Private disability insurance

[SteveinMN]

One of the expenses we've been reviewing lately is disability insurance I got for myself back when I started making decent money in a job that looked like a career. Now that I'm basically retired, though, I've wondered if it was still a smart way to spend money.

The premium works out to around $100 a month. It's an "own-occupation" policy, so the rules are not as stringent as for SSDI.

The benefit is guaranteed and is around $1800 a month tax-free. In speaking with the insurance company directly, I learned that if I am disabled (all the terms of the policy, yada yada) I get the $1800 whether I was paid a million dollars a month as a CEO someplace or earning servant's wages because I'm a retired-and-not-yet-65 househusband. Benefits stop at 65 in almost every case; no payoff for death.

FWIW the insurer is UNUM, which bought the company I signed up with (and many others; they're the biggest DBL insurer in the country) and has a poor reputation for paying claims.

One question I have is how much of a fight we would have with UNUM since many single folks run households without a second person there to clean/cook/shovel/keep books/etc., so how do you value that to replace it? As for making money in my photography business, it would be easier to claim disability if I were working outside the home. But, honestly, making a lot of money is nice if it happens, but nothing I'll bust body parts to achieve at this time of my life. If the business keeps me in gear and I see my work on some people's walls, that's payment enough for me.

I know many of us do a lot of things to save much less than $100 in a month. If I knew the benefit would reduce to what it would cost us to hire out things DW could not do, like taking care of the house/mowing/handyman work, terminating the policy would be a no-brainer. If I couldn't do that kind of work, I probably would qualify for SSDI anyway. But, as it stands now, it's a bet with 18:1 odds of collecting (not that I want to anyway).

So -- collective wisdom -- keep it or cheap it?

[Lainey]

This is a tough one since it's almost impossible to predict future life events. Can your spouse get same coverage disability insurance for you cheaper through work?
If it were me, I'd be inclined to keep it for now. If household income gets drastically reduced, it would be on the cut list.

[simplelife4me]

dump it.

[try2bfrugal]

If you are financially independent, even in the event of a divorce, then I would drop it. It depends on your current finances and your age - how close are you to Social Security / pension age? If it is not far off and you have the intervening years and retirement covered and planned for, then I would drop it.

[catherine]

I agree with try2bfrugal. Evaluate the risk of your needing disability in the amount of time you have to make it to SS. Do a "What's the worst that could happen" scenario, and if becoming disabled will not put you out on the street, I'd drop it.

[early morning]

Steve, DH's disabilty insurance is through Unum. He was in a traditional job when he was no longer able to work. There was, of course, reams of paperwork, and the first two years were pretty constant harassment (Why can't you do your job? Why can't you do any job? Can you be a road cone? Can you sit and answer phones? Why not??) AFTER the first two years, filing for SSDI is mandatory. Yes, they paid, but without payroll records to place a "value" on your labor and without the huge company DH worked for getting involved - I don't know that you'ld ever collect enough to make it worthwhile. DH is on SSDI now and Unum is still on the hook for a little bit, and we still have plenty of phone calls/paperwork, etc. For the $81 a month he gets from them. YMMV, I don't know. I can only share our own experience.

[SteveinMN]

early morning, your DH's experience with unum is an experience I see repeated time and again by others. Ugh. After having paid UNUM the equivalent of a new car for coverage over the years, the last thing I want to deal with along with a serious disability is a gamut of obstacles in claiming what I've been paying for. As DW and I discussed this last night, we wondered if the $100 monthly premium would, in fact, pay for the lawnmowing/snow clearing/handyman stuff that I do now. We don't need to eat such "gourmet" meals and the house can be vacuumed less often than it is. If it came to that, SSDI likely would kick in, too.


If you are financially independent, even in the event of a divorce, then I would drop it. It depends on your current finances and your age - how close are you to Social Security / pension age? If it is not far off and you have the intervening years and retirement covered and planned for, then I would drop it.
try2bfrugal, at this point we are not FI. We will be by 2019, when DW plans to retire and both of us will be 62. We might choose to continue working at that age, but it would be because we wanted to, not because we needed to. We have a good-sized EF we amassed before I quit working which we will use for large purchases (windows, replacement car, etc.) between now and then. So far we have not had to touch that for monthly living expenses, so I'm pretty confident it will hold us.

