Long Term Disability Insurance

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Topic Author
ianferrel
Posts: 192
Joined: Thu May 29, 2008 5:27 pm

Long Term Disability Insurance

Post by ianferrel » Mon May 21, 2018 12:12 pm

My employer provides group LTD insurance that provides 60% of my pre-disability income in the event of long-term disability.

I'm trying to determine if I should purchase additional insurance, and how best to think about the risks. A few data points that might be helpful.

1. Our current expenses are a bit more than 60% of my income, after accounting for lower taxes. We might have to (or choose to) move to a lower cost of living area if we had that long-term cap on my income.

2. I am in my 30s, and I don't believe there are adjustments for inflation. So the purchasing power of that 60% would be considerably lower by the end of the payout at "standard retirement age".

3. I am a software developer, which means that I'd have to be pretty significantly disabled to be unable to do my job. As long as I can think and operate a keyboard, I can do my job. So perhaps I should purchase more insurance because in the event that it kicks in at all, I likely have additional expenses for a personal caretaker of some kind.

4. My general philosophy with insurance is to insure only against catastrophic losses. To me, the 60% amount feels like that. We could survive fine, although we might not be as comfortable. But maybe in this case I should think about it more like income smoothing. Pay a bit more in premiums in the cases where I don't get injured in order to be more comfortable in the worst case.

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dm200
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Re: Long Term Disability Insurance

Post by dm200 » Mon May 21, 2018 12:17 pm

ianferrel wrote:
Mon May 21, 2018 12:12 pm
My employer provides group LTD insurance that provides 60% of my pre-disability income in the event of long-term disability.
I'm trying to determine if I should purchase additional insurance, and how best to think about the risks. A few data points that might be helpful.
1. Our current expenses are a bit more than 60% of my income, after accounting for lower taxes. We might have to (or choose to) move to a lower cost of living area if we had that long-term cap on my income.
2. I am in my 30s, and I don't believe there are adjustments for inflation. So the purchasing power of that 60% would be considerably lower by the end of the payout at "standard retirement age".
3. I am a software developer, which means that I'd have to be pretty significantly disabled to be unable to do my job. As long as I can think and operate a keyboard, I can do my job. So perhaps I should purchase more insurance because in the event that it kicks in at all, I likely have additional expenses for a personal caretaker of some kind.
4. My general philosophy with insurance is to insure only against catastrophic losses. To me, the 60% amount feels like that. We could survive fine, although we might not be as comfortable. But maybe in this case I should think about it more like income smoothing. Pay a bit more in premiums in the cases where I don't get injured in order to be more comfortable in the worst case.
Remember, also, that you have Social Security Disability eligibility as well. I think SSDI adjusts up with inflation. Check out whether SSDI would affect the 60% company disability.

For added protection, you might choose to pay for credit disability insurance on many types of credit union loans.

Depending on the details and your residence jurisdiction(s), certain expenses may be less (such as real estate taxers, public transportation, etc.)

State and Federal tax rates may be less at 60%

Rupert
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Re: Long Term Disability Insurance

Post by Rupert » Mon May 21, 2018 12:18 pm

You need an individual policy that is portable, i.e., that you can take with you if you leave your present employment. Otherwise you're SOL if you lose your current job after developing some sort of medical condition that makes you un-insurable. Also, this statement "I'd have to be pretty significantly disabled to be unable to do my job. As long as I can think and operate a keyboard, I can do my job" fails to take into account some of the most common ways that people become disabled: cancer, a chronic pain condition, mental illness. Each of these conditions affects how you think, either directly or via the side effects of medication, and thus you may be under-estimating your likelihood of becoming disabled at some point.

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dm200
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Location: Washington DC area

Re: Long Term Disability Insurance

Post by dm200 » Mon May 21, 2018 12:21 pm

Rupert wrote:
Mon May 21, 2018 12:18 pm
You need an individual policy that is portable, i.e., that you can take with you if you leave your present employment. Otherwise you're SOL if you lose your current job after developing some sort of medical condition that makes you un-insurable. Also, this statement "I'd have to be pretty significantly disabled to be unable to do my job. As long as I can think and operate a keyboard, I can do my job" fails to take into account some of the most common ways that people become disabled: cancer, a chronic pain condition, mental illness. Each of these conditions affects how you think, either directly or via the side effects of medication, and thus you may be under-estimating your likelihood of becoming disabled at some point.
There may be a big difference between being able to do the job and being hired for a job. Despite laws/regulations, I suspect being visibly disabled would reduce your chances of being hired at a different employer.

Yes - I also agree with the issue of being "portable".

Topic Author
ianferrel
Posts: 192
Joined: Thu May 29, 2008 5:27 pm

Re: Long Term Disability Insurance

Post by ianferrel » Mon May 21, 2018 12:25 pm

Rupert wrote:
Mon May 21, 2018 12:18 pm
You need an individual policy that is portable, i.e., that you can take with you if you leave your present employment. Otherwise you're SOL if you lose your current job after developing some sort of medical condition that makes you un-insurable.
Hmm. Good point. Are there policies that provide supplementary income in the event that I'm covered by the policy at work, but can be converted to cover more if I leave my current job/lose my current coverage?
Also, this statement "I'd have to be pretty significantly disabled to be unable to do my job. As long as I can think and operate a keyboard, I can do my job" fails to take into account some of the most common ways that people become disabled: cancer, a chronic pain condition, mental illness. Each of these conditions affects how you think, either directly or via the side effects of medication, and thus you may be under-estimating your likelihood of becoming disabled at some point.
I think you might be misinterpreting that point. I wasn't saying "I'm less likely to be disabled because I'm a software dev", I was saying "If I'm disabled, it won't just be that I can't do certain physical activities. It will be something with such high impact that I'm likely to need major help just living, so maybe I need more insurance."

book lover
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Re: Long Term Disability Insurance

Post by book lover » Tue May 22, 2018 8:29 am

There are disability policies that offer inflation protection at various levels. If you decide to purchase on your own, be sure to get one which is own occupation and check policy language to see if there would be any overlap with Social Security Disability such that the insurance company subtracts what you get in Social Security Disability payments from that they pay you. Also some policies allow you to keep until age 70 instead of age 65. Of course, adding inflation protection and keeping policy to age 70 adds to the cost of the policy. You may also want to check the policy language of your current policy with your employer to see if they cap the number of years you would be own occupation. For example , after five years if you could do any type of work you would no longer be considered to be disabled.

pintail07
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Re: Long Term Disability Insurance

Post by pintail07 » Tue May 22, 2018 9:14 am

You may qualify for additional individual coverage, talk to a broker that specializes in Disability.

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