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Do you have disability insurance? Vendors? Criteria?
Old 01-08-2009, 05:45 AM   #1
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Do you have disability insurance? Vendors? Criteria?

Not sure where to post this ...

Wondering who has disability insurance (not the kind you get through a job).

What should one look for and what are the recommended companies?

How did you decide "how much" to opt for?

Thanks in advance for comments!

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Old 01-08-2009, 09:45 AM   #2
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Disability insurance is sold in $100 monthly increments, and if you have to collect it, you won't pay income tax or social security on it. This means that you need less than your current gross.

It is generally less available to those whose occupations involve physical work, such as self-employed carpenters etc. These folks are rated as less desirable, and pay much more.

Generally, you have to be healthy to buy it.

The key to affordable coverage is getting a longer waiting period before you can collect. I think waiting periods can go from two weeks to six months. If you have a suitable emergency fund, a 90-day waiting period would be best.

Also important is the definition of disability in the policy. This can be either inability to perform your existing occupation, or any occupation. Policies can contain both definitions with the first appliying to the earliest time of disability, and the second applying after perhaps two years.

Policies are cheaper if they coordinate with Social Security, meaning they pay up to the limit after SS has been deducted. For many people, this means that the private policy will pay zero after SS.

Many life insurance companies don't write it, but if the company is a larger co. and writes it in your state, then you shouldn't worry about solvency. By all means get several quotes to get the best deal.

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Old 01-08-2009, 01:40 PM   #3
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I breifely looked, but my main company, USAA, doesn't sell it. I really should evaluate my needs, since I probably still require it.

My gov't job will pay a disability retirement if I get disabled, and so will SS. You have to be pretty bad off to qualify for those.

For short term, I have 650 hours of sick leave saved up. Slowly using it up tho, down from an all time high of 900 hours.

I used to have a 60% policy when I worked for the Army National Guard. You have to be pretty healthy to be in the guard and there was one of those associations that had special rates.

Not quite sure where to shop for it now...
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Old 01-09-2009, 05:39 PM   #4
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I got talked into Northwest Mutual diability insurance back around 1988 and have had it since.

It costs me quite a bit - around $2000 per year. I got as much coverage as they would give me at the time based on my computer contractor income so I think it pays about $60k per year with a clause for working in my own profession.

I had options to buy more coverage as time went on but I never did. I think I may have been paying for the options but never figured that out.

One woman at work who used to sell insurance said it seems like a very good policy.

The guy selling it managed to convince me that Northwest Mutual is a very good company and that the policy had less ways of wiggling out of paying than some of the cheaper ones.

Over time I have grown a little skeptical of the guys motivations, but I still think that Northwest Mutual might be a good company if you want disability insurance.

I also get disability insurance at work and it seems to cost much less, but I am not sure if I am comparing apples and oranges.

Now that I am much more financially independent and much older I keep thinking that I may as well dump it, then I get some aches and pains and worry that I should keep it.

Obviously if your ER you will have no income to replace. However, I am not sure what would happen if you ER and then become disabled. Maybe it would pay, but I suppose one would probably cancel it at ER to avoid paying the premiums.
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Old 01-09-2009, 06:24 PM   #5
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I changed jobs last year and looked into policies a bit after leaving an employer who provided a very generous policy.

These are the main variables:
  • Premium amount
  • Disability definition
  • Payment amount upon disability
  • When payment starts relative to the onset of the disability
  • When payments end
  • Coordination with other benefits, especially social security disability payments
For example, my base coverage with my current employer is $0 premium for a policy that pays 50% of my gross salary beginning 6 months after my inability to perform my current job. Payments end two years after beginning or when SS starts to pay, whichever comes first.

As noted above, the SSA has an infamously high threshold for defining disability and long review periods before granting benefits, so this level of employer coverage is pretty minimal. In effect, it would provide a very limited financial bridge until you got all of your paperwork straight with SSA in the event of a severe and long-lasting disability.
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Old 01-09-2009, 06:36 PM   #6
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I would be extremely picky about who you buy this from. I would really only look at the likes of Northwesterm Mutual, MassMutual, New York Life and Guardian. If you ever have to collect on the policy you will not be in a position to argue with a company looking to avoid a claim or worry about the company going under, so it pays to be choosy about who you buy DI from.
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Old 01-09-2009, 07:38 PM   #7
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I agree to carefully select a high quality company. I have one policy that will pay from 180 days after disabled to age 65. This pays about $45K in tax free benefits and costs about $1500 / year in premiums. The second policy pays from 60 days after disabled for 24 month. This pays about $12K in tax free benefits and costs about $150 / year. I dropped any company sponsored plans about 15 years ago in favor of being in control myself. The one is for a minor time off of work and the other for a major incident. This together with Long Term Care insurance has been our protection against financial ruin prior to age 65. Our Long Term Care isn't set up to pay it all...only about 60% of nursing home care but far better than nothing in case of a young age stroke or other disability issue. We took the option a number of years ago with the Long Term Care to pay it off in one single premium...seemed a bit expensive at the time but now with rising premiums a good choice.

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