How much money have you spent/received on disability/life insurance?

[BLADEMDA]

Disability Insurance 101 — PearsonRavitz

Disability insurance covers a portion of your (pre-tax) income if you can no longer work due to a long-term illness, an injury, or cognitive challenges.

www.pearsonravitz.com

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Members don't see this ad.

 

[Guillemot]

This may have been said already, but disability insurance pays until 65. You need enough to cover expenses before 65 + invest for expenses after 65. I have a policy through work and my own portable policies. I will plan to decrement my coverage as I progress in my career and net worth.

 

[pjl]

When your passive income is enough to cover your expenses, plus a little more (being disabled can actually be pretty expensive if you want regular activities) then you don’t need the insurance.
Until then, it is probably a good idea.
You live off ~120k a year? Insure for 10k/month until you have 3 mil invested.

of course, when you are at that point, your passive income can easily pay the premiums, so dropping it is not as big a deal either...

I personally am way over insured, but have never missed that money, and will be able to maintain my family’s lifestyle if I ever become disabled. It isn’t like I am choosing between disability insurance and fancy scotch. I get both.

 

[doctalaughs]

This is a dumb conversation.

Comparing disability insurance to winning the lotto is comparing things that are incredible orders of magnitude different in probability (and also a “safety” thing vs a “gamble”). Even if the chances to become disabled is 1 in 10,000 (probably is way higher in reality) the powerball is is 1 in 300 million- literally at least a 30,000- fold difference.

An analogous discussion would be comparing whether you should buckle your seatbelt in your car (because it takes 3 seconds per day and you could instead earn a dollar during that time, after all, car accidents are rare) versus whether you should spend a few minutes per day digging holes in your backyard with a shovel because you might find a treasure chest worth 2 million dollars - another “rare” event.

 

[pgg]

Growth stocks, not S&P index.

AAPL, NVDA, GOOG.

And getting extremely lucky with a few small pharmaceutical companies (NKTR for example).

High risk (to me) is hoping you get disabled so you can cash in on your disability insurance.

High risk (to you) is making big bets on unproven companies (like NKTR), but big bets can pay off big.

It's gambling either way, and I'd rather gamble in the stock market.

So you're telling us that your stock picking has outperformed the S&P500 by a factor of perhaps 500%, over the entirety of a 10 year historic bull market. And that you predicted this in advance, making a deliberate and rationale decision to gamble a quantity of money equal to what disability insurance premiums would have been. You weren't actually self-insured / FI during this period.

And you describe this decision and justify it purely in terms of FINANCIAL risk.

Whether or not any of the above is actually true and not forum hyperbole, the one thing that is absolutely clear is that you have no appreciation or regard for what actual risk is. The above is a terrible rationale for not buying disability insurance.

 

[Mman]

I consider disability insurance for me. It gives me income even if I can no longer work so that I can continue to enjoy a reasonable quality of life obviously depending on what the disability is. I consider life insurance for my family as it provides them with a reasonable quality of life in case I'm dead.

Both of those things have value for me. I mean I'd prefer to live to 85 or 95 and be totally healthy and what not, but just in case that doesn't work out I am happy to have a backup plan for both me and my family.

 

[Neopolymath]

20 year old me sitting in my college risk management course is falling out of his chair reading OPs valiant defense of misunderstanding how insurance works.

 

[Mman]

High risk (to me) is hoping you get disabled so you can cash in on your disability insurance.

High risk (to you) is making big bets on unproven companies (like NKTR), but big bets can pay off big.

It's gambling either way, and I'd rather gamble in the stock market.

The risk is the odds of losing and the magnitude of the loss. If I "lose" and don't ever cash in on my disability policy, it means I end up working an extra couple months at the end of my career to make up that expense. If someone following your strategy were to "lose" by becoming disabled at a young age, they'd have the rest of their life with minimal income and no reserves to live on.

So in essence I'm trading a couple months working in my 50s to remove the possibility (however remote) that I will end up in a catastrophic situation financially because of a disability.

 

[Mikkel]

The risk is the odds of losing and the magnitude of the loss. If I "lose" and don't ever cash in on my disability policy, it means I end up working an extra couple months at the end of my career to make up that expense. If someone following your strategy were to "lose" by becoming disabled at a young age, they'd have the rest of their life with minimal income and no reserves to live on.

So in essence I'm trading a couple months working in my 50s to remove the possibility (however remote) that I will end up in a catastrophic situation financially because of a disability.

30 years of premiums at $1000/month, compounded at 10% annually:

$2.38 million.

8%:

$1.58 million.

6%:

$1.07 million.


The risk of becoming 100% disabled in a job that is mostly safe to practice (needle sticks, twisting a back moving beds being the main risks) is less than 0.1%. If outside of work you do high risk activity or have high risk medical conditions, then obviously you'd benefit from disability insurance more than someone who is entirely low risk.


