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When to Cancel Disability Insurance / Life too...
Old 01-10-2018, 05:51 PM   #1
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When to Cancel Disability Insurance / Life too...

Always looking to save a dollar - gym membership, cell carrier negotiation, etc... attention just turned to Disability Insurance. We've essentially made it to the self-insured status - meaning we can make it if i lose my ability to earn.

Yet, it is relatively cheap to pay a few thousand a year for potential 11k per year in benefits...

I'm 53 likely retiring in 5 years. The contracts I have are old and allow a change to "plus 5 years" from now. That is a no brainer as it saves money. But, curious the wisdom on this topic out here.

Thanks!
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Old 01-10-2018, 06:01 PM   #2
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I canceled mine when my nut got big enough that I'd be able to pay my bills and live my life, without a disability payment.
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Old 01-10-2018, 06:33 PM   #3
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DW and I both have $100K term Life that we will probably cancel at the end of the year. Don't really need it anymore and premiums are getting pretty high as we near 60.
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Old 01-10-2018, 06:44 PM   #4
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I hope it never happens but being disabled can be very expensive. Not just increased medical costs but all kinds of ways you would not expect. Especially if you want to try to live as normally as possible.

If you have plenty of wiggle room in your budget then it is not so much of a concern. Mine has raised my cost of living about 10 percent and as I get worse it will be more when I have to move. And none of this is care providers
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Old 01-10-2018, 07:25 PM   #5
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Once you are retired you probably would not get any payments even if you became disabled, as most policies provide that you need to be actively employed (or possibly actively looking for work depending on the policy langauge) Of course if you are already FI then you don't really need it and can self insure. I canceled a private policy I had when I retired since it said you had to be actively at work before the disability started.
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Old 01-10-2018, 07:32 PM   #6
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Quote:
Originally Posted by Months.in.Wyoming View Post
....Yet, it is relatively cheap to pay a few thousand a year for potential 11k per year in benefits...

I'm 53 likely retiring in 5 years......

Having trouble seeing the value proposition. "Best" case you collect $132k ($11k a year from 53 to 65)... worst case you pay $36k ($3k a year from 53 to 65) and get nothing in return.... and the worst case has a much higher probability than the best case. Seems to me that if you keep the policy the expected value is negative no matter how you cut it so it would be better to cancel since you don't really need the coverage.
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Old 01-11-2018, 04:11 PM   #7
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Quote:
Originally Posted by pb4uski View Post
Having trouble seeing the value proposition. "Best" case you collect $132k ($11k a year from 53 to 65)... worst case you pay $36k ($3k a year from 53 to 65) and get nothing in return.... and the worst case has a much higher probability than the best case. Seems to me that if you keep the policy the expected value is negative no matter how you cut it so it would be better to cancel since you don't really need the coverage.
Oh No! Sorry - my mistake - I mistyped - It is not 11k per year - it's 11k per month! I liked the analysis you did however. I'm am having them quote me 5 years from now (so ends at 58 not 65) - it seems to be cutting my premium in half.
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Old 01-11-2018, 04:47 PM   #8
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The first question is are you retired, because disability policies won't pay if your not either actively working or look for work? Then if you were to be disabled do you still pay the premium? (it does make the math a bit simpler) implying about a 2% chance per year of being disabled. (actually less because the house (insurance company) needs to get it money back so it quotes worse odds than actually exit) In any case once you retire you don't need it in particular if as you suggest you are fi.
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Old 01-11-2018, 10:21 PM   #9
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This disability insurance sounds expensive, it does not sound like the normal available from the employer type which I recall cost about $20 for around $100K tax free per year.
It was tax free if you needed it, only if you paid for it yourself.
If you took the employer paid option, and then needed it, it was fully taxable.

OP is of course at the age of where it would likely be needed due to high blood pressure, heart attack, etc.
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Old 01-12-2018, 04:43 AM   #10
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My private (non employer) plan costs me $230/month for a $7,600 tax free monthly benefit should anything happen to prevent me from doing current job. I got the coverage 10 years ago when I was earning a lot less. Even though we are doing well financially I think about the cost of long term care should I have some debilitating stroke or something horrible and wouldn’t want my wife and kids to drain their resources looking after me for years in some care facility. I will keep it until I retire in 5 years and then tell the wife to smother me with a pillow should that happen. She may do it before, who knows.
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