Disability insurance recommendations?

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dkoffer
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Joined: Mon Mar 26, 2018 8:41 pm

Disability insurance recommendations?

Post by dkoffer »

I'm looking at getting disability insurance. Currently late 30's, renter, single with no dependents. Modest net worth (with sizable 401K), fairly good income through my LLC. No life insurance.

1. Does it make sense to get short/long term disability since I have no dependents?

My intuition is that long term disability would be good. But I can easily afford 5 years without working as it stands currently, so could skip short term disability.

2. How do you pick a company and policy? Any recommendations?

I use Amica mutual for my car and rental policy. They are trying to screw me on an uninsured motorist collision, but I do like that they are a mutual company (not a for profit).

3. How do you size the policy and balance premiums vs. benefits?

Thanks for any advice related to this. Feel free to chime in with thoughts here, I'm not even sure I'm asking all the right questions yet. Just getting started.
brajalle
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Re: Disability insurance recommendations?

Post by brajalle »

1. I am not sure dependents necessarily have a ton to do with disability insurance, I think the choice to have it has more to do with your desire to insure lapses in your ability to work. Sure, kids can be expensive, but it is all just hedging loss of income pretty much. If there is a lapse in your ability to work, it is possible you may be simultaneously experiencing a rise in various costs as well if it is due to a medical reason. You mention you can cover 5 years without working, which is great, and may be a good argument for not having disability insurance, but it is worth mentioning that while you are out of work and draining your savings, you are sabotaging future you...and draining your savings. Most Americans do not have adequate savings for a 3 month loss of income, so it is an easier sell to that cohort, but there are benefits to anyone. You will have to get some quotes and evaluate.

2. My employer offers LT for free, and has a relationship with another company for ST for payroll deduction, which is what I grabbed. I am not at all knowledgable in the insurance company business, but I do recall hearing several people on this forum suggest Mutual of Omaha for ST.

3. Our options are 3mo, 6mo, and 12mo on the short term for length. I know other options are available for length from the insurer, but my employer when selecting the options to offer could only select 3 to offer, and those are the most popular lengths. For benefit amount, it was capped as a % of your salary, but I had the option of dollar amounts I could pick under that. The partial disability option is half of that dollar amount. The elimination period options started at 0 days for disability and 7 days for sickness. It drastically increased the premium to go with the lowest option which was 7 days for sickness, so I went with 14 days.

How did I choose what I did? Well, the first year I had it, my employer did not offer the LT disability, so I went with 12 months of coverage. When the LT was offered for free, and it has a 3 month elimination period, I sized it down to 3 months. I may decide to lengthen it again, because I do not believe it is that much more to do so, and it could provide some nice overlap in case of increased costs...and because it is portable. I chose shorter elimination periods and the top dollar amount available because I did not think the cost scaling for doing so was that bad, and because I work in a field where I may not be able to have certain restrictions, ie I could be out longer than most with a similar injury. The cost of it seems pretty small compared to the hit I could take to retirement funding combined with savings depletion.

I do intend to price Mutual of Omaha and some other options, ie Breeze, for ST & LT within the next year. I have heard that LT disability should be fairly cheap, likely why my employer offers it for free. The vast majority of uses are short term, and long term stops paying when social security starts typically.

Some data on Disability rates https://disabilitycanhappen.org/disability-statistic/
Some of the shocking ones to me are that 25% of 20yr olds can expect to be out of work for a year before retirement. 5.6% of Americans will experience a 6mo or less short term disability each year, vast majority is non occupational.

Side comment about Amica and uninsured motorist costs. A year ago my (not Amica) umbrella shot up drastically, my agent told me a large factor was that they realized they could not adequately price uninsured motorist coverage, so had increased the price, and also stopped offering it to new customers in the Umbrella policy. Your comment made me wonder if it is an industry wide thing, so perhaps Amica is not screwing you.
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Iowa David
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Re: Disability insurance recommendations?

