Help me Increase Personal Disability Income Coverage

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Help me Increase Personal Disability Income Coverage

Post by TechFI » Fri Jul 31, 2020 3:40 pm

I'm getting really stressed these days, as I'm at this point 'desperately' trying to increase my disability income coverage. With the COVID-19 it's a no brainer that I need to increase my DI ASAP before I get infected.

It's really frustrating working through DI policies because there is no information whatsoever out there, besides the basic ones. Also, you can't trust insurance agents as they will just try to sell your new policies and don't have your best interests in mind. Thus, I'm hoping that fellow Bogleheads here can help.

Right now my base salary is $160k, but with stock grants (not options, RSUs so real money) and cash bonus it goes to about $250k+. Here's the roadblocks I have:
- Company won't allow me to waive group LTD which is the kiss of death. The lowest I can cover is 40% base which is $5300/mth.
- Right now I have personal policy A that covers $2000/mth and personal policy B that covers $2000/mth
- Normally DI policies will only cover 60-70% of income, using base that's a max of $8000-9300/mth. Because of this neither policies will allow me to increase coverage because I am "over-insured".
- Group LTD is crap anyway so that $5300/mth might as well not exist. With only $4000/mth combined individual DI, that's $48k/yr a small pittance against my TC of $250k+
- Then the individual DI policies are making a fuss that my total comp income needs to have at least 3 years track record, or else they won't count base or RSUs. Ridiculous games really, so maybe in 2021 if I can get them to count $250k income, that gives me $12,500/mth limit, which means I can increase my personal DI coverage to about $6k/mth or $72k/yr. Better, but no cigar. This means I'll have to make it out unharmed until 2021 if not 2022.
- Recently some insurance salesman is trying to convince me to get a policy to cover retirement income, I suppose that's better than nothing, but it's expensive and only 2-year own occupation, which is again like no-coverage.
- Haven't looked at supplemental DI, and I'm having hard time finding information about that.
- I fired one my of DI agents, that person screwed things up and costed me almost $3k/mth of coverage. I have no faith in these insurance agents anymore.

Please help, I'm running out of options, severely underinsured. If I get COVID and become a vegetable, I'm basically a dead financial duck.

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Re: Help me Increase Personal Disability Income Coverage

Post by BruDude » Sat Aug 01, 2020 4:08 am

DI guy here. Sorry to hear about your poor experience, maybe I can help clarify a few things:

1. It sounds like you are in the tech industry as RSU's are often a significant portion of overall compensation at Amazon/Facebook/etc. Each insurance company looks at RSU's totally differently and you can get a very wide variation in benefit amounts quoted. Sounds like you went to Guardian as they require 3 years of RSU income to count any of it. Principal and Standard typically do the best for these cases as they will often allow the full RSU amount that is shown on the most recent end of year pay stub. If there is a large disparity between years, they may average the two most recent years together. Mass Mutual, Ameritas, and Ohio National will only cover a portion of the total RSU income, they each have their own calculation.

2. Your group policy will only cover your base income (except for Amazon, which is the only company I've seen that covers RSU income). The 40% base is actually equivalent to ~$3700/month for DI purposes because it is a taxable benefit when the premiums are paid by your employer.

3. Bonus income will only be counted if it has been paid for at least two years. If you were in a similar job prior to this one, they may count bonus income from your former employer. That is at the underwriter's discretion.

4. The retirement income rider can be a reasonable alternative when your base coverage is already maxed out based on underwriting guidelines. You should definitely see what Principal and Standard would be able to offer first.

5. Based on a rough calculation, you would be eligible for around $9500-10,000/month based on a $250k income assuming your group LTD covers 40% of the base income only and is taxable.

6.DI policies will cover ~60% of income for lower levels of income but it is a sliding scale, so the higher your income is, the less of a percentage the insurance companies will insure under a single policy. For example, a $100k income can qualify or about $5k/month (60%). A $300k income can qualify for about $13k/month (52%). A $500k income can qualify for about $18k/month (43%).

7. You need an agent that understands how the RSU income works and how the insurance companies look at it. Most agents have no experience with these as it is rarely seen outside of the tech field.

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