Do I need disability insurance?

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ctraveler
Posts: 23
Joined: Fri Aug 27, 2010 1:45 pm

Do I need disability insurance?

Post by ctraveler » Fri Aug 27, 2010 1:58 pm

Hi,

I have been thinking about getting umbrella insurance. I currently have auto and renters insurance with State Farm. I was researching umbrella insurance and someone mentioned disability insurance and it go me thinking that I should probably consider getting it also. I am currently employed as a contractor in the IT field and I make a little over 6 figures. I'm not married and don't have kids yet.

Is it something I should have?

How many of you have disability insurance and how much should I expect to pay for it?

Also any suggestions on what companies to get quotes from would be appreciated.

Thanks

kenbrumy
Posts: 394
Joined: Sat Feb 28, 2009 5:13 pm

Post by kenbrumy » Fri Aug 27, 2010 2:12 pm

Whether you need disability insurance depends entirely on how you'll support yourself if you can't work. I have disability with my employer but I don't really need it in my financial position. I don't need what they give me for free but if I really needed it, I'd consider getting a policy outside of my employer.

Disability insurance isn't cheap and the cost will be determined by numerous factors. One is how long do you have to be disabled before benefits start. The definition of "disabled" is also important. Is it total disability so that you can't do any occupation regardless of pay or is it your current profession?

Remember you have a limited disability policy in the form of social security. The benefit is relatively small with lots of limitations but it is worth your looking at what would be provided.

Private insurance is probably justified in your case. Unfortunately, I don't have any shopping recommendations for you.

insurancerenegade
Posts: 114
Joined: Tue Jun 01, 2010 1:13 pm

Post by insurancerenegade » Fri Aug 27, 2010 2:32 pm

For someone in your situation-self employed in a non physical profession, and I surmise relatively young (don't have kids yet ) and no dependents, disability insurance is probably the most important insurance product for you to have. Your odds of beoming disabled are significantly higher than of dying. In you case, if you are too disabled to work as an IT professional, you are likely to be too disabled to do anything with a 6 figure level of compensation.

Unfortunately, individual disability insurance is expensive and the products are fairly comlicated. Find a good broker who specializes in life and disability insurance (if he or she tries to sell you whole life while you are there, they are not a good one.) and they can help you buy a good policy at the right price. Disabiity and homewoners insurance are the two prducts where I would never go the DIY route.

Hope this helps,
Ren

bluemarlin08
Posts: 1561
Joined: Wed Aug 29, 2007 12:18 pm

Post by bluemarlin08 » Fri Aug 27, 2010 3:09 pm

Your odds of dying are 100%. Disability insurance is less expensive the younger you are and in good health. Find an independent agent that knows disability and represents several companies.

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Watty
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Post by Watty » Fri Aug 27, 2010 11:01 pm

Being in IT it would be good to also price what long term care insurance would cost. It might be much less expensive at your age and if you are so seriously disabled that you can’t sit at a keyboard, then you may need to be in a nursing home.

Greg

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Rosebud
Posts: 386
Joined: Sun Feb 21, 2010 11:31 pm

Post by Rosebud » Fri Aug 27, 2010 11:23 pm

I know a number of people who went out on long term disability through the plan provided through their employer. One person was out for one and one-half years and another person was considered disabled at age 50 and will receive 70% of their salary, tax free, through the age of 65. This was the one product that human resource people at my three previous employers really encouraged everyone to sign up for. Also, my understanding is that if your employer pays for the premium, you need to pay taxes on the payments received if you are disabled, but if you pay the premium, the payments you receive are tax free. The premium I paid at my last employer (I'm now retired) was really really minimal compared to what I would have received if I had been disabled. While, it is possible to get disability through Social Security, from what I understand their requirements are quite stringent and I've been told it is far more difficult to qualify for Social Security disabililty than that from a private insurance policy. You can reduce payments by choosing a longer qualification period, such as 6 months instead of 3 months. That way you are covered in case of a serious long-term disease or disability. The statistics I've read are that a fairly high percentage of workers become disabled for various lengths of time. I'm just passing on what I learned as an employee over the years. Depending on your age, the amount of money you would need to sustain yourself until you are eligible for Social Security could be quite a large amount. Virtually everyone I worked with signed up for the policies and as mentioned earlier, several of them were very fortunate to have had the coverage when they became ill and could no longer work.

letsgobobby
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Joined: Fri Sep 18, 2009 1:10 am

Post by letsgobobby » Fri Aug 27, 2010 11:43 pm

unless you can support yourself for many years on your savings alone and MAYBE a pittance from social security, being self-employed without disability insurance is unimaginably risky.

I have 2 disability policies, one through my employer and a private one I bought as part of a group policy earlier. Neither is very high-quality, but they provide in the event of a catastrophe. The big limitations are 1. it is not own-profession; and 2. 2 year limit for mental health disability.

I pay $100/mo for about $4500/mo of tax-free benefit.

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