Post by Iowa David »

I have a LTD plan from Guardian.

https://www.guardianlife.com/disability-insurance

While my work provides LTD covering 60% of my salary, I opted for this plan based off of:

1. "True Own Occupation" disability definition
2. Guardian was well-recommended by many on this site (I believe it's popular with many physicians)
3. I liked having my own personal policy in the event that I change jobs I still have some portable coverage

My policy provides a monthly benefit of ~$2,500 and the monthly premium is around $110.
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing
cabfranc
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Re: Disability insurance recommendations?

Post by cabfranc »

We recently purchased policies from MassMutual. Our employer offers LTD up to 60% of salary or $6000. However, we both make more than $100K and the benefit is subject to taxes, so we deemed it too little in addition to other weaknesses with the plan so opted for individual policies. To answer your questions:

1. I think DI is just as important with no dependents. Disability among single individuals is a cause of poverty. I have a single friend in his 40s who was permanently disabled in a car accident and his parents have had to put off their own retirement plans because they need to leave him money to have a decent life.

2. I found shopping for DI exhausting. Too many companies and options. I suggest working with a broker. I found the wiki page and this forum important in identifying the various riders available.

3. I would buy as much benefit as I thought I needed. Though I tend to be moderate with insurance purchases, we opted for Cadillac DI policies. I'm not sure more modest policies offer sufficient protection. It's a cost I'm happy to pay. DW makes $200K per year and her policy is $5000/year for a monthly benefit of $9500. I think of it as making $195K that is insured against disability versus $200K that is uninsured.
Luckywon
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Re: Disability insurance recommendations?

Post by Luckywon »

I'd look for a good insurance agent. Mine was enormously helpful. I don't think the policy I got would have been cheaper without an agent.
gradStudentInvestor
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Re: Disability insurance recommendations?

Post by gradStudentInvestor »

Luckywon wrote: Sun Nov 01, 2020 10:58 am I'd look for a good insurance agent. Mine was enormously helpful. I don't think the policy I got would have been cheaper without an agent.
Agreed. A good agent will help guide you through the options. White Coat Investor has a list of recommended agents (I had some frustrations with the agent I used off that list, but in the end we got the coverage we needed).
DocInColo
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Re: Disability insurance recommendations?

Post by DocInColo »

I like Guardian. It was a bit more expensive than other carriers, but it was true own-occupation and comes highly rated. Depending on what you do for work, and what education/training you needed to get there, an own occupation policy is crucial. I worked with an agent, and made sure they sold Guardian policies.

I agree with others that disability insurance is probably one of the most important pieces of insurance you can get, especially since you are single. It's the stuff you don't want to think about, but If you became disabled and couldn't work, you don't have a spouse's income to fall back on. Now you have no income, but still have to pay basic living expenses, medical expenses, and maybe health insurance too.

I definitely wouldn't think of your retirement savings as disability insurance, especially if most of it is in your 401k. Most DI policies stop paying after you hit a certain age. Find a good agent and get a policy. The cost is well worth it.
Oilcans
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Re: Disability insurance recommendations?

Post by Oilcans »

All great advise from the above comments and I don't have much to add except to say that I inquired into disability insurance MANY years ago and remember that one thing that's very important in a disability policy is the policy's definition of total disability.

Good luck.
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

dkoffer wrote: Sun Nov 01, 2020 12:38 am I'm looking at getting disability insurance. Currently late 30's, renter, single with no dependents. Modest net worth (with sizable 401K), fairly good income through my LLC. No life insurance.

1. Does it make sense to get short/long term disability since I have no dependents?

My intuition is that long term disability would be good. But I can easily afford 5 years without working as it stands currently, so could skip short term disability.

2. How do you pick a company and policy? Any recommendations?

I use Amica mutual for my car and rental policy. They are trying to screw me on an uninsured motorist collision, but I do like that they are a mutual company (not a for profit).

3. How do you size the policy and balance premiums vs. benefits?

Thanks for any advice related to this. Feel free to chime in with thoughts here, I'm not even sure I'm asking all the right questions yet. Just getting started.
1. Long-term, yes. Short-term, no. Short-term coverage on the individual market is very expensive for the benefits you actually get. Put the money into the long-term policy.

