<p>Proclaiming ignorance - DH had coverage and won’t with new employer. How important is long term disability for someone 10 years from retirement? Youngest child will enter college '09. Thanks!</p>
<p>Ignoring college costs for a moment, would the family be able to live on your income and the income from your family’s investments if DH could not work for a prolonged period of time?</p>
<p>If the answer is no, then he needs long-term disability insurance.</p>
<p>If the anwer is yes, I’m not so sure, and now I am talking about college costs. If your husband were to become disabled and could not work, your family’s income would decrease, and therefore your financial need, in the eyes of colleges, would increase. Would the corresponding increase in need-based aid make it possible for your kids to still go to the kinds of colleges that they would otherwise have attended under those circumstances? </p>
<p>Maybe some of our financial experts here can answer that question.</p>
<p>True disability insurance is one of the hardest to get and most overlooked form of insurance out there. One does not hesitate to insure cars, home and things without question, but to insure the “motor” that makes it happen?</p>
<p>Most assume they are covered through a state employer plan (L&I, Workers comp) but what happens if you get sick? or a car wreck or home accident? </p>
<p>If you have the money to retire now, no worries. If you don’t, that’s what insurance is for. While I could write pages and pages on Disability coverage here is the easiest way to think about it… The shortest definition of disability is usually the best. It should be one sentence short and sweet. I have always found that the more words, the more “outs” from paying by a carrier. </p>
<p>Good coverage is very hard to get. If it’s really easy or the premium really cheap, chances are VERY high you really don’t have a policy that will cover you. </p>
<p>It is funny, but actually sad, I ran into someone I’ve known for 15 years in the grocery store last night. Last year, while helping lift a car off rail road tracks he tore several muscles in his arm. After surgrery he was out of work for six months. He had employer sponsored disability, it paid 50% (taxable) while he was out… he is selling his house this month to avoid forclosure… </p>
<p>If you don’t have the money in reserve or live a lifestyle that requires more than 50% of your taxable income… look into disability.</p>
<p>Do you have life insurance? That’s also to replace income; if you think it’s worth it for life insurance, then it’s worth it for disability. Remember too that if there’s a disability, it’s not just that income stops; expenses continue or go up as well - making a home accessible, medications, equipment, etc., as well as feeding the disabled individual and providing a home. On the other hand, when someone dies, these expenses stop. Yet people are never hesitant to buy life insurance.</p>
<p>During my brief stint in the insurance biz back in the last century, we used to tell clients that one out of four people will be disabled enough to not be able to work for <em>some</em> months during their working lives. I forget the value of <em>some</em>, but it is a sobering thought.</p>
<p>“Yet people are never hesitant to buy life insurance.”</p>
<p>78 million people don’t have any life insurance as of a recent study. I’m in the business and would totally disagree… there are so many people that have no coverage or 25/50k from work and that’s it. </p>
<p>The trend lately is to wait until 50’s and 60’s and seek a million or more of term for 20 years. The problem for most people is a million of term at age 50 if you’re not in perfect health is more expensive than you might think… so they go without… Alot of people consider themselves to be very healthly because their lifetime prescriptions control the “problem”. </p>
<p>And I don’t even care what “type” of coverage is sold anymore and don’t even bother to enter into those silly arguements. Other than to say why do you think they call it convertible term? </p>
<p>So many people with kids and debts have no insurance at all, it is really scary how little true planning is going on… sure…everybody wants to talk hedge funds and stock options and spiders and futures… then you find out they have 25k in life insurance and around a million of debt and have the beginings of some health condition. They can’t produce a clean lab report… high PSAs, Cholestrol, Blood sugars, poor liver functions… </p>
<p>Professionally what I am finding are people are waiting until they are of poor health and then seeking life insurance in large amounts. It just doesn’t work that way. All financial planning should allow for variances in the market, career and health. Simply, because outside of a few people, how many things have gone “exactly” as planned for you in the last 20 years? hands anyone? 
