DI companies are going to be Guardian, Ohio National, Principal, Standard, Ameritas, and Mass Mutual. The best choice for each person individually depends on a number of variables. Guardian has the best benefits in the industry, but if the price is 30% higher than one of the other companies, that certainly makes a difference too. Hence the reason to use an independent broker that can quote several companies.
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