Mid 20s D is moving to a distance state with a generous start up. When I was in her age, I worked in California which had a mandatory disability insurance program. I’ve learned only 5 states do.
I’m encouraging her to consider a disability policy. It seems the premium would be $150-$175/month to replace $4500 in come. That’s not full income; it is limited to a percentage of income. If an individual pays for their own policy, the benefit is not taxable.
I’d like to get thoughts from others on this topic!
You are more likely to become disabled at some point in your career than you are to die, yet most people worry about life insurance, not disability coverage. You and your D are wise to consider this.
Even in the five states that have disability programs, the benefits are paltry.
My husband and I have always lived and worked in NJ and NY which requires disability insurance. Just took a look at what my daughter’s company does. She is at her first post college job in Boston and she did not purchase any additional disability or life insurance but her company does provide some. The premiums you quote seem high to me. I think in order of priority I would put this last - first get good health, dental, and vision insurance, Then put in the company’s 401K the max they will match. If there is still plenty of money after paying living expenses and some savings I would consider the disability insurance. For a younger person with nobody dependent upon them (no kids or spouse) - it is not as important.
VH gives excellent advice. The disability policies aren’t what they used to be. Harder to find the “own occ (your occ)” policies. I had 2 of them- one as a professional and one as owner of the company (something like that - business executive or something). At any rate, these were purchased probably in the 80’s and they don’t make 'em like they used to. When I semi-retired and given that the coverage was based on my income (which was now significantly different from when I worked fulltime) I decided to cancel the policies. I am glad I had them, though fortunately never needed them. I was self employed, so did not have the option of any other employer-sponsored coverage. DH has relied solely on employer plans, but declined the option to purchase the additional coverage when it was an option.
Not sure if either of my s’s has coverage above and beyond what their employer offers. But their employer is pretty generous, so hopefully they are reasonably well protected/covered.
Decades ago, I bought some disability insurance, although it took some negotiating. I thought the premiums were far, far too high, and the coverage was too little. The reason was that the sales pitch is: “We start paying instantly when you have to miss work, and we pay for an entire year.” (or something like that).
My counter was: Look. I can take care of myself if I miss 6 months of work or so, since I save, and since I don’t spend a ton. I’m concerned about being permanently disabled for the rest of my life. The odds of that are quite low, and I ought to be able to buy a decent insurance policy to cover it at a low cost.
Agent counter: Well, statistics show that the vast majority of disability cases are either back to work after a year, or they are dead.
)
My point: Yes, and I want coverage for that very very rare instance where I’m still disabled and alive. How about you write a policy that doesn’t start until a year after I’m disabled? I’ll take care of myself for the first year.
We ended up with a policy written that way, and it was very affordable.
This is the problem with much of the “insurance” that we have today. It covers things that you know are going to happen with a fairly high likelihood. It changes the nature of it from insurance into “prepaid expense” programs, which are hugely expensive, and don’t make much sense. (Although people like them because they mistakenly think they are getting their money’s worth. )
Thanks all, especially VH. I will send her the link to this discuss. Medical is taken care of and she funds an HSA. There’s no 401k but she will max other retirement accounts. She’s already a good saver and investor. She recently asked us about an umbrella liability policy!
Perhaps at some point, if she had an inheritance or a spouse, she might consider dropping the policy, but I can also see the value of keeping it until 65!
We don’t have an insurance agent. USAA doesn’t seem to offer it. All I know how to do is search online.
I looked up Social Security disability credits because of the topic of this thread. Basically, a full-time worker earns 4 SS credits per year. I was curious what the qualification for disability credits under SS were for young people and here is what I found.
Before age 24–You may qualify if you have 6 credits earned in the 3-year period ending when your disability starts.
Age 24 to 31–You may qualify if you have credit for working half the time between age 21 and the time you become disabled. For example, if you become disabled at age 27, you would need credit for 3 years of work (12 credits) out of the past 6 years (between ages 21 and 27).
I don’t know if my D has any disability insurance through her employer or not. I’ll ask her. She has major medical and a 401K.