2. Use an independent broker, DI is not something you want to tackle yourself. It is a complicated product and you need someone's help that really knows what they are doing, can explain how the policy benefits work, and can help you determine which company is the best option. There may also be underwriting complications depending on your health history, a broker can help figure that out too. The cost to use a broker is exactly $0. Price is the same whether you buy through the broker or direct with the insurance company. The broker may also help you get a discount that you wouldn't otherwise know about, though not all policies are eligible for discounts.

Guardian has the best DI policy you can buy. Depending on your job and health, they may or may not be the best option. Sometimes they are the cheapest, sometimes they are the most expensive, there are a lot of variables in play.

3. The benefits you want to have in an ideal world are as follows:

Benefit period to at least age 65, "own occupation" definition of disability, unlimited mental/nervous disorder coverage, Future Increase Option rider, COLA rider, Residual/Partial Disability rider (the best version offered by whatever company you're looking at - some have more than one). The elimination period is subjective depending on your budget and risk tolerance, which appears to be high. A 180-day or 365-day elimination period will cost less, 90-day EP is the most common by far.

Side note - Group disability insurance policies are not nearly as comprehensive as individual policies. Make sure you understand the differences if you have to decide whether to opt out of a group policy in order to maximize your individual coverage. Most group policies don't allow opt-outs unless the coverage is voluntary and paid by the employee.


The "top tier" DI companies are Guardian, Principal, Standard, Mass Mutual, Ameritas, and Ohio National. Guardian has the best policy. In my opinion, Mass Mutual has the second best, but they are all good companies.

DI is not something you want to buy solely based on price, otherwise you will get what you pay for. A lot of agents will quote cheaper benefits without explaining why they are quoting it that way (usually because they are not DI experts and are just quoting what their marketing department told them to do). Make sure you understand what you are buying. That will be a lot easier with the help of a good agent, but you should also do your own research to make sure it lines up with what the agent is telling you.
brajalle
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Re: Disability insurance recommendations?

Post by brajalle »

BruDude wrote: Mon Nov 02, 2020 1:16 am Side note - Group disability insurance policies are not nearly as comprehensive as individual policies. Make sure you understand the differences if you have to decide whether to opt out of a group policy in order to maximize your individual coverage. Most group policies don't allow opt-outs unless the coverage is voluntary and paid by the employee.
I am not sure I understand this section. Are you saying that if I have a group LT policy that covers 60%, that I need to drop it to shop another policy with a different insurer that has better features? I thought you could just stack policies from different insurers if you wanted. Am I understanding what you said correctly?
tj
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Re: Disability insurance recommendations?

Post by tj »

brajalle wrote: Mon Nov 02, 2020 5:01 am
BruDude wrote: Mon Nov 02, 2020 1:16 am Side note - Group disability insurance policies are not nearly as comprehensive as individual policies. Make sure you understand the differences if you have to decide whether to opt out of a group policy in order to maximize your individual coverage. Most group policies don't allow opt-outs unless the coverage is voluntary and paid by the employee.
I am not sure I understand this section. Are you saying that if I have a group LT policy that covers 60%, that I need to drop it to shop another policy with a different insurer that has better features? I thought you could just stack policies from different insurers if you wanted. Am I understanding what you said correctly?
If you buy individual before you have group, then you're good. If you buy individual after you have group in place, then you're limited in the amount of coverage you can buy.
Luckywon
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Re: Disability insurance recommendations?

Post by Luckywon »

BruDude wrote: Mon Nov 02, 2020 1:16 am The "top tier" DI companies are Guardian, Principal, Standard, Mass Mutual, Ameritas, and Ohio National. Guardian has the best policy. In my opinion, Mass Mutual has the second best, but they are all good companies.
Interested to know your impression of Unum, which I have.
runninginvestor
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Re: Disability insurance recommendations?

Post by runninginvestor »

dkoffer wrote: Sun Nov 01, 2020 12:38 am I'm looking at getting disability insurance. Currently late 30's, renter, single with no dependents. Modest net worth (with sizable 401K), fairly good income through my LLC. No life insurance.

1. Does it make sense to get short/long term disability since I have no dependents?

My intuition is that long term disability would be good. But I can easily afford 5 years without working as it stands currently, so could skip short term disability.

