Too much disability insurance?

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Thacrane
Posts: 3
Joined: Wed Mar 06, 2019 7:19 pm

Too much disability insurance?

Post by Thacrane » Wed May 15, 2019 12:38 pm

I've just been approved and offered a private DI policy, which replaces 60% of my income if needed. I also have LTD through my employer, however since I'm a new hire it's not offered until a year of service completed.

During my application for my private policy I checked I would not obtain or become eligible for LTD in the next year elsewhere. My thinking was I would decline my employer LTD, which I've learned I cannot do. I can only choose how the premium is paid.

Am I risking paying premiums on my private policy for 60% replacement to only have it pay out less should they defer to my employer benefits first at the time of a claim? Or have them deny payments all together if it appears I was attempting to over cover myself? I prefer to have as much private coverage as possible given more flexibility in the definition of disability vs employer plan.

DEBTINATOR
Posts: 91
Joined: Thu Oct 20, 2011 8:05 pm

Re: Too much disability insurance?

Post by DEBTINATOR » Wed May 15, 2019 12:41 pm

You should be OK to get the private disability insurance now, and Its probably a good idea given that you have no insurance at the moment.

If you were to reapply in one year after your work disability would be in place then you would qualify for a reduced premium/benefit.

So by applying now you can essentially lock in more insurance than you otherwise could. If your concern is the monthly outlay for the private policy, you could reduce the amount to save 40% or year from now. It’s not well documented or explain but you can generally go down in benefit, just not the other way around without underwriting.

This is something that occurs with a lot of physicians for example that purchased disability during residency.

You should clarify with your broker that you misunderstood how the question was asked though. Generally if you don’t currently have it and won’t get it SOON, they underwrite as if it doesn’t exist. Not every di company is the same though.
Last edited by DEBTINATOR on Wed May 15, 2019 12:48 pm, edited 1 time in total.

GuyFromGeorgia
Posts: 117
Joined: Sat Dec 29, 2012 12:16 pm

Re: Too much disability insurance?

Post by GuyFromGeorgia » Wed May 15, 2019 12:46 pm

More disability insurance is a good thing. Lock in as much as you can. And do so while you're young. If you wait a year you might have something happen to you. Worst case is you get disabled for some period of time. Another negative could be that you have something happen that suddenly causes an exemption on your policy. Car crash resulting in whiplash and a few trips to a chiropractor? That might give you a permanent neck injury exemption.

mega317
Posts: 3052
Joined: Tue Apr 19, 2016 10:55 am

Re: Too much disability insurance?

Post by mega317 » Wed May 15, 2019 12:48 pm

It sounds like your filled out your application inaccurately since you will become eligible in the next year. You need to talk to your agent.

BruDude
Posts: 2920
Joined: Thu Dec 30, 2010 12:28 am
Location: Las Vegas

Re: Too much disability insurance?

Post by BruDude » Wed May 15, 2019 12:53 pm

Thacrane wrote:
Wed May 15, 2019 12:38 pm
I've just been approved and offered a private DI policy, which replaces 60% of my income if needed. I also have LTD through my employer, however since I'm a new hire it's not offered until a year of service completed.

During my application for my private policy I checked I would not obtain or become eligible for LTD in the next year elsewhere. My thinking was I would decline my employer LTD, which I've learned I cannot do. I can only choose how the premium is paid.

Am I risking paying premiums on my private policy for 60% replacement to only have it pay out less should they defer to my employer benefits first at the time of a claim? Or have them deny payments all together if it appears I was attempting to over cover myself? I prefer to have as much private coverage as possible given more flexibility in the definition of disability vs employer plan.
You need to report your group coverage to the insurance company that you applied with. If you had a claim and they found out your employer was providing coverage they could deny part of the benefits because if they had known about it up front they would have issued a lesser amount of coverage. Your agent should have advised you of this.

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