long term disability insurance- strategies for managing cost?

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Topic Author
Ed_Sandwich
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long term disability insurance- strategies for managing cost?

Post by Ed_Sandwich » Fri May 10, 2019 10:02 am

The quotes I have received for LTD insurance are pretty astronomical (between $130-150 per month, per person, so basically almost $300/month for my wife and I. This is for 60% of salary to age 65. We are mid-30s.

Is this the norm or are there cheaper options? I feel like we are exposed to a lot of risk by not having it, but that seems cost-prohibitive really. We both have short term disability insurance through our jobs, but obviously that isn't enough.

rj342
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Re: long term disability insurance- strategies for managing cost?

Post by rj342 » Fri May 10, 2019 10:18 am

That sounds high if that is optional LTD offered through your employer.
Of course it depends if they are subsidizing it or not.

If that was an open market quote, see if your employer has it available for purchase - they may have it even though they don' pay for it.

Quite often employers cover the LTD completely, but only offer optional STD.

BruDude
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Re: long term disability insurance- strategies for managing cost?

Post by BruDude » Fri May 10, 2019 11:03 am

Ed_Sandwich wrote:
Fri May 10, 2019 10:02 am
The quotes I have received for LTD insurance are pretty astronomical (between $130-150 per month, per person, so basically almost $300/month for my wife and I. This is for 60% of salary to age 65. We are mid-30s.

Is this the norm or are there cheaper options? I feel like we are exposed to a lot of risk by not having it, but that seems cost-prohibitive really. We both have short term disability insurance through our jobs, but obviously that isn't enough.
Impossible to say without knowing your occupations, income, and benefits being quoted. I would say those quotes are probably on the low side if you have a six-figure income.....disability insurance is expensive. Most of my disability insurance clients are doctors but the average premium I sell is around $2-5k/year for residents and $5-10k/year for doctors in practice (due to higher income amounts being covered). You can generally figure that a good individual DI policy is going to cost between 2-4% of the income amount being covered for a "maxed out coverage" level (i.e. age-65 benefit period 90-day elimination period, future increase option rider, COLA rider, partial disability rider).

If you want to reduce the cost, try increasing the elimination period to 180 or 365 days, reducing the benefit period to 5 years or 10 years, or removing optional benefits.

"Expensive" is a relative term. It would be a lot more expensive if you had no coverage and became disabled, then made no money for the next 30 years.

Think about it this way - say you make $100k and your benefit amount is $5k/month. You buy a COLA rider with your coverage. You become disabled and never recover. The insurance company is now on the hook for several million dollars over the next 30 years ($60k/year x 30 years x 3% annual increase). 2x, 3x, or 4x those numbers for higher incomes. Now that is expensive.

Topic Author
Ed_Sandwich
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Re: long term disability insurance- strategies for managing cost?

Post by Ed_Sandwich » Mon May 13, 2019 2:22 pm

BruDude wrote:
Fri May 10, 2019 11:03 am
Most of my disability insurance clients are doctors
Is there any reason for this? Is this just the industry you're focused on or is it due to high income?

BruDude
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Re: long term disability insurance- strategies for managing cost?

Post by BruDude » Mon May 13, 2019 2:25 pm

Ed_Sandwich wrote:
Mon May 13, 2019 2:22 pm
BruDude wrote:
Fri May 10, 2019 11:03 am
Most of my disability insurance clients are doctors
Is there any reason for this? Is this just the industry you're focused on or is it due to high income?
Doctors are the main market for disability insurance because of their high income and how easy it is to become disabled from their occupation, especially for those with surgical duties. Becoming disabled can easily be a $10M+ lifetime income loss for a physician. Of course, that is not to say that other jobs don't need DI, I'm just saying that doctors are the largest/most common market for it.

mega317
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Re: long term disability insurance- strategies for managing cost?

Post by mega317 » Mon May 13, 2019 4:22 pm

Your quotes seem within reason to me as well. Perhaps buy a smaller amount with a future purchase option? Is there no room to trim your budget to manage the premiums? If you are the kind of person who should have DI then you really should have it.

MedSaver
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Re: long term disability insurance- strategies for managing cost?

Post by MedSaver » Mon May 13, 2019 4:43 pm

Hard to know without more info but it doesn't seem outrageous. As a physician, I pay about $6k per year for own occupation and a bunch of riders.

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ResearchMed
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Re: long term disability insurance- strategies for managing cost?

Post by ResearchMed » Mon May 13, 2019 4:58 pm

Ed_Sandwich wrote:
Fri May 10, 2019 10:02 am
The quotes I have received for LTD insurance are pretty astronomical (between $130-150 per month, per person, so basically almost $300/month for my wife and I. This is for 60% of salary to age 65. We are mid-30s.

Is this the norm or are there cheaper options? I feel like we are exposed to a lot of risk by not having it, but that seems cost-prohibitive really. We both have short term disability insurance through our jobs, but obviously that isn't enough.
That 60% of salary... is it tax-free?
If so, that gives you more "value" for the premiums, at least.

RM
This signature is a placebo. You are in the control group.

BruDude
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Re: long term disability insurance- strategies for managing cost?

Post by BruDude » Mon May 13, 2019 5:07 pm

ResearchMed wrote:
Mon May 13, 2019 4:58 pm
Ed_Sandwich wrote:
Fri May 10, 2019 10:02 am
The quotes I have received for LTD insurance are pretty astronomical (between $130-150 per month, per person, so basically almost $300/month for my wife and I. This is for 60% of salary to age 65. We are mid-30s.

Is this the norm or are there cheaper options? I feel like we are exposed to a lot of risk by not having it, but that seems cost-prohibitive really. We both have short term disability insurance through our jobs, but obviously that isn't enough.
That 60% of salary... is it tax-free?
If so, that gives you more "value" for the premiums, at least.

RM
Benefits for individual policies are tax-free as long as the premiums are paid with after-tax dollars

Topic Author
Ed_Sandwich
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Re: long term disability insurance- strategies for managing cost?

Post by Ed_Sandwich » Wed May 15, 2019 12:30 pm

mega317 wrote:
Mon May 13, 2019 4:22 pm
Your quotes seem within reason to me as well. Perhaps buy a smaller amount with a future purchase option? Is there no room to trim your budget to manage the premiums? If you are the kind of person who should have DI then you really should have it.
By "kind of person" do you mean the paranoid kind? Then yes :D

But I feel like prettymuch everyone who works for a living should have it, personally.

mega317
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Re: long term disability insurance- strategies for managing cost?

Post by mega317 » Wed May 15, 2019 12:34 pm

I am saying that if it's cost-prohibitive then you should find the money somewhere else, don't just go uninsured.

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