So, giving up $1.58-2.38 million over a 30 year period because of a 1% annual risk seems like high risk to me.

What I don't understand is the reflex to buy an insurance product without consideration of the price and long term opportunity cost.

 

[Mman]

30 years of premiums at $1000/month, compounded at 10% annually:

$2.38 million.

8%:

$1.58 million.

6%:

$1.07 million.


The risk of becoming 100% disabled in a job that is mostly safe to practice (needle sticks, twisting a back moving beds being the main risks) is less than 0.1%. If outside of work you do high risk activity or have high risk medical conditions, then obviously you'd benefit from disability insurance more than someone who is entirely low risk.


So, giving up $1.58-2.38 million over a 30 year period because of a 1% annual risk seems like high risk to me.

What I don't understand is the reflex to buy an insurance product without consideration of the price and long term opportunity cost.

1) I will work far less than 30 years. It's maybe about 15 years of full time employment until I'd have enough to retire and I will actually retire or cut back to just part time within 20 years.

2) Your risk of disability is way higher than 0.1%. You think 1/1000 anesthesiologists end up on disability? I'd bet it's closer to 1% and might be higher than that.

3) $12,000 a year seems insanely high price for disability. Our group policy (specialty specific) costs me somewhere between $5-$6K a year.

 

[pgg]

The people I know who've become disabled and unable to practice medicine didn't become disabled because of injuries at work.

A freeway, a bicycle, cancer, genetic disease (x2). **** happens.

I don't believe my friend with cancer (like me, an active duty military physician) had a DI policy - just the pseudo-DI-policy we get via the military ("medical retirement") which covers perhaps 1/4 of our income. I pay for own occ DI and consider it money well spent. Like life insurance, it's mostly not for my benefit.

 

[bigdan]

M -

I did not run the math, but if somebody is paying $1000 per month for disability premiums, he/she needs to shop around a little more.

 

[thinkorswim]

So, giving up $1.58-2.38 million over a 30 year period because of a 1% annual risk seems like high risk to me.

What I don't understand is the reflex to buy an insurance product without consideration of the price and long term opportunity cost.

Oh come on. This is just absurd now. You're just pulling numbers out of your a** to fit your own delusions.

1. No one here pays close to $1,000 per month. Not even close.

2. No one here plans on paying DI premiums for 30 years.

3. You'll be paying taxes on most of that supposed $1.5-2 million. You won’t pay taxes on DI benefits.

4. The final amount won’t even be close to that high since it would be a ridiculous idea to toss your “insurance” money entirely into equities.

5. What happens if you become disabled during a recession? Now that $2 million in high risk growth stocks is only sitting at $1 million. Too bad your “insurance” will only let you pay yourself 50% of what you hoped it would and won’t last as long as you had planned.

6. What happens if you become disabled next week? Good luck finding any money to last you for the next 30 years.

7. If you're consistently pulling 10% annual gains, you're in the wrong field. You should be a hedge fund manager. That is of course if you're able to convince anyone that you have a modicum of financial literacy, which you have yet to do here.

 

[OneFellSwoop]

So, giving up $1.58-2.38 million over a 30 year period because of a 1% annual risk seems like high risk to me.

What I don't understand is the reflex to buy an insurance product without consideration of the price and long term opportunity cost.

I think I misread what you are saying here because wouldn't a 1% annual risk of disability equate to approximately a 30% lifetime risk over a 30 year career? Probably too high, but you also mentioned 0.1%, which is probably way too low, of course the truth is usually somewhere in the middle.

Any common full time anesthesiologist without some sort of unusual set of circumstances with appropriate financial education should be able to fund retirement, purchase appropriate insurance, fund a large chunk of kids' college and still retire in 20-30 years AND enjoy life in the meantime. My disability policy isn't necessarily for me, it's also for my wife and kids. This is huge and the value cannot be understated.

By comparing disability insurance with equity type returns you are comparing apples to oranges because the risk you take in equities is far higher than the risk of losing the said 1.5-2 million in portfolio earnings. Especially after accounting for the possibility of being disabled and utilizing the policy. Why? because the earlier you become disabled, the more you utilize the policy's payout, however if you become disabled early in your career in the investment scenario, you wouldn't have invested enough yet to live on. We simply can't predict the future.

The only real thing you risk by purchasing, but not using disability, is a slightly less baller and maybe later retirement. If baller is that important, I think a better plan is to purchase disability insurance and figure out how to carve out that extra 1,000 per month (which is likely too high of an estimate anyway) from spending and invest that instead.

 

[BLADEMDA]

When I was insured for $300k of coverage I think the cost was around $550 per month. Since this is a tax free benefit I figured $25k per month was plenty of money tax free.

I assume someone paying $1,000 per month must be budgeting for $40-$45k per month tax free income minimum.

