Disability Insurance

[GrandTheftAutumn]

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Hello folks.
It's that time of the year- selecting benefits for 2020.
I was wondering if it's a good idea to get additional disability insurance.
Currently a highly stressed staff RPh @ greenWal and almost 30 years young.
I'm already sensing my mental health declining but at least I only have myself to support for now.
greenWal provides disability insurance already, but also offers additional coverage of up to 20% of my salary.

What does disability insurance cover anyway?
Does coverage differ between company-sponsored and voluntary ones?
Is additional coverage worth?
Are there other coverage that's worth getting? (critical illness, personal accident, etc).

Thank you.

 

[mentos]

Disability insurance usually pays around 60% of your wage if you're unable to work due to illness, injury etc.

I recommend getting it outside of work because if you leave the company then you'll lose it and have to go thru the signup process again. I think blood work is involved.

 

[lord999]

From the actuarial standpoint, it's a hard call. The reason why is that disability plans find every way to say no before they say yes. However, I do personally carry such a policy through work besides what FERS offers, and I've seen it invoked enough times (the company is reputable as it's a General Re one) that it is worth it to have if some veterans decides to kneecap me.

 

[MD Financial Services Scott]

Hello folks.
It's that time of the year- selecting benefits for 2020.
I was wondering if it's a good idea to get additional disability insurance.
Currently a highly stressed staff RPh @ greenWal and almost 30 years young.
I'm already sensing my mental health declining but at least I only have myself to support for now.
greenWal provides disability insurance already, but also offers additional coverage of up to 20% of my salary.

What does disability insurance cover anyway?
Does coverage differ between company-sponsored and voluntary ones?
Is additional coverage worth?
Are there other coverage that's worth getting? (critical illness, personal accident, etc).

Thank you.

Really look at what you need because employers often offer plans that may or may not work as anticipated so READ the actual policy and not just the brochure. In addition, keep in mind of what you spend out of your paycheck because most of these plans will pay you 50-60% of your income and then tax it. Think about the amount you spend and if you could live on 40-50% of your current pay check, if yes and the terms of the policy work for you then great, if not then you need to look at supplementing.

 

[Rouelle]

Really look at what you need because employers often offer plans that may or may not work as anticipated so READ the actual policy and not just the brochure. In addition, keep in mind of what you spend out of your paycheck because most of these plans will pay you 50-60% of your income and then tax it. Think about the amount you spend and if you could live on 40-50% of your current pay check, if yes and the terms of the policy work for you then great, if not then you need to look at supplementing.

I tend to completely ignore the fact that employers offer plans. I assume that the goal of the employer plan is to protect the employer, not me.

 

[MD Financial Services Scott]

I tend to completely ignore the fact that employers offer plans. I assume that the goal of the employer plan is to protect the employer, not me.

Most employer plans are certainly not doctor friendly, I think that is because the person making the decision on what to buy does not understand what terms are important to the physician at claim time, they simply look at through their sets of lenses and not a physicians.

 

[Dred Pirate]

Really look at what you need because employers often offer plans that may or may not work as anticipated so READ the actual policy and not just the brochure. In addition, keep in mind of what you spend out of your paycheck because most of these plans will pay you 50-60% of your income and then tax it. Think about the amount you spend and if you could live on 40-50% of your current pay check, if yes and the terms of the policy work for you then great, if not then you need to look at supplementing.

This is not necessarily correct. If you pay for the insurance with after tax dollars, the benefit is tax exempt. If you employer pays for it - it is taxable as it is essentially tax free benefit/income.

This is were the 60% figure often comes from - which is often roughly your actual take home pay,

Not to be a smart ass but someone who is listed as a disability insurance expert should know this and give factual information.

 

[MD Financial Services Scott]

This is not necessarily correct. If you pay for the insurance with after tax dollars, the benefit is tax exempt. If you employer pays for it - it is taxable as it is essentially tax free benefit/income.

This is were the 60% figure often comes from - which is often roughly your actual take home pay,

Not to be a smart ass but someone who is listed as a disability insurance expert should know this and give factual information.

I do really appreciate the response as it does point out some very important facts.

