The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Longwaytogo on February 25, 2015, 09:06:41 PM
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In doing our taxes this weekend I was studying my wife's end of year pay stub. She has a long term disability policy that's costing $80 a month. kicks in after 31 days off the job and then pays until 61 years old (if needed). There is a cheaper option that kicks in after 151 days off the job that would be $26 per month.
I'm thinking we don't really need either? She is a teacher so unlike some unlucky friends I have had in construction it would take a pretty serious disability for her to not e able to work.
Plus we would be able to get disability through Social Security barring a true long term situation right?
She is meeting with her rep tomorrow to discuss options, but I'm leaning towards dropping it all together.
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Yes, get the cheaper disability insurance. The statistics are that one in three people will have a disability (short or longer term) during their working life. If you look around, you'll probably find that a number of people you know have had something like that happen to them. SSDI is full of loopholes and takes forever to get and often requires a lawyer, and even then it's often denied.
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Have a good read over the policy so that you understand what it does & doesn't cover. I've seen & heard of many occasions where disagreements have arisen between the insurer and the claimant, the insurer usually wins. Some policies have excellent, in-depth cover, while others aren't worth the paper they're written on- make sure you know where you're at.
Do you have kids? If she was really sick/hurt, how would this effect them and the living costs associated with that? Eg. she is very unwell, so unwell you have to take time off to care for her. Now you have no income. Plus you may have increased costs such as after school programs and daycare if you have kids because you would need to focus your time on her.
Same scenario as above example, yes you can dig into your stache but for how long? Don't forget to think about how long it took you to save that stache. If it all disappeared, how long would it set you back in your FI goals?
The stats on the likelihood of her needing to make a claim are quite scary. Make sure you weigh all the variables before you make a decision.
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We never imagined we'd need to make a claim, but we did. S&^% happens. I'm certainly glad for the income. Sure... we could have got by without it, but with medical expenses much higher than you'd otherwise expect and additional childcare costs etc etc, the coverage is welcome.
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Keep the disability insurance--go the cheaper route if needed---but make sure it has the coverage you need.
I've known a few people through my husband's work who have had forms of cancer or other illnesses where the long-term disability insurance was used.
Any long-term disability where frequent medical care was needed could pretty much financially ruin a person.
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I also believe it would be wise to keep at least the cheaper option. Good idea tread the policy too.
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Thanks for the quick response! She ended up having a snow day so we have another day to ponder as the rep will be there tomm (Friday) now.
A bit surprised by the responses, I figured most would say drop it for sure. I guess I do not know anyone that has ever been long term disabled, though I know my sampling of a couple hundred people is a small number. Still hard to believe the 1 in 3 statistic. I know some people in construction who have been hurt at work and on long workers comp with eventual settlements. Also know a couple older people who were on the social security disability in their late 50's before getting on regular SS.
More about my situation, we are in a serious debt emergency with No Emergency fund. So in theory even surviving the 6 months would be tough. Just seems like throwing $800 a year out the window but maybe it's a needed security blanket. I have already slashed my home/car insurance way down so just thought this could be another good target.
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I would go with the longer wait period as well. You can better manage 150 days than no income replacement. If she is a teacher she might be getting a group rate as well. As a self employed I had to buy it at market rate. I have asked other consultants for 15 years what they think about insurance wise, and every one said better to have disability than term if they could only have one.
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When I was dropping my hours so I no longer qualified for benefits, I looked into disability insurance. I read that most disabilities in the US are not caused by accidents at work, but rather chronic conditions such as diabetes and heart disease. Diabetes, for example, is one of the leading causes of kidney failure - it'd be pretty hard to work while doing dialysis and waiting for a transplant. Also, never forget the possibility of an accident while commuting. Or, if we're being morbid, for a teacher anything that affects brain function would be a disaster. We also always tend to think of never working again, but what if there was a disease or accident that needed a couple of years of rehabilitation to recover from?
In the end, I decided that disability insurance on the private market was just too expensive. It was going to run about the same as my health insurance. I am now totally reliant on Social Security disability being there, which is NOT a position that I'm happy about but I'm taking the risk that I can squeak by. And have you looked at how little Social Security pays out even if you do qualify? It's very low. Plus of course if you ARE dealing with a disability, presumably your health care costs go way up.
Anyway, if I had that $26 a month plan available to me, I'd jump at it. You should have enough emergency fund and other savings to go without her income for 151 days, I would hope. [Edit: I just read that you don't have enough emergency fund - maybe then I'd vote for keeping the $80 policy until you have one built up.]
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Yet another chiming in to say that I think you should keep this coverage, understand both of your policy options, and possibly go with the longer waiting period if that makes sense. My dad works with people applying for SSDI and it's horrible what most of them have been through by that point.
Also, I know it's shocking that disability is so prevalent, and you think that as a teacher, she is at less risk than those in constructions. You truly never know what will happen, though. {All true real examples ahead} She could slip on the ice and need hip replacement surgery a year later for an injury that doesn't heal. She could get pushed into a wall by an angry student and end up with post-concussion syndrome symptoms for many months. She could develop a chronic condition that needs management that doesn't mesh well with her work schedule or duties. She could be in a car accident and lose a limb. She could get cancer. She could develop psychological problems or dementia and no longer be able to work.
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It doesn't take much to become disabled. How about some form of cancer where you need chemo for a year and at best can work off and on? How about a heart attack or stroke?
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One of my brothers had to have a heart valve replacement along with aorta aneurysm repair. After being in the ICU for almost 30 days, he was & is medically unable to return to work as an accountant due to a lot of complications. Fortunately he had LTD insurance, & since it was deducted from his pay rather than provided by his employer, his disability benefits are tax free, but it just pays half of what he was earning.
