Federal employee disability worth it? (redux)

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peseta
Posts: 97
Joined: Mon Mar 09, 2015 11:40 pm

Federal employee disability worth it? (redux)

Post by peseta » Tue Sep 10, 2019 11:16 am

I'm a federal employee that has had a supplemental disability policy. I just found out that the insurer wants to almost double my premiums because I am in a new "age band." I checked other insurers that offer similar products and they all seem to offer similar pricing to these new rates (about $1300-1500 per year for someone with my salary). I am in very good health today, and have a decent nest egg. I'm a lawyer, so odds are that if I can't do this job, I won't be able to do much else (of course there is always a bit of "own occupation" risk).

I did some back of the napkin calculations on disability FERS payments and estimated potential future SSDI using the Social Security calculator. The FERS long-term disability retirement annuity is 40% of high-3 minus 60% of SSDI. My SSDI should be at or close to the max. Almost all policies provide a 60% benefit, minus all FERS and SSDI. It seems that I would get only about $19k less long term per year if I was uninsured (40% FERS plus 40% SSDI that can be kept) versus being insured. With family SSDI benefits, I would get back almost 65% of pre-disability income from FERS/SSDI without the insurance.

Am I miscalculating something here? If this is accurate, should consider dumping my policy? $1500 a year to provide an additional $20000 in income if disabled seems arguably a not-so-great trade-off. I am also in my mid-40s, so the benefits would only be needed/available for a bit over a decade until I reached my MRA at 57 (plus I have over a year of sick leave banked).

Thanks for any consideration and comments! You all are the best.

peseta

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

Re: Federal employee disability worth it? (redux)

Post by BruDude » Tue Sep 10, 2019 10:26 pm

Your benefit amount sounds pretty low and I'm not sure what kind of poilcy you bought but an individual DI policy should have premiums guaranteed through age 65. Sounds like you bought some type of association plan. Federal employees can generally qualify for about 40% of their income on an individual DI policy. Attorneys can also qualify for the best occupation class (lowest premiums). I'd look into buying an individual policy.

On a side note, it is not easy to qualify for SSDI. You basically have to not be able to do any job whatsoever. I would not count on receiving a penny from SSDI in your calculations.

chemocean
Posts: 95
Joined: Mon Dec 19, 2016 9:45 pm

Re: Federal employee disability worth it? (redux)

Post by chemocean » Wed Sep 11, 2019 10:25 am

If you have a large number of hours of accumulated sick leave, you could use the length of the accumulated sick leave to extend the waiting period before disability benefits start. Increasing the waiting period usually deduces the cost of disability period.

Topic Author
peseta
Posts: 97
Joined: Mon Mar 09, 2015 11:40 pm

Re: Federal employee disability worth it? (redux)

Post by peseta » Wed Sep 11, 2019 3:36 pm

Thanks for the very helpful replies. I decided to shop this in the private marketplace and I can indeed shave a few hundred dollars off the premium, plus that amount wouldn't get reduced by FERS or SSDI. I will probably go in that direction. My quotes have a 365-day waiting period because of my banked sick leave.

Appreciate the advice!

peseta

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