Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Financial Independence & Disability Insurance
Old 03-01-2015, 10:31 AM   #1
Dryer sheet aficionado
medelste's Avatar
 
Join Date: Apr 2013
Location: Chicago
Posts: 32
Financial Independence & Disability Insurance

I'm 40 & my wife if 42 and we are financially independent (yay!) but are still working while we enjoy it, which will probably be only a year or two. Saving more money by delaying ER will just be a nice bonus. I'm thinking that in the meantime we can cancel our Disability Insurance since it's meant to replace lost income that we don't *need*. DW is paying $4800/yr since her employer doesn't offer it, mine is another $800/yr. She's uncomfortable canceling.

Any factors we should consider, or is it a no-brainer to cancel?

Thanks!
__________________

__________________
medelste is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-01-2015, 10:43 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,016
Once you have ERd, disability insurance is pointess. However, it would be maddening to cancel it now and suffer a disability while still w*rking. My recommendation would be to wait till you finally ER, and then cancel it.
__________________

__________________
Meadbh is offline   Reply With Quote
Old 03-01-2015, 10:56 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,560
A recent thread:
Long Term Disability Insurance and ER
__________________
MRG is online now   Reply With Quote
Old 03-01-2015, 01:08 PM   #4
Dryer sheet aficionado
medelste's Avatar
 
Join Date: Apr 2013
Location: Chicago
Posts: 32
Hi,

Thanks for your answers so far. Reading them causes me to want to re-phrase my question. Another way to ask the group the same question is: when do you think Disability Insurance become pointless - when you become FI or after you RE? I'm in the former camp while my wife and Meadbh are in the latter camp.

@MRG - thank you. The thread you referenced is about someone who will be FI in 9 years, while we are already there. That feels different to me but point out if you disagree.

P.S. If it matters, my wife and I have Professional occupations

Thanks!
__________________
medelste is offline   Reply With Quote
Old 03-01-2015, 01:23 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,560
I waited till RE as my long term was included and Short term less than $250 year. At $5,600 year I'd think differently.

No it doesn't matter what type of work you do, I was a logger and sawmiller for years, luckily only had a few stiches, and a few concussions. Driving into my IT job the only person on I 70 that can't stop is behind me. Just goes to show you can't plan everything.
__________________
MRG is online now   Reply With Quote
Old 03-01-2015, 01:27 PM   #6
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,411
Quote:
Originally Posted by medelste View Post
Hi,

Thanks for your answers so far. Reading them causes me to want to re-phrase my question. Another way to ask the group the same question is: when do you think Disability Insurance become pointless - when you become FI or after you RE? I'm in the former camp while my wife and Meadbh are in the latter camp.
Disability insurance is to protect earned income. When you retire there is no more earned income, so at that point, if you continue with the insurance, you're throwing your money away.

Insurance in general is to reduce the risk of something happening you cannot afford. Once you become financially independent, by definition, you no longer need to pay to reduce the risk of losing your income, so the insurance becomes pointless IMHO.
__________________
MichaelB is online now   Reply With Quote
Old 03-01-2015, 02:02 PM   #7
Full time employment: Posting here.
 
Join Date: Jun 2012
Location: Suburban Woods in Ohio
Posts: 503
Quote:
Originally Posted by MichaelB View Post
Disability insurance is to protect earned income. When you retire there is no more earned income, so at that point, if you continue with the insurance, you're throwing your money away.

Insurance in general is to reduce the risk of something happening you cannot afford. Once you become financially independent, by definition, you no longer need to pay to reduce the risk of losing your income, so the insurance becomes pointless IMHO.
+1 I cancelled my private disability plan when I RE'd, then used the $ saved to buy dental ins. for DH and me. Dental ins. for the two of us cost about the same as the former disability premium. It seemed like a good trade-off, as we no longer had dental ins. provided by our employers.
__________________
"Everything becomes more itself." --C.S. Lewis
LitGal is offline   Reply With Quote
Old 03-01-2015, 02:09 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,016
Let me demonstrate my logic by illustrating with two hypothetical scenarios:

Scenario #1: You are 40, FI and plan to ER one year from now. You cancel your disability insurance. The very next day, you are severely injured in an accident. You require hospital care, rehabilitation for months, and ultimately need a wheelchair, a hospital bed, catheters and other medical supplies, and physiotherapy and home nursing care indefinitely. You can no longer work, and you have a decreased quality of life. The cost not covered by your health insurance will amount to millions over the rest of your life, which is estimated at 20 years. You have no legal recourse because the accident was your fault. Your NW is no longer sufficient. You end up destitute and your kids get no inheritance.