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I was not saying she is less likely to get hurt as a teacher just that she can continue on more easily than construction (like in a wheelchair for example)
Seems like cancer/ heart attack etc. are so much more likely in your 50's but that's probably my naive invincible 34 year old self talking.
Probably going to go with the cheaper $26 option. We don't have a true emergency fund but I could go back to work pretty easily (SAHD working part time right now) and we have a ton of family close by that could help out. I'm sure we could survive 6 months if need be.
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Drop it, social security disability is very generous. However, if you plan on having kids, short term disability will keep her paid for the first six weeks of having a kid, so in some cases it might be worth it.
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I was not saying she is less likely to get hurt as a teacher just that she can continue on more easily than construction (like in a wheelchair for example)
Seems like cancer/ heart attack etc. are so much more likely in your 50's but that's probably my naive invincible 34 year old self talking.
Probably going to go with the cheaper $26 option. We don't have a true emergency fund but I could go back to work pretty easily (SAHD working part time right now) and we have a ton of family close by that could help out. I'm sure we could survive 6 months if need be.
My husband is 29 and was told by multiple specialists this past summer that he should never drive a car again because he's a danger to himself and others. He was diagnosed with a neurological sleep disorder (narcolepsy), and he could literally fall asleep at any moment, behind the wheel or not. The basis of this disease isn't fully known but it's essentially a complex interaction between having a predisposing gene, an autoimmune reaction to a certain strain of influenza, and possibly repetitive sleep disturbance or head trauma. He was trained as an avionics electronics tech in the Marines, and this disability also has the lovely symptom of random loss of muscle control and/or sensation in random parts of your body, usually in response to triggers like stress or laughter....so, at work, when he's stressed about finishing a project, he could start randomly dropping a soldering iron every five minutes with no way to prevent it. There's no medicine that treats this effectively and no cure so far. This condition, at best, is going to stay the same for the rest of his life -- unfortunately, there's a huge chance it'll get worse as he ages, because that seems to be the statistical trend in people with this diagnosis.
My point is, if he wasn't a veteran, and hadn't been diagnosed while he was serving in the Marines, and we didn't have VA disability to fall back on, we'd be well and truly fucked. SSDI has denied him, after around 8 months of waiting for the initial decision. We appealed it a month or so ago and I haven't heard anything back yet even confirming that they've received the appeal and we're on the list or whatever. Based on my experiences fighting with the VA (took 2+ years to get proper recognition of and compensation for his disability), I'm not confident in any governmental organization.
I'm just trying to say to you, and anyone else who might be reading this, that you REALLY do not want to rely on your physical health to the point of blindness (that is, to the point of not being aware that you could lose it at any moment and planning for such). My husband is, and has always been, the outward picture of perfect health. I don't think the man has ever carried an extra pound of weight on his body and he still has significant muscle definition despite being out of the Marines and not working out for like 5 years. Trust me, under no circumstances did I expect to be 23 years old and dealing with a disabled husband who might never work again. But, shit happens and if you don't cover your ass, you could find yourself in a situation way worse than paying out $800/year.
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More about my situation, we are in a serious debt emergency with No Emergency fund. So in theory even surviving the 6 months would be tough.
It sucks, but this is precisely when and why you need the insurance. For most, this is just another part of the poverty trap, but you are badass and are moving forward. When you get ahead of the debt and build your stache, THEN you can start looking at hacking back the insurance which will only accelerate your wealth accumulation.
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Drop it, social security disability is very generous. However, if you plan on having kids, short term disability will keep her paid for the first six weeks of having a kid, so in some cases it might be worth it.
I don't know where you get this idea that SSDI is generous. It's literally based on your past pay and work credits, and it's incredibly difficult to get. You have to prove you can't do your past relevant work. People who are incredibly deserving of this insurance are often denied. SSDI basically keeps disabled people from becoming totally destitute, but sometimes even with the payments, that happens anyway because you may be in limbo for years before getting the money. A social security judge can, on a whim, decide your onset date wasn't two years ago, but only two months ago, so you get no back pay.
Come back when you have some facts.
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Drop it, social security disability is very generous. However, if you plan on having kids, short term disability will keep her paid for the first six weeks of having a kid, so in some cases it might be worth it.
I don't know where you get this idea that SSDI is generous. It's literally based on your past pay and work credits, and it's incredibly difficult to get. You have to prove you can't do your past relevant work. People who are incredibly deserving of this insurance are often denied. SSDI basically keeps disabled people from becoming totally destitute, but sometimes even with the payments, that happens anyway because you may be in limbo for years before getting the money. A social security judge can, on a whim, decide your onset date wasn't two years ago, but only two months ago, so you get no back pay.
+1
Relying on SSDI as a back-up plan means you don't have a reliable back-up plan.
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Alright, wife just called after talking with her rep. We switched from the 31 day policy to the 151 day policy effective April 1st. Going from $44 per pay period to $14 per pay period saving us about $60 per month.
She has a "sick bank" that she participates in where she donates 1-2 sick days a year that are stored up for emergencies so in a short term situation some of the time should be covered by that. Worst case we'll have to lean on family for some help God forbid something like that happens.
Maybe more risk than some of you would be comfortable with but to be honest my plan was to drop completely until you scared me into keeping it.
Thanks for all the input as always MMM community!
PS to poster who mentioned pregnancies we used to have the most expensive plan that kicked in after 7 days missed that paid out during both pregnancies. Actually because she had a C-section they pay for 8 weeks instead of 6 and the county sick bank covered 6 while she was only out 12 so we somehow came out ahead in the whole thing. Then the 2nd child was born during Summer break but we still got the 8 week payout so we are really ahead of the game with this insurance company so The $26 a month does not bother me too much.