long term disability insurance first steps

July 3rd, 2008

Long Term Disability Insurance – First Steps

Let me just say first, if I can manage to figure this out, you can too.  I’m not the most savvy of internet users – more proficient than average, maybe, but definitely no expert.  In fact, I’m finding it difficult to navigate the world of long term disability insurance from my computer and finding legitimate companies that aren’t front pages for affiliate ads to companies I have never heard of, but I am trying.

Earlier this week I wrote about my spouse’s employer offering short term disability insurance, and us exploring if it was a good idea for us.  Disability insurance has long been on the list of “things we should have but as of yet do not” – we have made progress on the list but disability insurance isn’t something we’ve tackled.  But we should.  Writing about short term disability insurance brought the long term option to the forefront of my mind, and ultimately after many encouraging comments kickstarted me actually looking into it.

Let me say, things I don’t know anything about intimidate me.  The activation energy required for me to take those initial steps, for really anything, seems enormous.  It was that way with getting life insurance, buying a house, even getting out of debt.  It was really hard to start, but once we did get ourselves in gear and started taking serious steps, the process went rather quickly.

So now I’ve taken those first steps, and hopefully that means the activation energy is overcome and soon we’ll be on the way to having long term disability insurance for my spouse.   We decided to just look at coverage for my spouse at this time for several reasons.  One, our goal is to be able to live on my spouse’s income alone.  At this point, it would be very tight and our debt elimination would stall, but we would be able to get by solely on my spouse’s income.  We wouldn’t be getting ahead, but we could survive without my income.  Second, of my three “jobs”, only one has an actual employer (taekwondo), tutoring is a contract position and I am not an employee, I am an independent contractor, and blogging is self-employment.  So it would be very complicated if not impossible to get coverage for my entire income.  And third, the blogging is partly passive via advertising revenue so it wouldn’t disappear completely immediately if I wasn’t able to do it for a period of time.   In the future, we may look into some sort of coverage for me too, but at this time, it is my spouse’s income that we primarily depend on, so it is my spouse’s income we need disability protection on.

So, on to the actual process.  I did a number of searches online for disability income insurance plans, as well as took suggestions from the comments on my previous post, and found one company I could get a generic quote online within 24 hours (Guardian), and then two others that I could ask a representative to contact me to discuss a quote (MetLife and State Farm).  I also called our current insurer for home, auto and life, Allstate, and talked to my agent about getting a quote.  I did try to find information about several other companies but I came up empty as far as online searches went, so I moved on.  Four quotes should give me a good idea at least.

My spouse’s employer actually uses Guardian for the short term disability policy they are offering, as well as their dental coverage (which we have currently).  So I am somewhat familiar with them.  They sent their online quote, and there were a number of options.   The coverage was to replace 70% of my spouse’s current salary, and would be tax free if we paid the premiums with after-tax dollars (which we would).  The policy covers if my spouse is disabled and cannot perform his current occupation, even if he can be employed in a different one, is guaranteed renewable and non-cancellable on their part until the age we select (more on that in a minute when I discuss options)  and had two additional things I could add to the policy for an additional cost – I can elect to have the policy adjust upwards until age 55 as my spouse’s income increases, and I could elect to have a rider that starts coverage when as little as 15% of income is lost due to disability.  I also had two variables I could change that affected the cost of the premiums – the length of the policy and the waiting period for it to become effective after a disability.  I could have the policy last 10 years, until age 65, and until age 67, and I could start coverage as little as 60 days after a disability or as long as 360 days.

For my spouse, the policy we were quoted, depending on if we added the additional riders and what variables we selected, the coverage would cost anywhere from $57 – $215 a month.  We are leaning towards a policy that would start 180 days after disability and provide coverage until age 65, which would be about $100 a month (starting 360 days after disability is $90/month).  We would also include the additional riders for automatically adjusting upwards as his income rises and the residual disability (coverage at 15% or more disabled), which is included in the $100 (or $90) a month.  I’d like to elect the 360 days after disability one instead, but I don’t think having that large of an emergency fund for us is likely for a good long time.

We haven’t decided if we will go with this company, of course, but it is nice to get the ball rolling and at least find out some information about coverage and costs.   We have many more quotes to get information about and compare to this one.  But the ball is rolling.  This seems to be the week I tackle a bunch of “now I’m really an adult and I need to think about this” questions.  And if I can do it, you can too.  Protect your financial peace.

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23 Responses to “Long Term Disability Insurance – First Steps”

  1. This is an extremely helpful post! I hadn’t given much thought to disability insurance before. I’m pretty certain my husband doesn’t have coverage through work, so we’ll need to shop around and get some quotes as well.

  2. As a small business owner, I was clueless about disability insurance. I came across a site at www disabilityinsuranceadvisor com that literally caused me to have a “a ha!” moment. I called the guy and he gave me options from half a dozen different providers. I selected a John Hancock policy that covers up to $130/day and increases with the CPI every year. I thought I was good with life insurance but disability is just as important. Thanks for confirming my decision to get it.

  3. Congrats to you for getting the ball rolling! It’s not a fun subject to approach and that makes it even more impressive. Just think 1 month ago you had no disability coverage and it was just a blip on the radar; a month from now you could have full coverage and financial peace of mind.

  4. Congrats on taking the bull by the horns!
    Good luck in the decision making progress.

    I didn’t have it, but managed to luckily not need it either… and at my age, I’ll just do the retirement thing if it happens.

  5. Thanks for this post, its made me think about different insurances I need.

  6. Nothing like getting insurance to make one feel adult. I feel like there’s so much of it to juggle. But then I periodically see how important someone’s health or car insurance was and it seems worthwhile.

  7. I got a quote from Mass. Mutual for around $250 a month. Yikes!

    This coverage is strangely hard to find, and my employer does not offer it. As I get older I really need to have something besides the impossible-to-get Social Security disability so I may just have to bite the bullet. Thanks for the company names.

  8. Two pieces of advice:

    1. Never rely on your employer for insurance (other than health). You could lose your job today and get hit by a bus — but not killed — tomorrow.

    2. Look for some kind of group affiliation or professional organization discount. A coworker of mine said that the only reason he is a member of the American Society of Mechanical Engineers is for the insurance. I checked it out and save a BUNDLE of money when I bought long term disability insurance last year.

    I make “good money” and this insurance costs only 0.5% of my salary. Most indications are that one should expect to pay between 1% and 3% of salary, so 0.5% is a steal.

    Good luck…

  9. for 11 Years I had LTD insurance offered throgh my Co with Unum insurance.
    In Dec of 2006 I was injured on the job and since haven’t been able to work.
    All it cost was $11.00 a Week and it has saved my life, literaly.
    Anyone who has been through a work injury and dealt with workers comp insurance Co’s know all to well how bad an injured worker is treated.
    To make a long story short, I was cut off from workers comp over 6 months ago and am waiting for a Court hearing to get them to settle.
    Anyone who thinks LTD insurance is a waste of Money needs to wake up!
    Unum has never given me any problems and thanks to them I can continue to keep a Roof over my Families Head while going through this nightmare.
    I used to have friends at work make fun of me and look at me like I was an idiot for wasting such a small amount of Money.
    I’m glad I didn’t listen to them and drop it because if I had my Family would be homeless.
    Any way you look at it, LTD insurance is the smartest Money you’ll ever spend.

  10. Unfortunately, it is nearly impossible to get this insurance if you have ever been treated, as many of us have, for depression or any other mental illness. Insurers fear that even those of us who have minor depression managed well by medication will someday become debilitatingly mentally ill and quit working.

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