Scenario #2: You are 40, FI and plan to ER one year from now. You decide (as I did) to keep your disability insurance for the next six months, knowing that the policy has a 180 day waiting period. The very next day, you are severely injured in an accident. You require hospital care, rehabilitation for months, and ultimately need a wheelchair, a hospital bed, braces, catheters and other medical supplies, and physiotherapy and home nursing care indefinitely. You can no longer work, and you have a decreased quality of life. The cost not covered by your health insurance will amount to millions over the rest of your life, which is estimated at 20 years. You have no legal recourse because the accident was your fault. Your disability insurance covers these expenses. Your NW is sufficient to cover other living expenses. You remain FI and leave a financial legacy.

My point is that disability can be very, very costly over time. Permanent disability lasts for the rest of your life, not just while you are working. Just because you have a SWR worked out while you are healthy doesn't mean that that SWR will cover all the expenses you may have if you become severely disabled. It seems to me that it would be a shame not to insure against such a catastrophe while you can. The cost of disability insurance reflects the fact that disability is not as rare as one might think, and when it occurs, it is expensive.

Different people approach risk management in different ways and there is a gender difference. The OP's viewpoint is understandable, as is his DW's.
__________________
Meadbh is offline   Reply With Quote
Old 03-01-2015, 04:02 PM   #9
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,077
I decided to give up disability insurance the year before I retired but then I went into HR and had a very similar discussion to that of Meadbh above. In my case the company LTDI was about $1k, so I decided to keep it.

"Are you feeling lucky, punk?"
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 03-02-2015, 09:41 PM   #10
Full time employment: Posting here.
 
Join Date: Jun 2012
Location: Suburban Woods in Ohio
Posts: 503
Sadly, Scenario #1, as described by Meadbh, happened to a dear friend of mine , though with some differences. She had no disability ins. to begin with, she was not prepared to RE, and the accident was not her fault.

Long story short, her van was hit head-on by a trucker who fell asleep and crossed the median. Ten years, countless surgeries, endless PT, and millions in medical bills later, the trucker had sheltered his assets. So when the court awarded my friends a judgment to pay their bills, the trucker had "no money" to pay them. They appealed, but to no avail. The trucker got off scot free, and they have been paying the price ever since. She is unable to work, in a wheelchair, and her husband is her primary caregiver.

Insurance premiums are a small price to pay.

__________________
"Everything becomes more itself." --C.S. Lewis
LitGal is offline   Reply With Quote
Old 03-02-2015, 10:21 PM   #11
Dryer sheet aficionado
medelste's Avatar
 
Join Date: Apr 2013
Location: Chicago
Posts: 32
Quote:
Originally Posted by Meadbh View Post

Scenario #1: You are 40, FI and plan to ER one year from now. You cancel your disability insurance. The very next day, you are severely injured in an accident. You require hospital care, rehabilitation for months, and ultimately need a wheelchair, a hospital bed, catheters and other medical supplies, and physiotherapy and home nursing care indefinitely. You can no longer work, and you have a decreased quality of life. The cost not covered by your health insurance will amount to millions over the rest of your life, which is estimated at 20 years. You have no legal recourse because the accident was your fault. Your NW is no longer sufficient. You end up destitute and your kids get no inheritance.

Scenario #2: You are 40, FI and plan to ER one year from now. You decide (as I did) to keep your disability insurance for the next six months, knowing that the policy has a 180 day waiting period. The very next day, you are severely injured in an accident. You require hospital care, rehabilitation for months, and ultimately need a wheelchair, a hospital bed, braces, catheters and other medical supplies, and physiotherapy and home nursing care indefinitely. You can no longer work, and you have a decreased quality of life. The cost not covered by your health insurance will amount to millions over the rest of your life, which is estimated at 20 years. You have no legal recourse because the accident was your fault. Your disability insurance covers these expenses. Your NW is sufficient to cover other living expenses. You remain FI and leave a financial legacy.

My point is that disability can be very, very costly over time. Permanent disability lasts for the rest of your life, not just while you are working. Just because you have a SWR worked out while you are healthy doesn't mean that that SWR will cover all the expenses you may have if you become severely disabled. It seems to me that it would be a shame not to insure against such a catastrophe while you can. The cost of disability insurance reflects the fact that disability is not as rare as one might think, and when it occurs, it is expensive.

