When to cancel a LTD policy

[BigBob]

My employer does not offer Long Term Disability, so I pay about $700 a year for this policy. I am about 8 years from FIRE and work as a software developer (so even if I lost my legs I could work, although I prefer to keep my legs ). At what point would you cancel this policy? I have about 1/2 of my nest egg I want to be able to FIRE, and my gut says I could drop it sometime before ER.
Any suggestions or points to consider?

 

[REWahoo]

Disability insurance is designed to help replace your income should you be unable to work due to illness or injury, right? Once you reach FI, you will no longer need to work to support yourself. The answer of when to drop disability insurance would seem to be when you reach FI. That's when I dropped mine.

 

[Nords]

Any suggestions or points to consider?

Welcome, BigBob, but please be aware of a couple features of this board's software:
1. It records all IP addresses, even those from accounts that were subsequently deleted, and correlates IP addresses among accounts to check for posters using multiple identities.

2. Due to a high volume of spam, admins & moderators are able to view the e-mail addresses on user profiles. Considering the domain name of the e-mail address in your profile, your question seems a bit ingenuous.

 

[Deetso]

2.  Due to a high volume of spam, admins & moderators are able to view the e-mail addresses on user profiles.  Considering the domain name of the e-mail address in your profile, your question seems a bit ingenuous.

Well that sure peaked my interest.  Im sure Ill never know.  I guess Ill just go back to wondering what that means...



back to the lurking hole!

 

[Patrick]

2. Due to a high volume of spam, admins & moderators are able to view the e-mail addresses on user profiles. Considering the domain name of the e-mail address in your profile, your question seems a bit ingenuous.

Ingenuous or disingenuous?

 

[Nords]

Ingenuous or disingenuous?

Yes, and that applies too:
- lacking craft or subtlety,
- lacking in candor,
- giving a false appearance of simple frankness.

 

[Patrick]

Yes, and that applies too:
- lacking craft or subtlety,
- lacking in candor,
- giving a false appearance of simple frankness.

Thanks. I understand now.

 

[BigBob]

Nords, I appreciate your advice after having lurked here for upwards of a year. However, I have no alternate motives or anything else. I am simply an IT guy at an insurance company (preparing self for the bombardment of tomatoes ) that does not offer health insurance and have no resources available at my hands to answer my question.
My thoughts on this question are, when I get to the point where I have enough to "get by", should I consider dropping the LTD and stashing the extra $$ elsewhere?
...guess I should have used my Yahoo email address instead...

 

[Martha]

I always had long term disability insurance when I was working. I would keep it until you are financially independent.

 

[Nords]

However, I have no alternate motives or anything else.

OK, thanks, sorry for the over-reaction.

A post that pops up with no other introduction, the IP address of an old deleted account, an e-mail address at an insurance company... the aggregate tripped the spamdar alarm.

In addition to dropping the DI when you're FI, you could also consider dropping it when you & family wouldn't be significantly affected by the loss of your income or the loss of your parenting support. But at $700/year, avoiding catastrophe sounds like a better benefit than the prospective savings.

 

[chinaco]

Big Bob. That is surprising that an Insurance company does not offer insurance as a benefit... even if it is cafeteria style.

Anyway. For $700/year... I would keep it. Do not think in terms of "You do not need it because you are healthy", you could wind up in an accident before you are FI.

I would only drop it when I was truly FI (well above the marginal situation) and not feeling I need to work. Or not working an fully retired. The reason why I say this is that many people think that they are FI but continue to work. But they are not FI to the level of lifestyle they want or are marginally FI (could get by). If you are still working... chances are you are not quite there yet. (assuming that you are not the rare individual that continues working because you love your "ball and chain" er I mean Job).

 

[Alan]

I would only drop it when I was truly FI (well above the marginal situation) and still feeling I need to work. Or not working an fully retired. The reason why I say this is that many people think that they are FI but continue to work.

Great point

I just reached FI but am planning to work for 33 more months to a pension at 55 and health insurance. However I can certainly cancel my LTD at work. It has to be done at year end, but it will still save me over $1,000 over the next 2 years.

Boy what a great forum this is

 

[Nords]

It has to be done at year end, but it will still save me over $1,000 over the next 2 years.
Boy what a great forum this is

Good point, and there's a link at the end of FIRECalc for a donation to Dory's server fund!

 

[kumquat]

The reason why I say this is that many people think that they are FI but continue to work. But they are not FI to the level of lifestyle they want or are marginally FI (could get by). If you are still working... chances are you are not quite there yet. (assuming that you are not the rare individual that continues working because you love your "ball and chain" er I mean Job).

I typed up a huge response to this and then realized it had nothing to do with an LTD policy. Please don't tempt me to say dumb things.

 

[REWahoo]

I typed up a huge response to this and then realized it had nothing to do with an LTD policy. Please don't tempt me to say dumb things.

Heck, it hasn't stopped the rest of us, so why do you think you're any different?

 

[Alan]

Good point, and there's a link at the end of FIRECalc for a donation to Dory's server fund!

This is not the first time this forum has saved me money and this won't be the first time I donate money to the forum - thanks for prompt Nords

 

[chinaco]

My employer does not offer Long Term Disability, so I pay about $700 a year for this policy. I am about 8 years from FIRE and work as a software developer (so even if I lost my legs I could work, although I prefer to keep my legs ). At what point would you cancel this policy? I have about 1/2 of my nest egg I want to be able to FIRE, and my gut says I could drop it sometime before ER.
Any suggestions or points to consider?

BigBob --- One other consideration. Especially if you intend to ER. This depends on whether or not you have health benes coming (but maybe not). If part of you retirement and (FI) is based on getting health benes from the company... you might want to check and see what happens if you become disabled. In some cases, you become eligible for SS and Medicare. It depends on your situation... Plus, in some companies, you no longer are an employee which may mean you lose health benes.

Take a look at the other implications. Granted, it is likely a longshot... but LTD payments may help offset other Health costs if you lost company health because you were disabled and could not fully retire.

 

[BigBob]

chinaco - for clarification, the company I work for has LTD as a cafeteria item. My company happens to be an insurance company that "You can't buy health insurance from" - we only provide Property and Casualty insurance, not health.

Alan - I think my situation is very similar to yours. I should reach FI(point in which I could "get by") in about 5 years or so, but will be holding out till 55 when I will receive the company pension. Part of the company benes includes healthcare subsidized for retirees.

I am not sure how my LTD policy works with respect to that provided by SS, but assume that SS disability works along side it.

Based on the feedback here and my gut feel, I'll park my decision for another 5 years and keep shelling out the $700 a year. At 52, I will revisit it, and will likely keep it until 55 when I RE(may be the best 2K I ever spent, but hope not... )

Thanks everyone for their pointers.