I had a friend who had serious health issues (mental and physical) and never worked full-time after college. Her husband divorced her and she had problems getting SS Disability because she had not accrued enough credits. A full-time work history is important for accessing SS benefits (and sometimes, not that easy to achieve).
Disability is the most important insurance for a young person. Much more important than life. Policies are cheap when purchased young. I’d get a policy with inflation protection, that runs until at least 65 or 70, and starts after an extended period (typically 90-120 days) to reduce costs. Other nice features include the ability to add additional insurance as her income changes. You should also select a larger, financially stable underwriter since she will likely keep the policy for 30+ years.
My financial advisor counseled me strongly to purchase disability insurance, which I finally did. What put me over the top was seeing a Kickstarter campaign to help a local woman make ends meet; she could not work because she was sick from treatment for breast cancer. Most people become disabled not through accidents but because they get sick.
Own occupation insurance is what I have, although it’s not strictly necessary in my case. My policy is through The Standard. (There is a website called Policy Genius…reputable, google it - that helped me get started finding a carrier.)
@Mom22039 - Through the Wealth Management division of USAA you can talk to people about policies, etc. And if you link your kids’ USAA accounts to yours, they get the wealth management benefits too.
My accountant encouraged me to get disability insurance in my early 30’s. Not much, and with a 90 day waiting period. Two months later I was treated for melenoma, so I would have been uninsurable. I stopped renewing it when I was 65, but it gave me peace of mind to have it.
I think much depends upon the deal you’re getting, what your company offers, your health and your occupation.
After all these years, we finally applied for disability insurance, and both me and my husband immediately got turned down for trivia. I was able to successfully contest it,but it seemed as if they were really working to deny it. I understand why, it is easy to lose your medical in our occupation and never get it back. Very common to collect on it at our age.
The great deal about it is that it’s tax free. The company automatically provides 60% long term disability, but this will provide 17% on incomes up to a million (I’d like to hit that limit, ha!). The premiums are based upon your monthly paycheck, because the payout is based upon the last 12 months. That seems very fair. I don’t know that I’d want to pay a set amount for a policy, when incomes can vary greatly over the years.
My company provides disability, both short and long term. The important thing was to sign up upon hiring. I know people who didn’t sign up and later had to go through med exams, etc. to get coverage and were denied. I pay some very small amount extra for 60% of base pay for LTD and can supplement with sick leave hours to be at full pay.
If my child worked in an industry where repetitive stress injuries were common, they were active in sports, or had a family history of cancer, heart trouble, etc, I’d be all over them to find private coverage.
I’ve used coverage a few times - recovery after minor surgeries, while undergoing radiation treatment, after the births of my kids. While we would have been ok without it, having the $ took the pressure off and I didn’t go back too soon.
Does her company offer anything? Can she get coverage through a professional organization? Will she make enough in comparison to expenses to self insure?
One of my kids started a job a few months back and I just looked at the benefits package. LTC is provided by the employer at zero cost to the employee which pays 60% of pay until the age of 65.
Most insurers do not offer personalized plans. They sell what they sell. If you want a personalized policy you have to go to Lloyd’s or another non-US insurer as any US policy would have to be approved by the state department of insurance and it would cost way too much to submit every single policy with actuary support for premium amounts, truncated to the exact months you get paid for (term not matching the triggering event).
Paying $150/ ($1800/yr) for disability on $4500 is high. Look at what they will pay, for what term, what constitutes ‘disabled’, exclusion periods. We used to joke that we wouldn’t be considered disabled as long as they could wheel us to our desks and prop a dictaphone under our chins. If you are a longshoreman, you might not be able to work with a broken arm, but if you work at a desk you might not be disabled under the terms of the policy.
I never had disability insurance, nor did H. I guess we were lucky, as we were always able to work. Our jobs mostly are seated and neither repetitive nor heavy manual labor.
I did get state temporary disability payments when I had a new baby and was on maternity leave for 3 months. The payments were probably enough for monthly groceries and baby diapers–much lower than my salary had been.
H and I had significant savings and emergency funds, so we could weather economic bumps along the way.