Author Topic: Insurance (Life, AD&D, LTD)  (Read 368 times)

mbjerry

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Insurance (Life, AD&D, LTD)
« on: November 05, 2018, 11:31:31 AM »
Annual enrollment time at work. Could you please point me in the right direction for resources to make good decisions on Insurance (Life, AD&D, and LTD)? I do not have the net worth to self insure. What do I do today to ensure my family is protected? Thanks.

Goldielocks

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Re: Insurance (Life, AD&D, LTD)
« Reply #1 on: November 05, 2018, 12:48:36 PM »
Life insurance.
I prefer term life insurance for the bulk of my needs, that I purchase outside of work.  If you are under 40, then chances are your rates will be much lower NOT on the group rates, that include 50 and 60 year olds.

What I do is figure out how much life insurance would be needed to keep my family going for 10 years, plus the cost of post secondary for the kids. (use 15 years if your kids are very young).  After 10 or 15 years, most spouses can figure out life after that.

My "Rule of thumb"
Life insurance $ = (10 years x current expenses/yr) + Education costs for kids - (50% of Savings and retirement staches) - (Life insurance already provided by employer).

Most people therefore don't need $1 million in insurance additional insurance, as your death is not supposed to be a payday win for your family (IMO).  Better to use the money with your family.

AD&D --up to you.  I usually decline unless it is exceedingly cheap.   

LTD - typically always taken through your employer, because of how much it costs.   The cost is related to how many months of disability need to pass before it starts paying out, and your salary today.  Another factor is if it pays out only if you can't do "Any" work, or work at your current occupation.  Most employer ones are for "ANY" work, including things like a call centre.   Most pay out 50% to 60% of your salary, but it is tax-free on payout, so you get more.  LTD is expensive because it is the single most important insurance, if you are relying on your ability to work for many years.   TAKE THE LTD.

Think about it -- LTD - your cost of living won't go down, because you are still alive, and need medical care, but if you die, your life insurance pays out and the living costs are a lot less with one less person.

lhamo

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Re: Insurance (Life, AD&D, LTD)
« Reply #2 on: November 05, 2018, 01:04:03 PM »
If you are in the US, be sure you understand how Social Security survivor benefits work assuming you are paying into the system.  Briefly, your minor children would each receive benefits of up to 1/2 your estimated FRA payout each up to a maximum of I think 125% of that number (check with ssa.gov to be sure) until they turn 18 or graduate from high school, whichever comes first.  The surviving spouse also receives a benefit until the kids turn 16, but it is highly taxed if they continue to work.

In our family's case, the combined family benefit for two kids plus non-working spouse would have been more than our monthly expenses, so DH and I both stuck to just the employer provided life insurance benefits and didn't buy our own supplemental policies.  Each of us made enough for the family to live off of, as well, so we also went with the disability insurance provided by our employers.

We are now FIREd and no longer need insurance. 

Undecided

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Re: Insurance (Life, AD&D, LTD)
« Reply #3 on: November 05, 2018, 06:10:42 PM »

LTD - typically always taken through your employer, because of how much it costs.   The cost is related to how many months of disability need to pass before it starts paying out, and your salary today.  Another factor is if it pays out only if you can't do "Any" work, or work at your current occupation.  Most employer ones are for "ANY" work, including things like a call centre.   Most pay out 50% to 60% of your salary, but it is tax-free on payout, so you get more.  LTD is expensive because it is the single most important insurance, if you are relying on your ability to work for many years.   TAKE THE LTD.


I've always had the choice of paying employer-sponsored LTD premiums with either pre-tax or post-tax money. LTD payouts are only tax free if the premiums were paid with post-tax money.

use2betrix

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Re: Insurance (Life, AD&D, LTD)
« Reply #4 on: November 05, 2018, 06:27:14 PM »
I took out my own personal term life insurance policy last year at 29. $65/mo for 30 years for 1,000,000 coverage.

The peace of mind knowing my wife would be set for life in the event of my death is a HUGE burden off my shoulders. Am I essentially “playing the lottery?” Sure, but it’s worth it for me. Could not imagine being diagnosed with a terminal illness and knowing my wife was going to have more on her plate on top of it. I’m sure my death would suck, but hopefully a mil would make her feel a little better. She’s frugal so I know it’d be in good hands lol.

seattlecyclone

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Re: Insurance (Life, AD&D, LTD)
« Reply #5 on: November 05, 2018, 06:39:06 PM »
Life insurance can be a tough one. Depends on how adaptable you think your spouse and family would be if you were to pass away. Seems like the most you should aim for is insta-FIRE for the surviving members of your family, meaning you would buy enough coverage for the insurance payout plus your existing assets plus any social security benefits to hit your FIRE number. On the other hand you could skimp a bit and try to figure out how much you would need to cover additional child care costs while expecting your spouse to go back to work after a short bereavement leave, and only buy that much coverage. Life insurance isn't that expensive so you may want to err on the side of buying too much.