I’m not sure why anyone needs a disability policy that large but to each his/her own.

 

[BLADEMDA]

I recommend that even if you don’t believe in insurance take out a small disability policy. This won’t cost you much and at least gives you monthly income just in case disaster strikes.

Almost any attending can afford $100-$150 per month for disability insurance. Shop around. See what that money buys.

 

[doctalaughs]

I pay $215 a month for 10k/mo disability benefit (have another 10k/mo through group plan for about $139/mo). Together would replace maybe 75% of my after tax and savings income. Same specialty.

No where close to $1000/mo (and I probably carry more disability than most since I’m very conservative). Also there’s no chance I carry it for 30 years. I’m about to reduce in a few years —since my net worth will be high enough —to 50% replacement income and then probably 25% 3-4 years later. Guessing I will carry some disability for 20 years total before dropping it entirely.

So with all your assumptions put those numbers in your spreadsheet. A super-conservative person like me may “lose” opportunity cost of 300k by not putting that money into the stock market instead. Less conservative person maybe 100-150k.

That is totally worth it to me (chump change over a career) for protecting my family. Not to mention most people probably would have spent that 200-300 dollars a month they had on an extra steak dinner out or expensive bottle of wine anyway. Or buying a BMW vs a Toyota Camry in the first few years of your career.

 

[Drangue]

Disability Insurance 101 — PearsonRavitz

Disability insurance covers a portion of your (pre-tax) income if you can no longer work due to a long-term illness, an injury, or cognitive challenges.

www.pearsonravitz.com

Is Pearson-Ravitz good?

Anyone have any other recommendations?

 

[GassYous]

I used dr disability through wci

 

[abolt18]

I went through larry Keller on Whitecoat Investor. Was quick and efficient.

 

[MD Financial Services Scott]

Is Pearson-Ravitz good?

Anyone have any other recommendations?

Yes, Stephanie is good to work with.

 

[MD Financial Services Scott]

I pay $215 a month for 10k/mo disability benefit (have another 10k/mo through group plan for about $139/mo). Together would replace maybe 75% of my after tax and savings income. Same specialty.

No where close to $1000/mo (and I probably carry more disability than most since I’m very conservative). Also there’s no chance I carry it for 30 years. I’m about to reduce in a few years —since my net worth will be high enough —to 50% replacement income and then probably 25% 3-4 years later. Guessing I will carry some disability for 20 years total before dropping it entirely.

So with all your assumptions put those numbers in your spreadsheet. A super-conservative person like me may “lose” opportunity cost of 300k by not putting that money into the stock market instead. Less conservative person maybe 100-150k.

That is totally worth it to me (chump change over a career) for protecting my family. Not to mention most people probably would have spent that 200-300 dollars a month they had on an extra steak dinner out or expensive bottle of wine anyway. Or buying a BMW vs a Toyota Camry in the first few years of your career.

Not sure what someone would be buying at $1k per month for disability. Typically the prices are:
Age 28-35 about $18-$25 per month per $1,000 of monthly benefit
Age 35-40 about $25-$30 per month per $1,000 of monthly benefit
Age 40-45 about $35-$40 per month per $1,000 of monthly benefit
Age 45-50 about $40-$45 per month per $1,000 of monthly benefit
Age 55-60 about $45-$55 per month per $1,000 of monthly benefit

 

[BLADEMDA]

I have about $750K of term/whole life. The term portion is $500K with a cost of $650 per year. That is on the high side but due to my age and health I am happy paying $650 per year. I also have whole life from a top rated company (this is a "C" grade investment so can't recommend).

My disability policy is own occupation specific which I pay about $250 per month. The benefit is roughly $175,000 per year if I get disabled. I don't really need the policy a this point but will keep it for at least a few more years. I feel comfortable knowing that amount of income is more than enough when combined with my assets. But, as I get older the value of the policy diminishes as I doubt the company will pay out past age 65. So, I'll just keep this a few more years.

There was a time where my disability policy would have paid out over $300,000 per year but as I gained FI I no longer needed that much coverage. Logically, I am at the age where I should just cancel this policy but like I have posted I will give it a few more years.

I highly recommend you get quotes on insurance for your family and loved ones. The cost of insurance is cheap at a young age and disability will protect your family against loss of income due to an accident or prolonged illness.

If you get the right agent then competitive bids will be obtained from multiple companies. If you are still wary get a second agent to make sure the first one is being honest.

Again, Insurance isn't just about you. It is part of true financial planning for the entire family.

So, I ran an analysis of my very long held whole life and variable life policies. These are among the worst 5 "investments" I made in my life/career. Yes, I have made bigger blunders but these policies really are NOT very good. The variable policy returned around 5% compounded over 25 years. But, I was carrying all the risk and was invested in the market. Yes, i got insurance then and even now but when you factor in the cost of Term and investing the difference in a Blended Mutual Fund (60/40 or 80/20) the difference was a huge sum of money. The whole life policy was even worse.