If we were divorced before then, though, I would have to ramp up my photography business or go back to work -- or, maybe more accurately, look for work, as an IT guy who was over 55 and had been out of the biz for a few years. <-- not pretty

I told DW that I didn't need an answer right away; give her some time to mull it over. Our tentative conclusion last night, though, was that we will continue the policy for now. If finances get a lot tighter, we'll reconsider. DW is much more risk-averse than I am. Thank you all for the input!

We also discussed my life insurance policy. Even though DW could handle the house payments on just her income, she said if I were to die, she would not want to keep living in this house. She would want to be able to sell the house without worrying about clearing the mortgage balance. (She'd get a little condo where the housekeeping would be simpler and someone else would do the heavy lifting.) Again, this falls into the category of financial peace-of-mind for her, and we can afford it (for now), so the policy will stay in force.

Complicated business, this....

[Spartana]

I think if you are not yet FI and are dependant on a salary or other form of income you could no longer have if you were disabled then I'd keep it. Find something in your life you can cut (that Starbucks Latte a few times a week?) so that paying that $100/month is covered without pain in the pocketbook. I also think that even if one IS FI and can live comfortablily without a working income, it might be a good idea to have disability insurance anyways to cover potential extra costs the disability will create. You may need a person to do things for you - shop, mow the lawn, drive you places, etc... And you may need to buy some things to help deal with a disability (cane, walker, wheelchair, Hooverround, adult diapers. Those things can be expensive and having a monthly disability income besides your regular FI income will make life more bearable financially.

[SteveinMN]

I think if you are not yet FI and are dependant on a salary or other form of income you could no longer have if you were disabled then I'd keep it. Find something in your life you can cut (that Starbucks Latte a few times a week?) so that paying that $100/month is covered without pain in the pocketbook. I also think that even if one IS FI and can live comfortablily without a working income, it might be a good idea to have disability insurance anyways to cover potential extra costs the disability will create. You may need a person to do things for you - shop, mow the lawn, drive you places, etc... And you may need to buy some things to help deal with a disability (cane, walker, wheelchair, Hooverround, adult diapers. Those things can be expensive and having a monthly disability income besides your regular FI income will make life more bearable financially.
Well, to clarify a little, we are doing okay on just DW's salary, including paying the monthly premium for the DBL insurance. Right now I'm bringing in peanuts, so my income is not critical to us going forward into the foreseeable future. So it's not a question of scrimping from somewhere else to pay for it; it's a question of whether it is money being spent effectively.

As I understand FI, it means having enough passive income to pay monthly expenses. By that standard, we're not FI. If DW were to lose her job, at least one of us would have to find a replacement job.

DW does have disability insurance through her work. So, right now, for both of us, income is protected. No idea if that we would get DBL coverage at any new organizations at which we might work, though if I keep the policy in question, my income is covered.

We also have to figure that, at least right now, it would be difficult for me to prove what I contribute to the household in a W-2 sense. No proof, no pay. If I am disabled enough to not be able to work even at home, I might qualify for SSDI (though I'm not banking on that). Our medical plan would cover at least some adaptive equipment, but you make a good point about larger expenses like home modifications, scooters, etc.

So that's the central question: what critical income am I protecting? From that perspective, it's money being wasted. OTOH, we pay car insurance premiums for years and never hope to claim, so....

[try2bfrugal]

We also have to figure that, at least right now, it would be difficult for me to prove what I contribute to the household in a W-2 sense. No proof, no pay.

I am not entirely sure how private disability insurance works. If you are not making a salary now, and became disabled, would you be able to collect anything?

I never had disability insurance when I was a stay at home mom and we were not FI. I had always had jobs that had disability insurance as a benefit, so when I quit to raise our kids I just didn't have any private insurance that I could keep in force.

