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rated:
Just curious about the thoughts here of getting LTD insurance. I have never had it before, but now I think it may be a good idea.

Me - 37, married, 2 young kids. My family depends on my monthly paycheck.

Monthly cost is <$4 for 55% payout or <$8 for 65% payout.

Any advice of considerations I should make would be helpful.

Thanks!

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I doesn't look like the group policy can be waived 

akiboshi (Apr. 24, 2017 @ 2:21p) |

I believe you are going to find the other main companies react just like Guardian unfortunately

dhodson (Apr. 24, 2017 @ 2:42p) |

You're right. It was all limited by the group plan. We're going to add a rider for the option to increase the benefit at... (more)

akiboshi (Apr. 25, 2017 @ 1:37p) |

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rated:
How much income are you insuring at that price? (because that sounds unusually cheap)

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My monthly gross salary is approximately $7K. The benefits are tax free. So it would be 55% or 65% of $7K.

rated:
Sounds crazy cheap. Can you name the provider?

rated:
You likely have some serious misconceptions about what you are considering purchasing. Those prices are ridiculously too low for any decent disability policy. Good disability insurance is very expensive. Cheap policies are very unlikely to pay unless you can't do a thing and benefits may be reduced from SS benefits.

There is no free lunch.

rated:
I have LTD. LTD is all about the details. LTD stands a much higher chance of getting used- and therefore is usually pretty pricey for a reasonable policy. A poorly written LTD policy is pretty much worthless. I recently priced out about 13k/month in LTD and it was around 300-400/month depending on details. This is for an medical doctor. I don't think you are gonna be paying $8 per month for $4500 in coverage. That 'sounds too good to be true'.

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Yes, out of all the supplemental insurance you can buy, LTD is really essential. Most companies offer LTD as standard or optional. I would get the one that pays the most percentage. $8 month for 65% payout is really a steal for you, get it!

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The policy is through a group option from my employer, and my employer is a very big state government. I believe that is why it is so cheap.

The provider is The Standard.

rated:
Employer-subsidy sounds like a big part of the seemingly impossibly cheap price.

But you are still neglecting a lot of details in terms of figuring out exactly what product you're buying.

For LTDI, there are at least a few other MAJOR factors to consider (on top of replacement percentage):
1) "own occupation"
2) how long before benefits start (big pricing differences between 90, 120, and 180 day windows)
3) COLA


(and the reason we all think this sounds so cheap is that LTD often runs in the price range of 1%, or more, of your actual gross income)

EDIT:  updated last comment for better clarity/accuracy -- sorry dhodson -- previously said "insured income" which is probably a mistatement and was interpreted by others to mean the "replacement amount" (i.e. 65% replacement of your 100% actual gross income)

rated:
Group policies always have limited coverage typically that it becomes such that disability means you can't do anything incywalmart greeter after a time period. Group is also frequently linked to social security benefits meaning that when you get money from SS for being disabled, they reduce what the insurance company pays.

Now if you wouldn't pony up for a "real" policy (which can be understandable given their high costs) then group policies are "something".

Just understand their limitations.


Also good individual is more than 1% of the monthly benefit amount.

http://whitecoatinvestor.com/what-you-need-to-know-about-disability-insurance/

rated:
The key (but rarely discussed) point about LTD is that the company has tremendous incentive to not pay.  And, they have many ways to not pay.

Disabled people are not usually in a good position to fight with the company as the company well knows.

rated:
dhodson said:   
Also good individual is more than 1% of the monthly benefit amount.

http://whitecoatinvestor.com/what-you-need-to-know-about-disabil... 

  
We are possibly saying the same thing, just referencing something different with the "1%" number.

Not an insurance guy -- just talking about it from the framework of, if I made $100k/year then for $1k/year I am possibly insuring 60-65% of that amount -- but even then, you're right that coverage might be $2k-$3k/year depending on the stipulations.  (and I wouldn't be surprised if coverage cost scales non-linearly with coverage amount)


This whole conversation reminds me that I need to review my policy, since I haven't updated it in awhile...

rated:
Not trying to be rude and argumentative about it but your wording before wasn't like you just put it. I just don't want people searching for the impossible 1% of benefit amount. They either will search in vain or have to pick a lousy policy trying to hit that number.

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dhodson said:   Not trying to be rude and argumentative about it but your wording before wasn't like you just put it. I just don't want people searching for the impossible 1% of benefit amount. They either will search in vain or have to pick a lousy policy trying to hit that number.
  I'm not taking your comment as rude or argumentative, at all.