Disability insurance seems underrated to me. A lot of people don't put as much thought into this as into life insurance, but I think this is probably an incorrect approach. The nice thing about being dead is that you're no longer costing your family any money in food or housing or medical care. The same cannot be said for a disability. This insurance can be super important. One wrinkle of disability insurance is that some policies will only pay out if you're unable to work at literally any job, while others will pay out if you're unable to return to your current career. The latter type of insurance is worth paying for, in my opinion.

Goldielocks

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Re: Insurance (Life, AD&D, LTD)
« Reply #6 on: November 06, 2018, 12:24:21 AM »
I took out my own personal term life insurance policy last year at 29. $65/mo for 30 years for 1,000,000 coverage.

The peace of mind knowing my wife would be set for life in the event of my death is a HUGE burden off my shoulders. Am I essentially “playing the lottery?” Sure, but it’s worth it for me. Could not imagine being diagnosed with a terminal illness and knowing my wife was going to have more on her plate on top of it. I’m sure my death would suck, but hopefully a mil would make her feel a little better. She’s frugal so I know it’d be in good hands lol.

Do you have a million dollar policy on her, too, then?  The same logic applies both ways, even if you earn more, when you are talking about $1 million.

Prior poster -- LTD should be paid with after tax dollars, so you can claim the beneift  tax free.   Kinda crazy to do it the other way, even though it is entirely permitted.

use2betrix

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Re: Insurance (Life, AD&D, LTD)
« Reply #7 on: November 06, 2018, 04:18:50 AM »
I took out my own personal term life insurance policy last year at 29. $65/mo for 30 years for 1,000,000 coverage.

The peace of mind knowing my wife would be set for life in the event of my death is a HUGE burden off my shoulders. Am I essentially “playing the lottery?” Sure, but it’s worth it for me. Could not imagine being diagnosed with a terminal illness and knowing my wife was going to have more on her plate on top of it. I’m sure my death would suck, but hopefully a mil would make her feel a little better. She’s frugal so I know it’d be in good hands lol.

Do you have a million dollar policy on her, too, then?  The same logic applies both ways, even if you earn more, when you are talking about $1 million.

Prior poster -- LTD should be paid with after tax dollars, so you can claim the beneift  tax free.   Kinda crazy to do it the other way, even though it is entirely permitted.

I make $250k-$300k/yr. she makes zero. If she did work, her earning capability at this time would maybe be around $15/hr. We started dating when she was 18 and she’s never worked regularly (she’s 25) as she has supported my career. I have a $500k policy on her.

Sugaree

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Re: Insurance (Life, AD&D, LTD)
« Reply #8 on: November 06, 2018, 05:56:54 AM »
I have a $500k policy on myself with double indemnity.  I can't afford to insure my husband, but if something should happen to him I think I'd be okay.  I should probably set it up in a life insurance trust fund of some kind.  My best friend's husband was killed in a car crash last year and he had a similar policy and now everyone in her family is hitting her up for money like she won the lottery.  She's also taking a lot of trips just to escape her house.  Like expensive Disney trips and shit.  I'd like to set DH and DS up so that they can't blow through it or get scammed out of it.

mbjerry

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Re: Insurance (Life, AD&D, LTD)
« Reply #9 on: November 06, 2018, 07:01:23 AM »
Thanks all for the advice. The post seem to be inline with what I was thinking so that makes me feel good. Sounds like it is unanimous to pay my LTD with post tax dollars? Thoughts on buying $500k in AD&D for $20/month?

Goldielocks

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Re: Insurance (Life, AD&D, LTD)
« Reply #10 on: November 06, 2018, 06:34:36 PM »
That is expensive for ad&d.  $20 per year is better.

katsiki

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Re: Insurance (Life, AD&D, LTD)
« Reply #11 on: November 06, 2018, 06:40:58 PM »
Easy way to get a quote on term life: https://www.term4sale.com/

Dr Kidstache

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Re: Insurance (Life, AD&D, LTD)
« Reply #12 on: November 07, 2018, 07:26:23 PM »
Re: LTD insurance. Employer provided policies (regardless of how you pay for them) are regulated differently from individual LTD policies. Most of the employer LTD (aka ERISA) policies are barely worth the paper they're printed on & should never be relied upon as sole LTD coverage. It is rare for them to pay at all & very rare for them to pay  > 24 months. Linda Nee has the best info on LTD on her website lindanee.wordpress.com.