......
IMO, LTD insurance is one of the most important to have regardless of other factors. If you become disabled and can't obtain gainful employment to provide income, chances are your spending on healthcare, adaptations, modifications, and potentially aides will be a habitual increase to yearly expenses. Some form of aide in some capacity would be even more probable with no other in home dependents to help with the little things that may become difficult or impossible.

So even though you have no other dependents, think of it as yourself as a dependent that you are ensuring some added financial flexibility for if the worst happens.
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

brajalle wrote: Mon Nov 02, 2020 5:01 am
BruDude wrote: Mon Nov 02, 2020 1:16 am Side note - Group disability insurance policies are not nearly as comprehensive as individual policies. Make sure you understand the differences if you have to decide whether to opt out of a group policy in order to maximize your individual coverage. Most group policies don't allow opt-outs unless the coverage is voluntary and paid by the employee.
I am not sure I understand this section. Are you saying that if I have a group LT policy that covers 60%, that I need to drop it to shop another policy with a different insurer that has better features? I thought you could just stack policies from different insurers if you wanted. Am I understanding what you said correctly?
If you have a group policy that you can't opt out of, the individual policy can only be used as a supplement to the group LTD. For example, if you earn $200k you would normally be eligible for around $9,500/month. If your employer has 60% of salary coverage and they are paying the premiums, you'd only be eligible for around $4,000/month on an individual policy. If you wanted to get the $9,500/month for an individual policy, you would have to opt out of the group policy. Most employers don't allow opt-outs for employer-paid LTD, but voluntary policies paid by the employee can be opted out of.
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

Luckywon wrote: Mon Nov 02, 2020 9:55 am
BruDude wrote: Mon Nov 02, 2020 1:16 am The "top tier" DI companies are Guardian, Principal, Standard, Mass Mutual, Ameritas, and Ohio National. Guardian has the best policy. In my opinion, Mass Mutual has the second best, but they are all good companies.
Interested to know your impression of Unum, which I have.
I would have to see the policy. I believe Unum only sells their individual DI through employer groups, and they would be tailored to what the group decided to offer.
Luckywon
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Re: Disability insurance recommendations?

Post by Luckywon »

BruDude wrote: Mon Nov 02, 2020 2:30 pm
Luckywon wrote: Mon Nov 02, 2020 9:55 am
BruDude wrote: Mon Nov 02, 2020 1:16 am The "top tier" DI companies are Guardian, Principal, Standard, Mass Mutual, Ameritas, and Ohio National. Guardian has the best policy. In my opinion, Mass Mutual has the second best, but they are all good companies.
Interested to know your impression of Unum, which I have.
I would have to see the policy. I believe Unum only sells their individual DI through employer groups, and they would be tailored to what the group decided to offer.
Thanks for the reply. The policy was indeed originally purchased for me by a small business.
SirOvlop
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Re: Disability insurance recommendations?

Post by SirOvlop »

interesting that there's no mention of Northwestern Mutual. That's who I went with a few years (6-7?) back after a good bit of research. The final nail in the coffin that sold me on NWM was a lawyer friend who specializes in disability claims who claimed everyone in her firm (she's a partner) uses them because they have the highest payout percentage compared to the other popular names which imo is worth a few premium points for the peace of mind (who wants a drawn out legal battle on the heels of a major life changing event that would even trigger the need for this money).

Maybe things have changed, IDK. I ended up with LT Disability which kicks in after 90 days (self-insured for short-term) and a term life policy.
Boglegrappler
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Re: Disability insurance recommendations?

Post by Boglegrappler »

Years ago, (in fact more than several decades ago), I bought a LT disability policy from Northwestern Mutual. I can remember that I shopped around. I do remember that I had to argue with the sales rep about what I wanted.

They wanted to sell a policy that started benefits right away, and only lasted for a year or so. I insisted that I could cover my own costs for a year or two, but was worried about the truly long term. In the end they wrote something that had a year-long waiting period and would pay up through my old age.