After that I always worked at home, so I figured the odds were with me that I could always either sit at a computer and type and earn an income or if I was too disabled for that I could qualify for SS disability insurance.

[SteveinMN]

I am not entirely sure how private disability insurance works. If you are not making a salary now, and became disabled, would you be able to collect anything?
I can't speak to every private disability policy, but, as I stated in my original post, my policy will pay the agreed-upon amount on documented disability -- regardless of what I am earning at the time of disability -- even nothing. The discussion point undoubtedly would be fitness for whatever I was doing at the time.

[try2bfrugal]

I can't speak to every private disability policy, but, as I stated in my original post, my policy will pay the agreed-upon amount on documented disability -- regardless of what I am earning at the time of disability -- even nothing. The discussion point undoubtedly would be fitness for whatever I was doing at the time.

Oaky, sorry I forgot you did mention that in your first post.

[cx3]

Steve, good thread.

From what I'm able to put together from your posts. This policy is good til you turn 65,which will occur in about 9 yrs.So roughly $11,000 remaining in premium payments for 9 more years of coverage. Coverage will pay you $1800 a month for a disability.
On the surface it appears that you are getting good coverage for the price you are paying.I would dig deeper into the policy until I was confident I understood what was and was not covered.Would an illness be covered,or is it just for personal injury?
A friend was telling me this past weekend that his brother-inlaw recently fell while changing a light bulb. The brother-inlaw is now paralyzed from the waist down.I'm sure this man would have loved to have your policy.You just never know.

[SteveinMN]

From what I'm able to put together from your posts. This policy is good til you turn 65,which will occur in about 9 yrs.So roughly $11,000 remaining in premium payments for 9 more years of coverage. Coverage will pay you $1800 a month for a disability.
On the surface it appears that you are getting good coverage for the price you are paying.I would dig deeper into the policy until I was confident I understood what was and was not covered.Would an illness be covered,or is it just for personal injury?
A friend was telling me this past weekend that his brother-inlaw recently fell while changing a light bulb. The brother-inlaw is now paralyzed from the waist down.I'm sure this man would have loved to have your policy.You just never know.

Thanks, cx3. Everything you mentioned is pretty much correct. As I read the policy, anything that disables one from the primary activities of one's occupation is considered "disability" once a 60-/90-day period has passed. I'm covered whether it's a work accident, a car accident on my own time, me jumping off a diving board, or a bacterial infection. This policy even pays in case of complications of pregnancy (not my worry!).

As an IT geek, below-waist paralysis likely would not constitute an own-occupation disability since I should still be able to do most of my IT-geek-type job responsibilities even if I were in a wheelchair. If I were a firefighter, though, below-waist paralysis pretty much means you take a desk job in the fire department because you won't be responding to fire calls anymore. I would guess that, in the latter case, there would be some discussion if the desk job did not pay as well as actively fighting fires, so maybe they would pay the difference up to the policy amount.

I got the policy decades ago, when it was impressed upon me that I -- indeed, anyone -- was far more likely to be injured long enough to be out of work rather than just dead. Still holds true -- I know many friends and colleagues who were laid up enough to exhaust their sick leave and short-term disability. Some of them were lucky enough to have good long-term disability insurance. Very very few colleagues just up and died.

[Spartana]

it would be difficult for me to prove what I contribute to the household in a W-2 sense. No proof, no pay. If I am disabled enough to not be able to work even at home, I might qualify for SSDI (though I'm not banking on that).
One thing you need to look at also is that SSDI is only good if you have worked, and contributed, into SS in the last 10 years before you were disabled. It will generally state if you are eligible for SSDI on your annual SS statement. Mine for example says that I am not eligible for SSDI because I have not worked and contributed into the system in the last 10 years. This may be the case for other early retirees too - as well as others (again like I was) who are in public sector jobs that don't pay into SS. No pay - no disability benefit.