I still have these policies because as of TODAY they aren't too bad going forward. I can capture reasonable returns going forward because I suffered through miserable returns for decades.

I am posting this so you all can learn from my mistakes. Buy Level Term 20 or 30 years and invest the rest. I still believe in disability insurance and still have a policy today even though I am financially secure. I plan on keeping the policy for 5 more years (probably another stupid decision).

I really urge all of you reading this to realize how deceptive and dishonest insurance salespeople can be. Most of what they claim is simply false or misleading at best.

If I could do it all over again I would NEVER purchase a Whole life/Adjustable/Variable life. I would buy 2 term life insurance policies, one for 20 years and one for 30 years.

I would also not make the same mistakes buying "red hot" tech stocks with sky-high valuations during a market boom. Anyway, this is just some advice from a older PP dude who despite his mistakes still managed to achieve his goals of money due to a historic stock market run.

 

[sevoflurane]

.

 

[ZzzPlz]

What is your umbrella @BLADEMDA ?

My wife and I are looking into our homeowners insurance as well as umbrella.

Our home(s)/rentals are @2.5 mill but likely will raise that soon as our properties have increased in value the last few years (7 years since we signed our contract w/insurance company). Our hotels are not included here as they are part of an LLC.

Then there is umbrella. We are not sure how much to get here. Currently @3million but our net worth not including our homes is approaching 10mil in investments/assets.

How far would you go w/ umbrella?

Worst case scenario you get in a MVC and you disable a neurosurgeon who looses his ability to practice. He then sues you for everything including future lost wages. Unlikely, but curious as to how you and others see this.

Umbrella is cheap…I just went from 1 to 3 mil and I’m just 6 years out from residency. If I were if your shoes I’d get 5 mil at least

 

[sevoflurane]

Yeah… was just going to post that. Probably go all the way to net worth. Probably a 2-3k a year.

 

[sevoflurane]

or less.

 

[ChiDO]

We have 3mil umbrella after 3 years of practice. Think we pay like 400-600/yr

 

[BLADEMDA]

Yeah… was just going to post that. Probably go all the way to net worth. Probably a 2-3k a year.

Sure, you can purchase a $5 million umbrella policy if you think you really need it. But, I suspect the $3 million coverage would be more than adequate for 99% of the scenarios that may arise. I mean you could hit Jeff Bezos or Bill Gates and that $5 million policy would be peanuts. But, considering even most physicians on here would settle out with you for $3 million I wouldn't insure for the 1 in ten million scenario.

That Neurosurgeon also has a disability policy which pays out at least $500k per year most likely. Litigation is expensive so I am pretty sure most ambulance chasers would take the $3 mil and move on.

That said, if $5 million allows you to sleep better at nigh then increase the policy to $5 million (and avoid hitting Billionaires).

 

[Splenda88]

I just did my tentative attending budget plan and I realized that I will only be able save/invest 80-85k/yr (on a 330k/yr salary)? Is that even good considering I plan to be FI in 10-12 yrs.

I might have to pick up some extra shifts because the goal was to save/invest 100k+/yr.

How much you guys/gals save/invest every year?

 

[chessknt]

I just did my tentative attending budget plan and I realized that I will only be able save/invest 80-85k/yr (on a 330k/yr salary)? Is that even good considering I plan to be FI in 10-12 yrs.

I might have to pick up some extra shifts because the goal was to save/invest 100k+/yr.

How much you guys/gals save/invest every year?

Just roll with it for a year and see how it goes before you panic about your ability to retire or try to upgrade to 1.3fte. No reason to race to fi in 10 years—you’ve been reading too many of the doom threads predicting the end of paid medicine…

 

[Arch Guillotti]

How much you guys/gals save/invest every year?

> 100K.

 

[Splenda88]

> 100K.

That's the goal for me. I don't know if I will ever get there since I won't be able to do that with what is already a decent salary as a hospitalist.

 

[chessknt]

That's the goal for me. I don't know if I will ever get there since I won't be able to do that with what is already a decent salary as a hospitalist.

It is doable but you need to pace yourself. If you jump in to attending life eating ramen and sleeping on a futon in your shared studio you'll save more but it isn't worth it. Strike a balance and enjoy life without worrying about the numbers. You need to be able to keep it going for years and years to come.

 

[nimbus]

I just did my tentative attending budget plan and I realized that I will only be able save/invest 80-85k/yr (on a 330k/yr salary)? Is that even good considering I plan to be FI in 10-12 yrs.

I might have to pick up some extra shifts because the goal was to save/invest 100k+/yr.

How much you guys/gals save/invest every year?

That is plenty. Maybe not in 10 years but if you do it consistently, you will eventually be rich.