You are using much more precise language than I did, originally. 
(which I'd definitely expect given your other posts on insurance topics in the past)



i.e. you were talking about % of benefit, I was talking about % of gross, that they then discount to your benefit.

The only reason that specific way of thinking about it sticks with me is that 8 or 10 years ago there used to be some guy on the finance forum that would give the hypothetical of:
a) would you rather have a job that paid 100% of your gross and if you were disabled you received nothing
or
b) would you rather have a job that paid 99% of your gross and if you were disabled you still received 60% of your income

(as a VERY rough example of ballpark numbers, just to get people thinking about it from that standpoint)


Obviously that's somewhat of an emotional appeal, but as such, it really made it stick in memory.


Of course ratchet up from that percentage depending on how long you want to wait for coverage to kick in, at what age you want coverage to terminate, whether you have COLA, and whether you have "own occupation".  (I wouldn't be surprised if there are at least a couple other elements to coverage that I'm not even thinking about)

rated:
As long as it is employer group policy, get it. That said, it may be a good idea to talk to an independent insurance agent as a source of answering questions and comparing details with a policy you could buy individually.

rated:
Honestly it's better to do it of benefit amount

It's easier to go apples to apples

Also most of the time you don't automatically get increases with increases in salary without paying more.

Keep in mind cola doesn't start until after disability and keep in mind future purchase options.

rated:
dhodson said:   Honestly it's better to do it of benefit amount

It's easier to go apples to apples

Also most of the time you don't automatically get increases with increases in salary without paying more.

Keep in mind cola doesn't start until after disability and keep in mind future purchase options.

  
I'm completely agree.

I was just attempting to provide the (convoluted) background for my earlier statement.


In terms of LTD coverage, what is your expert opinion on the critical components? (i.e. what riders are practically mandatory, versus what riders may be discretionary, in terms of what you would consider GOOD coverage)

rated:
arch8ngel said:   
dhodson said:   Honestly it's better to do it of benefit amount

It's easier to go apples to apples

Also most of the time you don't automatically get increases with increases in salary without paying more.

Keep in mind cola doesn't start until after disability and keep in mind future purchase options.

  
I'm completely agree.

I was just attempting to provide the (convoluted) background for my earlier statement.


In terms of LTD coverage, what is your expert opinion on the critical components? (i.e. what riders are practically mandatory, versus what riders may be discretionary, in terms of what you would consider GOOD coverage)

  I think some of the critical components are non-cancelable and guaranteed renewable, own occupation disability definition, and partial disability coverage.  Some kind of inflation protection is nice too but not mandatory.  

rated:
Snezz said:   
arch8ngel said:   
dhodson said:   Honestly it's better to do it of benefit amount

It's easier to go apples to apples

Also most of the time you don't automatically get increases with increases in salary without paying more.

Keep in mind cola doesn't start until after disability and keep in mind future purchase options.

  
I'm completely agree.

I was just attempting to provide the (convoluted) background for my earlier statement.


In terms of LTD coverage, what is your expert opinion on the critical components? (i.e. what riders are practically mandatory, versus what riders may be discretionary, in terms of what you would consider GOOD coverage)

  I think some of the critical components are non-cancelable and guaranteed renewable, own occupation disability definition, and partial disability coverage.  Some kind of inflation protection is nice too but not mandatory.  

  
Let's not end up confusing the OP here by introducing non-applicable IDI features into this discussion.

OP, just get the coverage. Your employer is highly subsidizing the premium so it is a no-brainer in this case. But I would also advise finding good IDI to suppliment, The Standard also potentially being a good place to start (among some others).

rated:
Sorry to bring this topic back up. I'm just going to piggy-back off this post so that I don't have to make a new one:Recently I started pricing out the individual policies with a broker using Guardian,and he mentioned that the maximum monthly benefit that Guardian will allow is based partly on how much is covered by my company's group policy.So hypothetically if I earn $100K, and my company group LTD policy pays out 60%, Guardian is only willing to offer an individual plan that pays out like ~$2.5K, which does not seem like a lot, especially given the general deficiencies of a group policy. I would prefer to have an individual policy offering $5K for that level of earnings. Have any of you run into this problem before? And how can I get Guardian to offer a higher benefit/month?Thanks in advance.

rated:
You likely can't without cancelling the group

rated:
dhodson said:   You likely can't without cancelling the group
  I doesn't look like the group policy can be waived   

rated:
I believe you are going to find the other main companies react just like Guardian unfortunately

rated:
You're right. It was all limited by the group plan. We're going to add a rider for the option to increase the benefit at some later stage as our incomes rise, without having another medical exam. Thanks for your help

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