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<p>If the poster wants, they or anybody can pm me with questions. I will answer them with no effort to “sell” anybody. This is not the place for that.</p>
<p>I was disabled for 8 months about 5 years ago.</p>
<p>My disability insurance saved my butt. If you pay for it out-of-pocket, the benefits are tax free to you. If your company pays for it, the benefits are taxable to you.</p>
<p>It’s really important. Lots of working people suffer brain damage for one reason or another and the families they support would be much better off had they died. Definitely research all options. At least till the kid is out of college and can support kidself.</p>
<p>Opie, we bought a boatload of additional life insurance on WashMom and me about three years ago. WashMom was disgustingly healthy and got super-low rates. My insurance cost is three times hers for the same amount due to hypertension and a couple of other minor things. Since then, she’s had malignant skin cancer (she’s fine) and I’m sure her rates would be very scary now. I’m SO glad we bought in when we did, with guaranteed renewable, non-cancellable life insurance. Good advice, Opie.</p>
<p>Count me as another person who planned ahead and was happy for it. Bought a term life insurance policy when my employer-sponsored one ended after my maternity leave with DS1. Doubled the coverage amount six months later when I was four months pregnant with DS2. (Yes, they are that close together.) Was smart enough to get the automatic increase rider. Signed the policy on September 11, 1991.</p>
<p>Diagnosed with cancer a little over ten years later. I’m uninsurable at any price. Policy has grown to just about double its face amount. We bought it so if anything happened to me, we’d have college money for the kids. Yup. Good move. Premiums were $16/mo when I was 31, are now $60/mo at age 47. </p>
<p>Another reason to have disability coverage: the rate of disability starts climbing dramatically when one is within ten years of retirement. If you have disability coverage, it may also help you when you go to collect Social Security disability benefits – the insurance company and SS benefits are often coordinated, so the insurance company will have a vested interest in making sure you qualify for SS. It will also help w/SS in the sense that you have to have made it through the insurer’s rigamarole to collect benefits, so you may have better documentation.</p>
<p>In some companies – if you go out on disability, the company will continue to pay its share of medical premiums or treat you as if you were retired on disabilty and give you retiree medical benefits. Going out on disability can also mean additional pension service credit. If there’s not a disability plan, what constitutes disability may be fuzzier and therefore make it easier for an employer to terminate you for cause, leaving you up a creek and without benefits (except COBRA, if you can afford 102% of full premium).</p>
<p>I used to be a pension/benefits administrator – we got DH disability coverage through an industry group when his previous employer didn’t offer it to their EEs. There was no way we’d manage without his income.</p>
<p><<the trend=“” lately=“” is=“” to=“” wait=“” until=“” 50’s=“” and=“” 60’s=“” seek=“” a=“” million=“” or=“” more=“” of=“” term=“” for=“” 20=“” years.=“”>></the></p>
<p>If you don’t have any dependents (kids are on their own) why would you ever need a million in life insurance. I guess you could count that as buying your inheritance. I plan on being cremated (no $10000 funeral)and dying with no debt (except for house, which can be sold). I plan on dropping life insurance once my son is fiscally independent from me.</p>
<p>If no dependents you don’t need life insurance. You can put the amount for your funeral in a trust that is exempt if you go into a nursing home and need to spend down your $$$ to qualify for Medicaid. I can’t remember how nice your funeral can be that way, but I guess if the $$$ goes to Medicaid or goes to your funeral you might as well go for the platinum package. And I’m depressing everyone on Valentines Day…</p>
<p>We have it…both of us.</p>
<p>“why would you ever need a million in life insurance.”</p>
<p>Some of it today has to do with more and more people “retiring RED”. That is, alot of folks are going into retirement with hundreds of thousands of debt. They have refinanced and double and triple dipped into their home equity, leaving a substantial mortgage still in play. They have spent far more than they’ve saved and still owe alot of people. That’s one group.</p>
<p>Another group I am seeing more and more is grandparents who are raising thier grandchildren. Their offspring has not found their footing for various reasons, yet have produced grandchildren. Alot of people are looking to take care of their grandchildren. The grandkids or a trust are the beneficaires, not their kids. </p>
<p>and Some learn the only way they can tap their entire retirement is to buy an insurance policy to replace their retirement should they die before their spouse. Many retirement plans offer a payout that upon death of the retiree, slice the benefit to 50%. </p>
<p>There’s alot of things happening to people. Some are fairly new. When I started 20 years ago you rarely ran into anybody who was retiring with a giant mortgage still in play. Most folks had paid off their homes and had winnies or a smalll debt on a second home. Today, alot different. Far too much finanical advice given without responsibility for the suggestions people are following. </p>
<p>As I said, plan for results like your hunting ducks with a shotgun, not a rifle. One requires a decent aim, the other requires a perfect aim. Which one are you?</p>
<p>Opie,
You offer some excellent advice. I plan to keep my life insurance in place until we have college paid off, since I expect we’ll be tapping our home equity and running through most of our non-retirement savings to put these kids through school (plus current income). I don’t think our eight year old cars are going to make it until DS2 graduates from college in 2014, either. At least this will even out what would have been my share of income had I not become ill.</p>
<p>A million dollar policy isn’t that much these days, either – we were advised to look at a replacement ratio of 7-10x salary when we bought our policies w/young kids. The thought was to use the income off the principal to live on, then the principal for college. For term coverage for a healthy 30-something, that’s not expensive.</p>
<p>“For term coverage for a healthy 30-something, that’s not expensive.”</p>
<p>You’re absolutely correct it’s dirt cheap. And what’s even better you lock in that super preferred classification for the duration. They can’t take it away from you after you age 20 years and double in weight… you’re still super perferred. And if you need it longer you can convert it super preferred. </p>
<p>I jokingly tell folks I’m twice the man I am now compared to then and if you have a scale, I’ll proove it to you. 