As I said "most of these plans", that did not mean 100% but certainly most employer plans are paid by the employer with no employee contribution thus the benefit would be taxable. In addition, a large number of plans are 50% of income and even those that are 60% (which is more common than 50%) still does not net out what one takes home. As you probably know we live in a progressive tax bracket system so not until Married filing jointly earning over $612k or $510k if single does one even start to pay 37% federal tax and of course that is only for those dollars earned in excess of those limits. If someone was actually making $300k, $400k, $600k, $1 million+ then taking 40% is more than they would have paid in federal taxes thus the benefits via 40% reduction is more than the taxes would have been.

I know this is confusing stuff so thanks for making a comment to allow me to expand the response.

Here are the 2019 tables:

Table 1. Tax Brackets and Rates, 2019

Rate	For Unmarried Individuals, Taxable Income Over	For Married Individuals Filing Joint Returns, Taxable Income Over	For Heads of Households, Taxable Income Over
10%	$0	$0	$0
12%	$9,700	$19,400	$13,850
22%	$39,475	$78,950	$52,850
24%	$84,200	$168,400	$84,200
32%	$160,725	$321,450	$160,700
35%	$204,100	$408,200	$204,100
37%	$510,300	$612,350	$510,300

 

[confettiflyer]

Correct, post tax payment = post tax benefit.

I want my own outside policy with a more generous “own occupation” limitation, but mine is relatively cheap ($400/yr for $10,000/mo post-tax benefit) so I figure it’s a nice bridge until I figure out having my own policy.

The own occupation limitation is 2yrs after which switches to “any occupation”


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[itaos]

Sites like White Coat Investor will walk you through signing up for Own Occupation policies that can cover you til 65. I seriously regret not looking into it in my 20's, as existing conditions will likely require exclusions to the policy. The policy offered by your company will not get you very far.

 

[confettiflyer]

Just read the last line. Also, is yours level or adjusting?

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Level. I surmise that I’m getting what I pay for, but I can’t justify $200/mo which is the estimate im getting for the policy I want.


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[GrandTheftAutumn]

Thank you for the great insighs.

Does disability insurance only cover injury/illness related to work?
Say I f*ck up my back or legs at gym, get disabled from doing risky leisure activity (i.e. skiing, not that I ski but anyhow), or car accident, any of these covered?
greenWal offers additional disability insurance for like $2-300/yr for 20% of my salary.
I wonder if it's worth it.

 

[MrBonita]

I have a ton of coworkers who get hurt and collect. Do what you can to get hurt. Be opportunistic.

1. Let stuff drop on you when you can.
2. Stand in front of doors so someone can hit you with it.
3. Wet floors are a gold mine. Slip at all sightings.
4. Be prepared to fake a seizure. If that is on camera, then it helps your case.
5. Know how to respond to a doctor's examination for pain.

 

[MD Financial Services Scott]

Thank you for the great insighs.

Does disability insurance only cover injury/illness related to work?
Say I f*ck up my back or legs at gym, get disabled from doing risky leisure activity (i.e. skiing, not that I ski but anyhow), or car accident, any of these covered?
greenWal offers additional disability insurance for like $2-300/yr for 20% of my salary.
I wonder if it's worth it.

Individual policies will pay regardless of it being a work related accident or not. The employers group policy, 99% of the time, have an exclusion for work related incidents with a statement similar to "this is not meant as a workmans comp substitute", you can also see this if you read the employers policy (not the brochure) under 'Benefit Income Offsets'.

One thing to watch on group buy up offers is that sometimes they will say something like 50% of your income not to exceed $10k is covered as an employee benefit. If you want to buy up to 70% being covered up to $10k then here is the cost. What one needs to be careful of is when you look at the amount being offered by the employer and then your income do you already meet or exceed the max amount covered? I have seen dozens of times when an employee is doing a buy up from a % standpoint but the max benefit has already been reached so they spending money on something they get zero value for. The mathematical example of the numbers/% above would be income is $240k, employer benefit is 50% not to exceed $10k. This individual already meets the $10k max but then not doing the math decides to buy up to 70% of income, still not to exceed $10k max. It is a nuance that high income earners with this type of employer benefit structure needs to pay attention to.