Different people approach risk management in different ways and there is a gender difference. The OP's viewpoint is understandable, as is his DW's.
Scenario #3: You are 42, and have ER'd! You decide to end your disability insurance on your last day of work.The very next day, you are severely injured in an accident. You require hospital care, rehabilitation for months, and ultimately need a wheelchair, a hospital bed, braces, catheters and other medical supplies, and physiotherapy and home nursing care indefinitely. You have a decreased quality of life in retirement. The cost is not covered by your health insurance will amount to millions over the rest of your life, which is estimated at 20 years. You have no legal recourse because the accident was your fault. Your NW is no longer sufficient. You end up destitute and your kids get no inheritance.

I don't understand the difference between Scenario #1 and #3. In both, we are each drawing a line for how long you will continue to pay disability insurance. The only difference is each person's risk tolerance on where we each draw the line, right? Some people NEVER purchase disability insurance, some people purchase it until financial independence, some people purchase it until retirement, some people purchase it until age 70, some people purchase it until age 80. Apart from those that pay disability insurance from the first day they work until the day they die, whatever day we each decide to cancel, the next day could bring tragedy.

I'd argue that financial independence is just as reasonable a line to draw as retirement, especially when $5,600/yr is the financial cost in the meantime. Your comments definitely give me something to think about, however.
__________________
medelste is offline   Reply With Quote
Old 03-03-2015, 03:13 AM   #12
gone traveling
 
Join Date: Oct 2007
Posts: 1,135
I can continue to pay disability after I leave my megacorp. Would it not be wise to keep the disability insurance even if I am fired / unemployed by choice and not disabled ? Seems like cheap insurance if a disability km were to hit and I was unable to go "back" to work after huge medical bills.
__________________
papadad111 is offline   Reply With Quote
Old 03-03-2015, 07:10 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Feb 2014
Posts: 1,045
Couldn't you still apply for Social Security Disability? Seems to make no sense to have your own policy in addition.
__________________
jim584672 is offline   Reply With Quote
Old 03-04-2015, 04:13 PM   #14
Full time employment: Posting here.
 
Join Date: Jun 2012
Location: Suburban Woods in Ohio
Posts: 503
Quote:
Originally Posted by papadad111 View Post
I can continue to pay disability after I leave my megacorp. Would it not be wise to keep the disability insurance even if I am fired / unemployed by choice and not disabled ? Seems like cheap insurance if a disability km were to hit and I was unable to go "back" to work after huge medical bills.
I bought my DI from a company outside of my school district and what the teachers' association offered, because that policy could travel with me wherever I went to work. It provided great peace of mind when I relocated to another state, took time off from teaching, then taught in a couple settings before settling into 12 years at my final school. Because it was a private policy it would have always paid in addition to SSDI and/or a DI provided by the local school district.(The agent said that, as long as there was never a lapse in premium payment, I would be insured.)

Fortunately, I never needed to use it; but I didn't mind paying those premiums (for about 19 years) because of the reasons all of you have listed here.

__________________
"Everything becomes more itself." --C.S. Lewis
LitGal is offline   Reply With Quote
Old 03-04-2015, 04:18 PM   #15
Full time employment: Posting here.
 
Join Date: Jun 2012
Location: Suburban Woods in Ohio
Posts: 503
Quote:
Originally Posted by jim584672 View Post
Couldn't you still apply for Social Security Disability? Seems to make no sense to have your own policy in addition.
The criteria for qualifying for SSDI are very stringent: one must be certified by a dr. as being unable to work in any capacity. The private policy's criterion was this: a dr. would have to certify that I could no longer work in my current (then) profession as a high school teacher. So, I could collect on that policy, if necessary, and then go out and get some kind of work that I could do.
__________________

__________________
"Everything becomes more itself." --C.S. Lewis
LitGal is offline   Reply With Quote
Reply

Tags
disability insurance


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Changing the balance of quality of life and financial independence cute fuzzy bunny Life after FIRE 229 06-14-2013 03:17 PM
Hello-from young married girl with big financial independence dreams Miss_Lala Hi, I am... 24 09-21-2007 10:42 AM
Financial Independence Per CNN yakers Other topics 0 06-30-2005 09:13 AM
Planning Financial Independence Skylark Young Dreamers 2 01-17-2004 05:33 AM
ltc & disability insurance frugal Other topics 7 12-08-2003 08:14 AM

 

 
All times are GMT -6. The time now is 03:07 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.