Their sales pitch is that most disabilties are over within a year, either through recovery or death. Maybe this sales pitch has changed, but I ended up with about what I wanted by holding firm.
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

SirOvlop wrote: Tue Nov 03, 2020 7:48 am interesting that there's no mention of Northwestern Mutual. That's who I went with a few years (6-7?) back after a good bit of research. The final nail in the coffin that sold me on NWM was a lawyer friend who specializes in disability claims who claimed everyone in her firm (she's a partner) uses them because they have the highest payout percentage compared to the other popular names which imo is worth a few premium points for the peace of mind (who wants a drawn out legal battle on the heels of a major life changing event that would even trigger the need for this money).

Maybe things have changed, IDK. I ended up with LT Disability which kicks in after 90 days (self-insured for short-term) and a term life policy.
NWM's policy is not as strong as the others. There are several limitations on the policy, with the biggest one being the limited "recovery" benefit under the Partial/Residual Disability rider. NWM only covers a maximum of 12 months under this benefit, while the others will cover it for the full benefit period. Example:

You are making $300k and become disabled for 5 years. When you go back to work, your new job is paying $150k. Let's assume your income stays at this level forever. Now you are no longer disabled, are back to work full time, but still have lost half of your income due to the disability putting you out of work in the first place. NWM would pay 50% of your monthly benefit for 12 months. The others would pay 50% of your monthly benefit through age 65+. That is a massive difference.

They also have limitations on the guaranteed insurability rider, limited benefits for mental/nervous disorders, their medical occupation definition of disability is not as good as the definitions offered by other companies, the COLA benefit resets after recovery, etc. They simply don't compete with the top tier companies that I mentioned upthread.
SirOvlop
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Re: Disability insurance recommendations?

Post by SirOvlop »

BruDude wrote: Tue Nov 03, 2020 10:42 am
SirOvlop wrote: Tue Nov 03, 2020 7:48 am interesting that there's no mention of Northwestern Mutual. That's who I went with a few years (6-7?) back after a good bit of research. The final nail in the coffin that sold me on NWM was a lawyer friend who specializes in disability claims who claimed everyone in her firm (she's a partner) uses them because they have the highest payout percentage compared to the other popular names which imo is worth a few premium points for the peace of mind (who wants a drawn out legal battle on the heels of a major life changing event that would even trigger the need for this money).

Maybe things have changed, IDK. I ended up with LT Disability which kicks in after 90 days (self-insured for short-term) and a term life policy.
NWM's policy is not as strong as the others. There are several limitations on the policy, with the biggest one being the limited "recovery" benefit under the Partial/Residual Disability rider. NWM only covers a maximum of 12 months under this benefit, while the others will cover it for the full benefit period. Example:

You are making $300k and become disabled for 5 years. When you go back to work, your new job is paying $150k. Let's assume your income stays at this level forever. Now you are no longer disabled, are back to work full time, but still have lost half of your income due to the disability putting you out of work in the first place. NWM would pay 50% of your monthly benefit for 12 months. The others would pay 50% of your monthly benefit through age 65+. That is a massive difference.

They also have limitations on the guaranteed insurability rider, limited benefits for mental/nervous disorders, their medical occupation definition of disability is not as good as the definitions offered by other companies, the COLA benefit resets after recovery, etc. They simply don't compete with the top tier companies that I mentioned upthread.
Maybe there are different flavors of LTDI w/ NWM as this is a scenario my agent and I went through in excruciating detail due to the nature of my work (software consulting) and I'm (nearly) certain what you stated is not the case for my policy...

Here's an excerpt from my policy (purchased back in 2015)...

Image
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

SirOvlop wrote: Tue Nov 17, 2020 3:25 pm Maybe there are different flavors of LTDI w/ NWM as this is a scenario my agent and I went through in excruciating detail due to the nature of my work (software consulting) and I'm (nearly) certain what you stated is not the case for my policy...

Here's an excerpt from my policy (purchased back in 2015)...

Image
According to the policy info you posted:

1. You must not be working in another job to qualify as totally disabled. This is the standard "modified occupation" definition of disability. The own occupation disability pays whether you are working in another job or not, regardless of the income from the new job.

Example scenario: You are disabled from your job earning $200k and take a teaching job for your line of work paying $100k. Since you took the teaching job, you are not totally disabled. They will now only pay 50% of your benefit amount (under the partial disability rider) because you are earning 50% of your income. With an "own occupation" definition, you would be paid 100% of the benefit amount even though you are working in another job. That is a big difference.

