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Long Term Disability Insurance and ER
Old 02-26-2015, 09:12 PM   #1
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Long Term Disability Insurance and ER

I recently met with a Financial Advisor to see if he could convince me that I would be better off letting him manage my money rather than doing it myself. I was very clear that I was covered on life insurance through work and not excited about any insurance products.

His proposal included a chart showing how inadequate my disability coverage is. My goal is to retire in nine years at age 40. My current disability coverage (provided thru work) would provide $7,000 a month until I am 60. My monthly expenses are $4,000/month. But the advisor thinks my coverage is inadequate. By my calculations, I would actually be better off financially if I were disabled because I would make $7,000/month until 60. That's more money than my current $12,500/month that will end when I ER at 40.

I think he failed right off the bat and couldn't resist pitching an insurance product for a commission. Am I missing something?

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Old 02-27-2015, 04:14 AM   #2
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I think your instincts are right, but I'm not sure I follow your math.

Disability insurance has several variables that are very important when making comparisons, including waiting period, the definition of a covered disability (unable to do any job vs. your current job) and whether the benefit is coordinated with other disability payments to cap your total benefit.

No doubt a continuous prosperity, though spendthrift, is preferable to an economy thriftily moral, though lean. Nevertheless, that prosperity would seem more soundly shored if, by a saving grace, more of us had the grace to save.

Life Magazine editorial, 1956
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Old 02-27-2015, 05:37 AM   #3
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The limitations that Htown Harry mentioned are very important. I know of people who went on long term disability and then were kicked off after a couple of years because they were able to do some work but not the work they did before disability.
All that glitters is not gold. -G. Chaucer, W. Shakespeare
All that is gold does not glitter. -J.R.R. Tolkien
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Old 02-27-2015, 06:53 AM   #4
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When I had dangerous jobs I had no disability insurance. When I was in an office job I had both short and long term disability. I was injured in an accident, out of work 13 weeks. I used the short term for 8 weeks, 55% of my pay. They cut me off the last month I was out, as my DR. didn't want me driving yet(driving was not part of my job description), I spent the days doing PT, and walking, Dr's orders. So I wasn't "disabled", just unable to come to work(no WFH at that time).
If you're truly disabled for an extended period Social Security Disability Insurance does kick in. There are some funding issues with that for next year. I'm sure our representatives will do what's right.

I would be very leary of spending too much on insurance that may leave you high and dry. My short term kicked me out ASAP.
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Old 03-02-2015, 07:45 AM   #5
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I will just comment on the Life Ins portion of your recent posting. I and my spouse had life ins (term only) most of our lives. Mostly because we had a mortgage, car payments and some college to take care of in our 30's and 40's.

We stupidly did a renewed on a ten year term policy at the age of 55 for both of us. We were okay as far as retirement, debts, children care and any other huge living event. Of course it expired last year when we were at the age of 65. Paid handsomely for it and as I look back at it now, was a waste of nearly $10,000.00.

If I had put that into the stock market which is what I wanted to do, I would be $25,000.00 better off today. The salesperson (that's what they really are) worked on my wife's feelings and so I was screwed into doing it.

If you or your spouse has strong feelings either way on this subject, take my advice and hold off making such a decision to a later time.

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Old 03-02-2015, 07:58 AM   #6
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Having a Financial Adviser telling you he can help you make and save money makes me think of the story of the IRS Agent knocking at your front door and saying " I am from the IRS and I am am here to help you"!! Or, a representative from 60 Minutes wants to interview you!!

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Old 03-02-2015, 08:03 AM   #7
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Carried disability (and life) insurance when I was younger and had a future salary to protect. So close to ER it is no longer needed for me, since if I stopped work tomorrow I would be okay, and if I finish my OMY I will be sitting pretty. I'd rather have the premium dollars securely added to my portfolio instead of the coverage. You need to figure out for yourself if you reach such a point. In some cases with a spouse or a potential tax issue, you may continue to need insurance.
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Old 03-02-2015, 09:50 AM   #8
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I'm like so many white collar workers with good benefits. Had short term disability that covers through 6 months (after disability) when social security would begin. Then, long term disability would kick in to make up apporox. 90% of original salary.

What was never addressed is what happens if Social Security rejected my claim? The insurance company has accepted the doctor's disability decision. Most SS claims on disability are rejected--and appealed--and rejected again. I'd have to get an attorney and appeal to an administrative law judge for a formal hearing.

Getting Social Security disability is not guaranteed. In most states, it's very difficult to really be disabled. You can lose a leg, and they can say you can work for a bank calling past due accounts.

And then, you'll run up on those on Social Security disability running a chainsaw and loading trees with their "bad back."

Life is so often just not fair for those trying to work the system legitimately.

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