I'm also confused by how disability insurance works - whether it's SSDI or private insurance. I get a military disability pension because I suffered an injury in the line of duty. I get paid for the loss I suffered irregardless if I can continue to do my job (in my case I couldn't so had to change careers but actually got a much higher paying job) or do another equally-paid job. For instance if you lose a leg while in the service you will be compensated for that loss by a certain percentage for the rest of your life even if you are still able to hold some kind of job. It doesn't seem that way with SSDI or with private insurance. It seem s that those are more based on "whats your income been and how much do you need to live on" rather than the nature of the disability. Although you said your policy was based on the type of disability you suffer and how it will impact your ability to do your profession rather than the amount of your income. So I guess the question is - if a disability isn't sever enough to effect your ability to do your job, but may impact you in other ways so that work is difficult or you need other things that are costly to aid you in funtioning in your life, will you get any pay? Doesn't sound like it.

[SteveinMN]

So I guess the question is - if a disability isn't sever enough to effect your ability to do your job, but may impact you in other ways so that work is difficult or you need other things that are costly to aid you in funtioning in your life, will you get any pay? Doesn't sound like it.
In that situation, I don't think I would get anything, either. Then again, we-all can do lots of things on our own which make life difficult -- bad backs/hips/knees, etc. -- that may make our work and private lives more difficult and ... well, tough toenails, as they say. I suppose that's where medical insurance would come in -- for durable medical aids, additional therapy, etc.

[Spartana]

In that situation, I don't think I would get anything, either. Then again, we-all can do lots of things on our own which make life difficult -- bad backs/hips/knees, etc. -- that may make our work and private lives more difficult and ... well, tough toenails, as they say. I suppose that's where medical insurance would come in -- for durable medical aids, additional therapy, etc.Yeah that's what I think too - they won't pay anything unless you are permanently disable to the point where you can't do your job any longer. What if it was just a temporary disability? Would they cover you until you were well or is it just for permanent disabilities? It's all confusing to me.

[SteveinMN]

Yeah that's what I think too - they won't pay anything unless you are permanently disable to the point where you can't do your job any longer. What if it was just a temporary disability? Would they cover you until you were well or is it just for permanent disabilities? It's all confusing to me.
I think there's a little confusion here. In your post, you said a "if a disability isn't sever enough to effect your ability to do your job", would they pay? And I replied that they would not because you could still do your job. This is just job insurance, not long-term care insurance. If I suffer an injury that does not impair my ability to do my job, then the DBL insurance company no longer cares. It's kind of like if someone drove your car into your garage door. The auto insurance company doesn't care a bit about the garage door or anything it's connected to; they only care if your car is damaged -- and even then, only about damage beyond your deductible.

On my policy, temporary disability is covered -- even pregnancy. So if I were female and my job was loading packages and luggage onto an airplane and I became pregnant and the doctor told me I had to be on bedrest for a couple of months, this policy would pay from the time I exhausted sick leave/short-term disability until the pregnancy was over. Of course, you are examined by their selected doctors to check your condition/abilities. And that's where early morning's DH has had some problems with their insurer.

In many ways, though, you're not wrong on the confusing part. There was a regular Chinese menu of options when I got this policy -- "any occupation"/"own occupation", amount of coverage, option to buy additional coverage at key dates, etc. As with most private insurance, however, if you're willing to pay their price you can get what you want.

[Spartana]

OK I understand now - saying that it is "job insurance" makes it much clearer. So in effect, if you had a desk job and lost both your legs to injury or illness they wouldn't pay you anything at all to compensate for THAT disability because it wouldn't affect your ability to do your job. Even if it did affect your ability to do other day to day things or increased your costs to do day to day things you could no longer do and had to hire out for. Well poop - that kind of sucks :-)!

[SteveinMN]

OK I understand now - saying that it is "job insurance" makes it much clearer. So in effect, if you had a desk job and lost both your legs to injury or illness they wouldn't pay you anything at all to compensate for THAT disability because it wouldn't affect your ability to do your job. Even if it did affect your ability to do other day to day things or increased your costs to do day to day things you could no longer do and had to hire out for. Well poop - that kind of sucks :-)!
You've got it now -- on all counts!