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question on STD, LTD, life insurance
Old 10-28-2009, 02:02 PM   #1
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question on STD, LTD, life insurance

(No, not that kind of STD)

Curious on the opinions of the group here. Assuming a person of the following characteristics:
- 40 years old
- No children, no plans to have children
- Married, spouse approx same age and has own career
- Spouse earns approx same income
- Spouse has short term, long term, and life insurance paid by employer
- Can both live comfortably on either salary while still contributing to savings
- Currently on track with savings to both retire early in mid to late 40s
- Both healthy

If this person could buy short term, long term, and life insurance offered thru employer but must pay for out-of-pocket would it be wise to sign up for it?
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Old 10-28-2009, 02:17 PM   #2
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Generally, emplyers will offer the benefits at a reduced cost because they are subsidize it. Do you mean you could buy it through HER employer, or yours?
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Old 10-28-2009, 02:28 PM   #3
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I would not bother with STD. It insures you for 90 days of income if you are disabled, so most likely if you are on this forum and have the kind of ER plans you describe, this is a risk you can cover yourself and likely have emergency funds set aside that are adequate should you ever suffer a short term disability.

Life Insurance you should only take if the surviving partner would need a lump sum amount to deal with the loss should the insured die. If either partner is gainfully employed, can live on one salary, has no special debt that needs to be paid off in the event of a death of the other partner, and no dependents that would need support, then you may not need life insurance either. Occasionally people use life insurance for inheritance issues with complicated estates, but sounds like that doesn't apply here.

LTD would cover you (replace part of your income) if you were disabled for a long time - like the rest of your life. It's not a pension or a long term care policy, so it only replaces your income during your normal working years. Some have limits (like 10 years) or others by age (like to age 65). If you are almost ER and your partner's income would cover your care you might not need this, but generally I think it is worth having if you are still counting on your income to accumulate the rest of your retirement portfolio (ie you are not FI yet).

When offered these three at low rates at my employer, I enrolled in LTD only. You need to make your own choice based on your own situation.
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Old 10-28-2009, 02:52 PM   #4
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Thanks for kind (and prompt!) replies.

FD - These would be thru my new employer. Old employer paid for term life and LTD so was taken for granted, now I'd pay 100%. I think I can get life insurance thru her employer but that's it, and it's pretty limited spousal coverage I think 20k max.

G_O - That's exactly the way I was leaning.
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Old 10-28-2009, 03:10 PM   #5
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I would first check the plans... our STD is 6 months when the LTD kicks in...

If the company pays for the insurance, and you receive money it is considered income to you... if you pay the premiums it is not... since the premiums are small, I would rather pay them with after tax money so IF I ever needed the money... it would be tax free...

Also remember.... if you do qualify for LTD, them more than likely your costs will go up and you might not have enough set aside...
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Old 10-28-2009, 07:33 PM   #6
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IMO it is better to get insurance outside of the job. Not to say if you can get a good deal (subsidized) through them you shouldn't do it, but as many people have discovered recently if your insurance is tied to your job you could be without it at a very bad time. I don't have any info on STD or LTD, but when I was shopping fir term life 10 years ago I found a number of policies that were cheaper than what I could get through the job. I'd definitely check out alternatives.
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Old 10-28-2009, 08:29 PM   #7
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I agree with Harley on life insurance.

ESPlanner has a feature that allows you to determine the optimal life insurance you'll need taking into account the effect of lost wages, taxes, SS, etc.
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