Disability insurance for retired people

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
Wondering if the hive mind has any pertinent experience, etc. --

I may be in the position to retire from my job, at a relatively young age (mid 50s).  While working, I have carried (i) an employer-provided LTD policy, which I will lose upon retirement, as well as (ii) a group policy through a professional association, for which I pay an annual premium.

With regard to the group policy, I understand that at my currently selected monthly benefit level ($3k) there is no weekly work requirement immediately prior to disability.  Contrast with 17.5 hr/wk requirement if I was at a higher level.  Also:  the group policy has a "your occupation" definition of disability, and is renewable up to age 70.  Benefits are tax-free.

So:  Even though I don't currently plan to work (part-time or full-time) after retirement, I am considering continuing to carry the group policy (at the $3k/mo level), at a cost (currently) of around $400/yr.  Anything I'm missing/ignoring?  Thanks.

Member Summary
Most Recent Posts
LTC and LTD are not interchangeable. They are different types of insurance covering different needs.

RBirns (May. 02, 2017 @ 10:43a) |

I did, see above where I said I contacted the administrator (Prudential) of the group plan.

tuphat (May. 02, 2017 @ 2:58p) |

Administration isn't always the insurance company.

What you say is just very uncommon for a benefit.

None the less, hope i... (more)

dhodson (May. 02, 2017 @ 3:21p) |

Staff Summary
  • Also categorized in:
Thanks for visiting FatWallet.com. Join for free to remove this ad.

Do you have kids? How old are they?

If you are not working and don't need to work, why do you want to spend money on a policy designed to replace income which you aren't losing?

Stubtify said:   Do you have kids? How old are they?
  My kids are grown-ups w/good jobs, I don't need to support or otherwise provide for them (or their kids).

acroBios said:   If you are not working and don't need to work, why do you want to spend money on a policy designed to replace income which you aren't losing?
  Regardless of its "design," I look at the policy as providing an additional/incremental source of income, maybe to pay for larger medical expenses, or for additional household help (mow the lawn, etc.)  

I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
 

Well, you do get SSDI if you get seriously disabled. The good version as long as you have sufficient paid-in quarters in the preceding 10 years, and the crappy lower-paying version afterwards.

I'm with the others and don't see a need to insure being able to work when you've already replaced it with investments. In that case, the policy is just a negative-expectation lottery ticket on you getting disabled. Is there some angle here I'm missing? I'm assuming you're not looking to game the benefits.

Would the $400 group plan even pay out anything if you're disabled while unemployed? Wouldn't it just replace your current work income of zero? Forgive my ignorance.

ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  LTC doesn't seems like a good deal when compared to LTD, at least for me. Annual premium more than 4X higher, longer waiting period and much more limited lifetime benefit.   

[q=TravelerMSY;19858710 said]
Would the $400 group plan even pay out anything if you're disabled while unemployed? Wouldn't it just replace your current work income of zero? Forgive my ignorance.
  Yes, as stated above, my benefit would be $3k per month even if I'm not working at the point I become disabled. 

Is this the aicpa plan? I have the one that includes partial disability and it doesn't mention anything about the 17.5 hour work requirement not applying to the lower coverage amount.

Do you have the full disability plan with different terms or are you grandfathered into an older plan term.

ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  
Anyone reading this forum should know better than to be buying such a policy because with proper planning you won't be giving those leeches one red cent out of your hard earned savings!  

tuphat said:   
[q=TravelerMSY;19858710 said]
Would the $400 group plan even pay out anything if you're disabled while unemployed? Wouldn't it just replace your current work income of zero? Forgive my ignorance.

  Yes, as stated above, my benefit would be $3k per month even if I'm not working at the point I become disabled. 

I don't think that's exactly the question. 

Right now now you pay $400/mth. You're about to get $3k/mth because of your disability. 

What benefit is it for you to keep the 400/mth  policy?

Jason it is $400 a year.

What is the exact definition of disability on that LTC plan?

LOOPHOLE said:   
ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  
Anyone reading this forum should know better than to be buying such a policy because with proper planning you won't be giving those leeches one red cent out of your hard earned savings!  

  
What leeches?

Some (or most?) LTD policies, especially private ones, require you to inform the insurance co if you're not employed for 30 days in a row, so that may result in a claim denial. LTC as someone said may be better, but if disability read the fine print carefully on what the coverages, and especially exclusions, are.

tuphat said:   
ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  LTC doesn't seems like a good deal when compared to LTD, at least for me. Annual premium more than 4X higher, longer waiting period and much more limited lifetime benefit.   