2. The "recovery" provision that is limited to 12 months that I mentioned is not cited. Ask your agent what happens if you are out of work for 5 years, then go back to work with no limitations, but are now earning half of your pre-disability income. Without a recovery provision, you would get $0. If the recovery provision is only 12 months, you would get paid $0 every year after the first one. Other companies have a recovery benefit that goes through the of the benefit period chosen.


If your agent did not quote you a policy with the own occupation definition, I would question their knowledge of disability insurance. It is a pretty inexpensive "upgrade" to the policy, yet I constantly see NWM agents not quoting it just to look more price-competitive. That is doing a disservice to their clients. One of the most commen things I see from NWM agents is a policy with an age-70 benefit period, no "own occupation" definition, no partial disability benefit, and a "graded" premium that increases every year, without explaining to the client that it increases every year. Quoting an age-70 benefit period without the other stuff is absurd as the own occupation and partial disability benefits have a much larger impact on your potential payouts than the difference between an age-65 and age-70 benefit period.
SirOvlop
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Re: Disability insurance recommendations?

Post by SirOvlop »

BruDude wrote: Tue Nov 17, 2020 4:26 pm
SirOvlop wrote: Tue Nov 17, 2020 3:25 pm Maybe there are different flavors of LTDI w/ NWM as this is a scenario my agent and I went through in excruciating detail due to the nature of my work (software consulting) and I'm (nearly) certain what you stated is not the case for my policy...

Here's an excerpt from my policy (purchased back in 2015)...

Image
According to the policy info you posted:

1. You must not be working in another job to qualify as totally disabled. This is the standard "modified occupation" definition of disability. The own occupation disability pays whether you are working in another job or not, regardless of the income from the new job.

Example scenario: You are disabled from your job earning $200k and take a teaching job for your line of work paying $100k. Since you took the teaching job, you are not totally disabled. They will now only pay 50% of your benefit amount (under the partial disability rider) because you are earning 50% of your income. With an "own occupation" definition, you would be paid 100% of the benefit amount even though you are working in another job. That is a big difference.
I'm fine with this. Why pay higher premiums for a low-probability event? The main point of LTDI is to make me "fiscally whole" in the unlikely event I become disabled... my policy does this. Plus, I have full control to invest the difference in premiums how I see fit.
2. The "recovery" provision that is limited to 12 months that I mentioned is not cited. Ask your agent what happens if you are out of work for 5 years, then go back to work with no limitations, but are now earning half of your pre-disability income. Without a recovery provision, you would get $0. If the recovery provision is only 12 months, you would get paid $0 every year after the first one. Other companies have a recovery benefit that goes through the of the benefit period chosen.
Correct - this is what's in my policy (didn't have the page scanned in). If I'm going back to work w/ (truly) no limitations, 12-months (of partial benefit) seems like a good amount of money and time to "get back on my feet" again. What's a scenario where I'd be back to work with no limitations and unable to get back to my previous level of income? The qualifications for partial-disability is quite low in my opinion (and policy).

If your agent did not quote you a policy with the own occupation definition, I would question their knowledge of disability insurance. It is a pretty inexpensive "upgrade" to the policy, yet I constantly see NWM agents not quoting it just to look more price-competitive. That is doing a disservice to their clients. One of the most commen things I see from NWM agents is a policy with an age-70 benefit period, no "own occupation" definition, no partial disability benefit, and a "graded" premium that increases every year, without explaining to the client that it increases every year. Quoting an age-70 benefit period without the other stuff is absurd as the own occupation and partial disability benefits have a much larger impact on your potential payouts than the difference between an age-65 and age-70 benefit period.
All of this was explained to me. I specifically chose "regular occupation", age-65, (potential) annual premium increases.


Hoping I'm not coming across as argumentative... I really appreciate your input to help me find holes in my logic (and insurance coverage).
BruDude
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Re: Disability insurance recommendations?

Post by BruDude »

SirOvlop wrote: Thu Nov 19, 2020 11:25 am
BruDude wrote: Tue Nov 17, 2020 4:26 pm
SirOvlop wrote: Tue Nov 17, 2020 3:25 pm Maybe there are different flavors of LTDI w/ NWM as this is a scenario my agent and I went through in excruciating detail due to the nature of my work (software consulting) and I'm (nearly) certain what you stated is not the case for my policy...

