Long term disability & Life Insurance for DINKs?

[fund4tomorrow]

Hi All,

My wife and I are making our ways through saving for early retirement.  Along with the inevitable health insurance premiums we will be paying in early retirement, I wanted to ask anyone who is willing to respond, what's your take on getting long term disability and/or life insurance for couples who plan on not having children?  I'm leaning towards carrying the long term disability, but am not planning on the life insurance. 

Having these questions answered would really give me a better idea as to what to budget for in retirement as well as during our working years.

Thanks everyone!

[rubybeth]

Disability (short and long-term) is much more common than many people realize, and it's far more difficult to qualify for Social Security Disability benefits than many realize. I'd carry the long term disability as long as you would need that as replacement income. Once you're fully retired and don't need that income, you could drop it. Disability stats: http://disabilitycanhappen.org/disability-statistic/

Life insurance is kind of separate--if you're FIREd, theoretically you don't need life insurance since spouse has enough income on their own, but what if they would make some drastic life changes without their partner? Would they move to be closer to family or other source of comfort in their grief? Would the additional life insurance money allow them to fund some sort of passion project--an endowment, gift, or charity in their deceased loved one's name? This isn't really a simple answer, more of a discussion between the two of you about your legacy and what you want that to be--maybe even more important to discuss since you don't have children to be that legacy. Life insurance could also cover any expensive end of life costs--health care, hospice, funeral, etc. Also you'd theoretically have term life insurance purchased when young, so the cost would be low.

[Dr Kidstache]

I second rubybeth. Disability can happen to anyone, anytime. I'm proof of that and having long-term disability insurance has made a tremendous difference in my ability to live independently and get the best health care. If you're not FI, you need LTD insurance. There's all sorts of unexpected expenses that come with disability that you wouldn't anticipate - the obvious is your health care expenses go up but also you have expenses to adapt your home/lifestyle, plan for progressive disability needs like home care, get extra help with tasks you used to do yourself, have legal expenses to access benefits, and maybe your spouse even has to change/modify their job to take care of you. Long-term disability insurance companies are a nightmare to deal with but the money is a life-saver and the premiums are a bargain if you ever need it. If you're shopping for LTD insurance, take a few minutes to check out lindanee.wordpress.com and read about the different companies. LTD brokers sell you policies but they aren't involved when you actually go to file the LTD claim and much of the marketing is inaccurate.

[Dragonswan]

Consider also if Social Security is a significant part of your retirement budget.  If so, then when one of you dies only one SS check, the larger of the two, will be coming in.  The other check goes away.  So if you need that income, buy enough life insurance to cover the smaller check.

[rubybeth]

Consider also if Social Security is a significant part of your retirement budget.  If so, then when one of you dies only one SS check, the larger of the two, will be coming in.  The other check goes away.  So if you need that income, buy enough life insurance to cover the smaller check.

This is an excellent point. It may depend on how you file for benefits, and who dies, and that may determine who carries the life insurance. If the lower earning partner dies, then it might not be a problem, but if the higher earner dies and the lower earner was taking half their benefit, that could be a significant difference.

Also a plug for short term disability if you are still working--I recently used mine via my employer and it was a major help. It only paid 60% of my salary and there was a 7 day waiting period after I had surgery this spring, but having 60% for seven weeks was a huge relief. Many people think that disability won't happen to them, but my surgery was for a very common orthopedic issue that is typical among young people (young being relative, I'm in my late 30s). Severe illness, hospitalization, cancer, broken limbs, etc. don't just strike the old--they happen to healthy, active people, too. Short term disability is more expensive than long term, but in my case, it was well worth the peace of mind.

I also kind of wonder if OP meant long term CARE insurance. Those policies are much more complex, and you'd probably want to talk to a broker about how they actually work. There can be many exclusions and issues with them not covering what you thought they would after years of paying into them.