  
LTC and LTD are different types of insurance protecting different risks/needs.

id be surprised if the policy actually pays if you arent working for an extended period of time. That just isnt usual. You may wish to have in writing what you think you will receive and under what circumstances in a long term non working scenario.

One reason they dont typically allow this is because once you are retired, there isnt much reason for you not to "be disabled".

tuphat said:   
ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  LTC doesn't seems like a good deal when compared to LTD, at least for me. Annual premium more than 4X higher, longer waiting period and much more limited lifetime benefit.   

The only valid comparison between the two is that you are much more likely to need the LTC benefits than you are the LTD benefits (hint:  that's why it's more expensive).  They are insuring completely different risks.  I agree with other posters that if you can afford to retire, a LTD policy seems like a strange option to be considering.

.

When it comes to paying out disability benefits, there are a few caveats in the contract itself where they will imply that the benefits will only be paid if you keep demonstrating that your disability prevents you from doing a job in your field of expertise. Most policies also reduce benefits if you receive other benefits, especially retirement benefits.

But foremost, almost all of them will make you file for disability benefits with social security to offset what they have to pay you. So if you stand to receive $2.5k from social security disability benefits, they'll only pay you $500 extra. They may provide you with an attorney to represent you in your SSDI case because it stands to save them tons of money. So check carefully the details of the policy and your projected SSDI benefits to determine if it's worth keeping the group policy.

Shandril said:   When it comes to paying out disability benefits, there are a few caveats in the contract itself where they will imply that the benefits will only be paid if you keep demonstrating that your disability prevents you from doing a job in your field of expertise. Most policies also reduce benefits if you receive other benefits, especially retirement benefits.

But foremost, almost all of them will make you file for disability benefits with social security to offset what they have to pay you. So if you stand to receive $2.5k from social security disability benefits, they'll only pay you $500 extra. They may provide you with an attorney to represent you in your SSDI case because it stands to save them tons of money. So check carefully the details of the policy and your projected SSDI benefits to determine if it's worth keeping the group policy.

  FYI, this policy has no coordination/benefit reduction language, with SSDI or any other disability insurance or retirement plan.  During disability, you can be asked to be placed on Rehabilitation status, which allows you to work while also collecting a reduced benefit.  But that's different.

tuphat said:   
Shandril said:   When it comes to paying out disability benefits, there are a few caveats in the contract itself where they will imply that the benefits will only be paid if you keep demonstrating that your disability prevents you from doing a job in your field of expertise. Most policies also reduce benefits if you receive other benefits, especially retirement benefits.

But foremost, almost all of them will make you file for disability benefits with social security to offset what they have to pay you. So if you stand to receive $2.5k from social security disability benefits, they'll only pay you $500 extra. They may provide you with an attorney to represent you in your SSDI case because it stands to save them tons of money. So check carefully the details of the policy and your projected SSDI benefits to determine if it's worth keeping the group policy.

  FYI, this policy has no coordination/benefit reduction language, with SSDI or any other disability insurance or retirement plan.  During disability, you can be asked to be placed on Rehabilitation status, which allows you to work while also collecting a reduced benefit.  But that's different.

  

You still never posted the exact definition of disability

RBirns said:   
You still never posted the exact definition of disability

  "You are disabled when [Insurer] determines that, due to your sickness or injury: (1) you are unable to perform, for wage or profit,the material and substantial duties of your own occupation; (2) you are under the regular care of a doctor; and (3) you are not working at any job for wage or profit."  Each underlined term is further defined in the certificate.

That seems to say that if you are retired (and therefore not working), you no longer have any "material and substantial duties of your own occupation"  that you "perform, for wage or profit."  I would think you therefore would have no insurable interest, so the ins. co would have no obligation to pay you if you became disabled. Kind of like taking out fire insurance on a house you never built. So, I would think you would be paying premiums for a policy that won't ever pay out.
Also - it is not clear to me why you would want a disability policy if it isn't to replace income. Are you looking for a way to pay disability care expenses?

On the other hand, most good LTC policies (all I have ever seen - through employers and associations) aren't tied to working. They are tied to being able to take care of yourself (functional performance). If you shop carefully, LTC can be a great deal. Some policies have constant premiums (what you pay now you pay forever), and some are surprisingly affordable. My father had one he took with him into retirement from a government agency (15 years ago?). Premiums were low enough that he got back (in benefits) all the premiums he had ever paid in less than 6 months of claims. in a way, the family kind of got double benefits - I was managing his affairs, so I hired family members to take care of him (with full knowledge of the insurance co), so he got the care and the benefits flowed back into the family.

