Disability insurance

[crash2500]

I am in the underwriting process of obtaining disability insurance. Just wondering what everyone's thoughts were on the amount of disability insurance to get. People say to get full current income coverage which I understand why but the premium can be somewhere between $6000-$7000 which is quite pricey. I'm in my thirties so I do understand the importance of being covered but just wanted to see what everyone's thoughts were on the amount of coverage.

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[agammaglobulin]

I'd figure out how much you anticipate needing given your current salary and cost of supporting you and your family. I'd think for most Anesthesiologists, you'd want at least $10K per month benefit (120k/year post tax). I'd also suggest getting a 'future increase option rider' that allows you to up the coverage without additional underwriting (usually up to a max of around $15K). Another rider worth thinking about is the 'cost of living adjustment rider' (COLA) that increases your monthly benefit to keep up with inflation. $10K next month is a lot more than $10K in 20 years if you get permanently disabled today. If you do not get COLA, you probably want to have a higher benefit/future increase available since in 20 years the same benefit will be worth a lot less.

 

[thinkorswim]

To be honest, it really depends on a number of personal and financial factors that really only you would know. How much will you be comfortable living off given your monthly expenses? How much do you have in retirement savings? Are you financially independent and can afford to retire tomorrow if need be? Does your spouse work and have disability insurance as well?

In general, early on in your career, you can't go wrong getting full coverage for the maximum amount they'll give you. You can always slowly remove the riders and decrease the coverage amount as you save more and become more financially stable through the years.

Another rider worth thinking about is the 'cost of living adjustment rider' (COLA) that increases your monthly benefit to keep up with inflation. $10K next month is a lot more than $10K in 20 years if you get permanently disabled today. If you do not get COLA, you probably want to have a higher benefit/future increase available since in 20 years the same benefit will be worth a lot less.

One note on the cost of living adjustment, at least on my plan through Guardian, the adjustments for inflation are only applied once your disability payments start. So if you have $10k of coverage then you will get that amount to start, whether you become disabled tomorrow or 20 years from now, and only after that will it start to increase by a certain percentage.

 

[urge]

One note on the cost of living adjustment, at least on my plan through Guardian, the adjustments for inflation are only applied once your disability payments start. So if you have $10k of coverage then you will get that amount to start, whether you become disabled tomorrow or 20 years from now, and only after that will it start to increase by a certain percentage.

Good to know.

 

[crash2500]

Any other opinions? Currently have 120 k student loans, a wife, and a mortgage.

 

[pjl]

Any other opinions? Currently have 120 k student loans, a wife, and a mortgage.

If you become disabled from doing anesthesia, you lose a huge amount of future income. Right now, that would cripple you, as you have a bunch of debt, mortgage, and need to afford to live. Later, it won’t matter as much, as long as you do all the usual LBYM stuff and gain a nice cushion. At that point you can start reducing.

Look at your current expenses, and know that you need to cover that much as a minimum. In residency, I lived on ~30k a year, and didn’t think I would ever need much more. Now I live on ~100k a year, and invest the rest for long term goals. This is my stable amount for about 5 years, with not too much creep. I worry that disability would actually increase expenses some, so I targeted 150k for coverage. Add in saving for kids college/retirement etc, and I added 50k.

Additionally note that if you pay with post tax dollars, you are not taxed on benefits, so you can just calculate what you need.

That was my personal decision making process to end up at ~15k monthly personal coverage, and then when it was time I added 5k additional group coverage that I am forced to buy (but is great, and cheap). I would bump this to 15k and drop my personal if I was 100% certain I wanted to stay at my current job.

You stop noticing the premiums eventually as it becomes a smaller portion of your net worth. Early on they seemed huge, now they seem like a very unimportant amount. For me, when I turn 40, 50, and 60 I planned to decrease coverage depending on overall saved money, but will have to re-evaluate at that time. Im leaning towards dropping total coverage back to 10-15k when I hit 40 since I have enough other saved to meet the important life expenses.

 

[Painted]

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[Painted]

He Took a Drug to Prevent AIDS. Then He Couldn’t Get Disability Insurance.

 

[MD Financial Services Scott]

I am in the underwriting process of obtaining disability insurance. Just wondering what everyone's thoughts were on the amount of disability insurance to get. People say to get full current income coverage which I understand why but the premium can be somewhere between $6000-$7000 which is quite pricey. I'm in my thirties so I do understand the importance of being covered but just wanted to see what everyone's thoughts were on the amount of coverage.

If you are in your 30's then most contracts should be about $250 per month for $10,000 of coverage. Keep the policy efficient and not bloated up with riders that most likely will never be utilized.

 

[crash2500]

If you are in your 30's then most contracts should be about $250 per month for $10,000 of coverage. Keep the policy efficient and not bloated up with riders that most likely will never be utilized.

Which riders would you consider expendable? Residual? Don't see how you can practice part time in anesthesia but not full time. I also have catastrophic, regular occupation, and COL.

 

[facted]

If you are in your 30's then most contracts should be about $250 per month for $10,000 of coverage. Keep the policy efficient and not bloated up with riders that most likely will never be utilized.

For which riders?

Is this for an own occ policy?

 

[MD Financial Services Scott]

For which riders?

Is this for an own occ policy?

That would be for a True Own Occupation contract, 90 day wait, age 65, full residual.

 

[MD Financial Services Scott]

Which riders would you consider expendable? Residual? Don't see how you can practice part time in anesthesia but not full time. I also have catastrophic, regular occupation, and COL.

I am not a fan of Catastrophic but that is because in my 25 years in the disability insurance business we have never had a single client qualify for payout on that rider. In regards to the COLA it takes about 12 years on claim for that to become beneficial so I typically don't recommend that either. When you look at claim stats it just does not support buying a feature that it takes 12 years to breakeven on.