Life and Disability Insurance

[ferco]

As you approach FIRE or are into FIRE when can you "safely" get rid of those life and disability policies. In other words does anyone ever get to the point of not having to contine to pay those god awful premiums. I can see maintaining the LTC policy, especially if its paid up(as we will have at FIRE with John Hancock).
We have 20 year level premium life policies (til age 65) and you never know when you "might" have to return to work so do you maintain the disability stuff?

[brewer12345]

When you are FI (25X or whatever your definition is), you can shoot the DI and life insurance policies out of a cannon.

[Nords]

Quote:

Originally Posted by ferco As you approach FIRE or are into FIRE when can you "safely" get rid of those life and disability policies.

The day you retire. I don't mean "ER but I'll work if things don't go the way I planned", I mean really retire as in "ER and they ain't dragging me back there ever again".

If you're really worried you could cancel the policies and save what you used to pay in premiums to invest in your portfolio.

[ferco]

Who has cancelled either policy only to regret that decision later? What were the ramifications?

[SteveR]

Personal experience here.

Wife #2 died 7 months into her ER. She did not qualify for Life Insurance (LI) due to a medical condition. Had she not stopped working, her LI would have paid out several hunded thousand $$. Once she retired it stopped.

Current wife was going to retire in the near future. She was forced to go on Disability Insurance (DI) last month. Had she not paid the premiums to continue her payout at a higher level she would have been forced to take a huge cut in income until she reaches normal retirement age. She now has a defined payout for a defined number of years before she then takes early retirement.

Worth the cost? You bet.

IMHO, once you retire from a company I believe you no longer are eligible for DI since you no longer have a paycheck. You could fund your own DI and LI for that matter. If you NEED to have the insurance to cover your expenses then by all means pay the premium. If you don't (like Nords said..you are truly retired an can afford to be retired) then you don't need the extra money to meet your daily needs. In that case you don't need the insurance so you don't need to pay the premium.

[ferco]

Lets say you are 2 years into ER and have continued to pay your DI premiums but have no earned income(ie., no work) and become "disabled" are you still eligible to receive payments? I've seen several of the forms people use to file for their disability and it asks for your monthly income as a means of justifying loss of income....I guess this is a good question for the insurance people on the forum.

Also since most self employed individuals pay their DI premiums with after tax dollars their DI payments from the insurance company would be tax free?

[Empty Pockets]

I'm self employed and my CPA told me NOT to deduct the premium on my DI policy when I took it out, even though I could. The simple reason is what Ferco mentions, if you use after tax dollars the payments are not subject to income tax if you ever collect.

I plan on keeping my DI policy in effect up to the day I retire.

At the risk of getting pelted, I'm in the VUL camp. I have it included in my financial & estate plan for many reasons that I won't get into.