One piece of analysis you should do - look at what the max the LTC policy pays per day and plot out how long it takes you to recoup your premiums.

yahoot said:   That seems to say that if you are retired (and therefore not working), you no longer have any "material and substantial duties of your own occupation"  that you "perform, for wage or profit."  I would think you therefore would have no insurable interest, so the ins. co would have no obligation to pay you if you became disabled. Kind of like taking out fire insurance on a house you never built. So, I would think you would be paying premiums for a policy that won't ever pay out.
  There's other language in the policy that says monthly benefits below a certain level (like mine) don't require proof of pre-disability earnings, i.e., you don't have to be working at time of disability.  I have confirmed this by discussion with the sponsor and administrator.  P.S. You are confused on what "insurable interest" means; an individual always has an insurable interest in his/her own health.

There is about a 15% chance a 55 year old will become disabled for 90 days or more. Half the people end up disabled for 5+ years.

Most disability is due to illnesses so it's hard to predict or guard against.

http://www.actuarialfoundation.org/consumer/disability_chartbook.pdf

Spending $400/yr for $3000/mo may be worth it.

tuphat said:   yahoot said:   That seems to say that if you are retired (and therefore not working), you no longer have any "material and substantial duties of your own occupation"  that you "perform, for wage or profit."  I would think you therefore would have no insurable interest, so the ins. co would have no obligation to pay you if you became disabled. Kind of like taking out fire insurance on a house you never built. So, I would think you would be paying premiums for a policy that won't ever pay out.
  There's other language in the policy that says monthly benefits below a certain level (like mine) don't require proof of pre-disability earnings, i.e., you don't have to be working at time of disability.  I have confirmed this by discussion with the sponsor and administrator.  P.S. You are confused on what "insurable interest" means; an individual always has an insurable interest in his/her own health.


I'd contact the insurance company directly to confirm

Does the $400 rate go up with your age?

dhodson said:   
tuphat said:   
yahoot said:   That seems to say that if you are retired (and therefore not working), you no longer have any "material and substantial duties of your own occupation"  that you "perform, for wage or profit."  I would think you therefore would have no insurable interest, so the ins. co would have no obligation to pay you if you became disabled. Kind of like taking out fire insurance on a house you never built. So, I would think you would be paying premiums for a policy that won't ever pay out.
  There's other language in the policy that says monthly benefits below a certain level (like mine) don't require proof of pre-disability earnings, i.e., you don't have to be working at time of disability.  I have confirmed this by discussion with the sponsor and administrator.  P.S. You are confused on what "insurable interest" means; an individual always has an insurable interest in his/her own health.


I'd contact the insurance company directly to confirm

  
I would too.  I have never seen any disability plan pay a claim after retirement.

dcwilbur said:   
tuphat said:   
ananthar said:   I would apply the $400/year towards a Long Term Care policy: This will cost around $150/month for a $80K/year, $240K max policy with 1 year deductible and inflation rider age 55 in good health.
  LTC doesn't seems like a good deal when compared to LTD, at least for me. Annual premium more than 4X higher, longer waiting period and much more limited lifetime benefit.   

The only valid comparison between the two is that you are much more likely to need the LTC benefits than you are the LTD benefits (hint:  that's why it's more expensive).  They are insuring completely different risks.  I agree with other posters that if you can afford to retire, a LTD policy seems like a strange option to be considering.

  Actually the risk of needing LTC at a particular age is less than the risk of needing LTD : The requirement for getting benefits under LTC are similar to the requirements of Catastrophic LTD (which only pays if you can no longer take care of yourself, rather than just not being able to work). You can buy Catastrophic LTD for less than the cost of similar LTD insurance. The reason premiums for LTC are higher is partly because it does not require that you remain employed (so more risk of adverse selection for the insurance company), but mainly because the premium is fixed for the remainder of your life even though the covered benefit keep increasing by 5% a year. By contrast LTD premiums from a group policy will increase until you reach age 65, then the policy typically terminates. After age 65 is when you will most likely need LTC, but if you wait till then to buy it, you will typically be charged $500-$1000/month.  

LTC and LTD are not interchangeable. They are different types of insurance covering different needs.

dhodson said:   I'd contact the insurance company directly to confirm
  I did, see above where I said I contacted the administrator (Prudential) of the group plan.

Administration isn't always the insurance company.

What you say is just very uncommon for a benefit.

None the less, hope it isn't something you have to trigger.

Best of luck with your decision.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017