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<p>Sometimes to get these young, super healthy, off the pot, so to speak… I simply say…look at your folks… will you still be a super preferred person in 20-30 years? Are they? That surprizingly works more often than not.</p>
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<p>I agree and just want to follow up on this and add a few comments. I represent people in disablity claims, mostly applying for SS disability, but sometimes also for private long-term disability insurance (LTDI). I agree that it can certainly help with the SS claim, if someone has already been through the LTDI process, but often the standards are different. </p>
<p>For example, to be entitled to SSDIB, one has to be disabled (or expected to be disabled) for at least 12 months. Some LTDI policies kick in after a shorter period of time. To be considered disabled at all under SSDIB, one needs to meet certain presumptive criteria or be unable to perform essentially any other work in the economy, no matter how little it pays. For some LTDI policies, they often will pay for about two years when a person is merely unable to return to his own past work. That can make a tremendous positive difference for someone who had a high paying job, but it can also mean he can meet the LTDI definition of disabled but not the SSDIB definition. Also, in many LTDI policies I’ve seen, there is a limit on how many years one can collect disablity under the policy for a mental impairment. And finally, many LTDI policies contain offset provisions so that people can’t collect the full amounts of LTDI and SSDIB benefits for the same time. LTDI carriers do have a vested interest in making sure their insureds get SSDIB, but sometimes the LTDI policies assume after a certain period of time that a person will be eligible for SSDIB, even if he has not been approved for it, and will deduct the amount of the presumed benefit from the LTDI benefit. </p>
<p>I have seen a wide variation in the terms of LTDI policies, and most people, especially if they have a policy through their employers, don’t really know what the terms of the policy are until they file a claim and are turned down. I always recommend that people study their particular LTDI policies for time limits on what the company will pay. And if your company hands out some amendment to the company LTDI policy, read it. The terms of the policies can change from time to time, and it’s necessary to keep up with any changes in coverage (they’re usually not adding coverage). If you have a choice in company, I also recommend that people investigate the track record of the company to see what kind of a history they have for denying claims. I’ve seen some outrageous denials over the years that do eventually get straightened out, but the process of fighting the LTDI carrier (or the SS Administration) can take a lot out of someone.</p>
<p>The above is not intended as legal advice, as it’s obviously an impossible subject to cover without a lot of generalizations, but please read your policy carefully and be aware of little details.</p>
<p>To support what nceph has written, DI is all about definitions. The shorter the better. Take your group plan and a highlighter and pay attiention to the words “after”… that usually will mean the benefit will change (not necessarily in your favor) Most basic group DI will have good coverage for the first two years, then as nceph has pointed out definitions change. Also mental health becomes an issue after two years. This is where stress comes up. Did stress cause your condition or does your condition cause stress? </p>
<p>It pays to go through your booklets your employer (or that you buy) and dogear, paperclip, mark up whatever and learn what you have ahead of time. Most people don’t, so don’t feel bad if you haven’t. But they are pretty easy to read. I am always shagrined (sp) when people watch me go through their benefit booklet and they are in awe, like it was the rossetta stone. :)</p>
<p>I have STD (short term disability) through my employer. For the first time this last year I increased the amound covered to 80% they covered 60%.
I am now undergoing chemo. With the payment where it is I feel I don’t need to drag myself to work any earlier than I will be ready. (I have a physically demanding job)
While we could use savings etc, this keeps those assets in place, especially when you don’t know the big long term picture.</p>
<p>As a widow with 2 kids, term life and DI (both through my work and a private plan to supplement) were a no brainer, but LTCI is tougher. I finally broke down and applied through my work (the Federal govt), but am still not toally convinced it’s the way to go. Like life insurance, it’s better to do when younger and in good health, and there are scary stories out there. Any thoughts?</p>