Long Term Disability Insurance?

[~Ari~]

So there may already be a thread on this topic - but I can't seem to search it. If there is, please link it to me! :)

My DH and I are taking small steps forward in our financial decisions, we both recently signed up for term life insurance through our employers and added our son as a "rider". Now, we are wondering if Long Term Disability insurance is a good idea? My hubby and I are pretty young (23 &24) and healthy, so we know we could get fairly good rates, but is it worth it? We are so new to all of the different information about insurance and feel like a fish out of water sometimes.....growing up is hard! haha Anyway, any advice is greatly appreciated!

[CopperTex]

Surprised no one has answered you yet. Yes, disability insurance is incredibly important. You have a much greater chance of becoming disabled than you do of dying. Think of it as income insurance, since that's what it is.

[ZMonet]

Insurance companies are constantly changing the premiums on long-term disability insurance and some are even stopping offering such a product.  Also, those that do offer it put all sorts of limitations on payouts.  Every time I look at it, I come to the conclusion that a long term disability is something that would be a fantastic hardship but is not one, actuarially speaking, that is worth insuring against.  I guess if you know that you are more prone to long-term injury, then it may be worth it.

You have a much greater chance of becoming disabled than you do of dying. 

I'll take the other side of that bet :), but I get what you're saying.

Links to past discussions on this:

http://forum.mrmoneymustache.com/ask-a-mustachian/disability-insurance-32465/

http://forum.mrmoneymustache.com/ask-a-mustachian/long-term-disability-insurance/

[seattlecyclone]

I think long-term disability insurance is even more important than life insurance for a lot of people. If you die and have dependents those folks might have a tough time recovering, but they'd probably make it through. If you became seriously disabled without a devoted spouse or a big stash to pay for a caregiver, there's really no recovering from that.

[Rural]

I have long term disability because if something goes horrifically wrong, I'd cost my loved ones a lot more alive than I would dead.

[pbkmaine]

Yes, you need it, but check what is already provided by your employer. It is possible that you already have some kind of LTD through work and this is just an "add on". While you are at it, check for short-term disability as well. You may also have the option to pay for disability insurance pre tax or after tax. I had this option at my employer and chose to pay for it after tax, because of an interesting aspect of the tax law. When you pay for disability insurance pre tax, it is taxable when you receive it. When you pay for it after tax, it is tax free. I chose to pay more up front because I wanted the maximum income if I was disabled, but there are multiple opinions on this. As has already been mentioned before, it's a good idea to read what the policy actually covers. It will be slow going, reading through the provisions, but you will learn a lot.

[TheFrugalShrink]

I am a rehab psychologist, meaning that I work with people who have experienced major injury or illness.  Because of what I've seen, I would never EVER go without long term disability insurance if I at all needed my income.  All it takes is one bad car accident and you're in rehab/ recovery for 6 months to two years.  Trust me when I say that no one is immune to debilitating injury, and that it impacts your finances and career in a major way.

[Libertea]

What do people who are going from FT to PT work (but not yet fully FI) do about disability insurance?  I'm thinking keep it until fully FI.

[Goldielocks]

Statistically, a 40 year old is 3x more likely to have a disability lasting over 90 days than they are to die.

Only after age 65 does the chance of death begin to exceed the chance of long term disability. 

It's expensive though. 
Reduce your costs by not having it pay out until say, 6 months after the disability occurs, and have an emergency stash to cover the gap.

The other way to reduce costs (for Libertea) is to downgrade the payout trigger to "inability to work at ANY occupation"  That way the PT person can claim for a full disability, but if only partly disabled, change jobs, go back to FT at lower pay, and still make income.

[Libertea]

The other way to reduce costs (for Libertea) is to downgrade the payout trigger to "inability to work at ANY occupation"  That way the PT person can claim for a full disability, but if only partly disabled, change jobs, go back to FT at lower pay, and still make income.

Thanks, that's what I figured.  I guess another option to decrease premiums would be to protect less income.  Particularly if you are spending much less than you earn, it might not be necessary to protect your entire income.

[Beriberi]

Buying disability insurance on the open market is difficult and expensive.  Part of the problem is that people who privately buy disability insurance tend to use it at higher rates than people on group policies.  Some employers will offer a group policy that you can continue to pay, even after you end employment. That is often a much cheaper option.

Depending on work history, you likely will qualify for some amount of Social Security if you became disabled.  That + savings may mean you don't need disability.