Here's an excerpt from my policy (purchased back in 2015)...

Image
According to the policy info you posted:

1. You must not be working in another job to qualify as totally disabled. This is the standard "modified occupation" definition of disability. The own occupation disability pays whether you are working in another job or not, regardless of the income from the new job.

Example scenario: You are disabled from your job earning $200k and take a teaching job for your line of work paying $100k. Since you took the teaching job, you are not totally disabled. They will now only pay 50% of your benefit amount (under the partial disability rider) because you are earning 50% of your income. With an "own occupation" definition, you would be paid 100% of the benefit amount even though you are working in another job. That is a big difference.
I'm fine with this. Why pay higher premiums for a low-probability event? The main point of LTDI is to make me "fiscally whole" in the unlikely event I become disabled... my policy does this. Plus, I have full control to invest the difference in premiums how I see fit.
2. The "recovery" provision that is limited to 12 months that I mentioned is not cited. Ask your agent what happens if you are out of work for 5 years, then go back to work with no limitations, but are now earning half of your pre-disability income. Without a recovery provision, you would get $0. If the recovery provision is only 12 months, you would get paid $0 every year after the first one. Other companies have a recovery benefit that goes through the of the benefit period chosen.
Correct - this is what's in my policy (didn't have the page scanned in). If I'm going back to work w/ (truly) no limitations, 12-months (of partial benefit) seems like a good amount of money and time to "get back on my feet" again. What's a scenario where I'd be back to work with no limitations and unable to get back to my previous level of income? The qualifications for partial-disability is quite low in my opinion (and policy).

If your agent did not quote you a policy with the own occupation definition, I would question their knowledge of disability insurance. It is a pretty inexpensive "upgrade" to the policy, yet I constantly see NWM agents not quoting it just to look more price-competitive. That is doing a disservice to their clients. One of the most commen things I see from NWM agents is a policy with an age-70 benefit period, no "own occupation" definition, no partial disability benefit, and a "graded" premium that increases every year, without explaining to the client that it increases every year. Quoting an age-70 benefit period without the other stuff is absurd as the own occupation and partial disability benefits have a much larger impact on your potential payouts than the difference between an age-65 and age-70 benefit period.
All of this was explained to me. I specifically chose "regular occupation", age-65, (potential) annual premium increases.


Hoping I'm not coming across as argumentative... I really appreciate your input to help me find holes in my logic (and insurance coverage).
The question is why settle for this policy and these definitions when you can have better ones for about the same price? That is why NWM is not competitive in the DI market. They're charging a similar price for inferior benefits. My job is very easy when the product I'm competing against is NWM because it's easy to show why the benefits aren't as good as the other insurers.

There are many scenarios where you may be disabled and then return to work at a lower level of income. Example - a doctor owns part of a practice and is included in the profit sharing so let's say they are earning $500k per year. They are disabled and out of work for 5 years, then decide to become a W2 employee because they don't want the hassle of being an owner or working as many hours as they were pre-disability. New job pays $250k, which is acceptable to them. The NWM policy would pay half your benefit for 12 months, while every other company would pay half your benefits until age 65. That is a massive difference! Let's say this happens at age 40 and return to work at 45, and let's assume a $15k/month benefit. That is $90,000 per year x 20 years = $1.8 million tax-free dollars, plus the cost of living adjustment.

Regarding the own occupation definition versus modified occupation definition, here is an example scenario. You are earning $300k and become disabled and let's say your policy pays $13k/month, which would be tax-free. Now you find another job you can do but you are only earning $100k doing it. Your DI policy will no longer pay you $13k/month because you decided to work in another job. Assume your partial disability benefit kicks in and pays you 67% of your benefit amount instead, so you get $8700/month in DI benefits. Instead of getting $13k tax free, you now have $8700 tax free and $8333/month in taxable income. You are now working "for free" essentially just to get to the same level of income you'd have if the policy had an own occupation definition. For the relatively minimal difference in cost, I know which definition I'd rather have.
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