I’ve not posted here for a while because in my mind, I’m already retired. I’m not in the deciding whether I should retire or not. But on the insurance issue, I tend to over insure just in case I miscalculate somehow. I have ltc, life insurance, earthquake, umbrella, etc… I figure the premiums are worth the peace of mind even if I have enough money to cover it.
I have been following along, but not posting much. But I have a question now about disability insurance. We purchased disability insurance for my DH above what is provided by his employer. I stopped working 5 years ago, and he is thinking of retiring in one to three years. If we feel we have enough to retire, then why should we keep buying disability insurance. If he gets disabled, he could just “retire”. Son is graduating from undergrad in three weeks and daughter’s college fund (she is a sophomore) will fund the rest of her undergrad.
Has this been discussed before?
I just pulled my disability insurance plan out, too, to review. Part of our overall review of insurance. I looked and it does not really add that much to our income and since I am within a couple of years to age 65 when I believe it stops paying out anyhow it may not be worth it anymore. That is what you need to check. Is there an age it stops paying benefits.
Disability insurance protects one’s earning ability. If your earning ability is no longer material towards your financial goals, it’s probably time to reevaluate.
To your question, H has an individual policy from 20+ years ago but I’m not sure it would pay much more today than to keep the lights on, so to speak. It was necessary protection when we were much younger. I evaluate the need every year or so but we’ll probably keep it until he stops working. Yet it isn’t cheap because it’s one of those same-occupation policies.
You should compare monthly premium cost to benefit and check (1) the definition of disability and (2) the elimination period again, just to make sure you are comfortable that your risk is minimal until your H’s retirement. Let us know what you discover.
I will note re disability ins …my employer used to have a great and relatively cheap short term policy for disabilities under 6 months IIRC. This renewal season it was still cheap BUT they required employees to use all vac time, sick time and any donated leave before it kicks in. If I am that disabled I will be looking at SS because I have a lot of time saved. I have a long term policy for greater than 6 months.
Yes, it important to see what any policy does and does NOT cover and the price for what benefits. Disability policies vary tremendously, as do LTC policies. Know what you are buying and HF ave a conversation with an agent to clarify that you actually have the coverage you think you do.
Some disability policies only pay when you are unable to do ANY work. Folks with degrees can often have physical issues but still able to perform some desk job, even if unable to do original profession. There may he huge change in responsibilities and reduced wages. Be sure the policy provides the protection you mean to purchase.
If you are closer to retirement you can eliminate disability insurance. For my husband he gets more from Social security disability then his Social Security. He is older than 62. When he was younger he’s covered at work.
It depends. If it is a choice between being out on the street or not, get insured. If it is a choice between leaving a lot to your heirs or somewhat less, I’d say take your chances.
I don’t know if you get insurance for the average or not. If you can’t see far into the future, I don’t know what else you can do other than going by the average. To be comfortable, one could double the average to four month care. I think I can afford fourth month care or even six months without insurance. Six months probably covers 2-3 standard deviation and 97% cases.
I googled a bit, I am seeing some conflicting numbers.
This site says the average nursing home stay is over 2 years, and 1 in 10 are in a nursing home for more than 5 years:
But this site says the average stay is 14 months, and the median only 5 months (and men die much quicker in the nursing home, median of 3 months vs. 8 months for women):
http://www.geripal.org/2010/08/length-of-stay-in-nursing-homes-at-end.html
To me, we need to take the steps that reasonably allow us to sleep well at night. For each of us, those steps can be a bit different. We are confident that our pension and assets and rentals give us sufficient self-insurance to cover our foreseeable expenses, including potentially paying all our D’s expenses if she is unable to work due to her chronic health issues. We feel that is enough and are satisfied to not pay premiums to anyone to give us even MORE coverage for things we don’t feel we need.
Prices of premiums range considerably and CAN have a significant impact on having assets for current needs. When we were looking into LTC insurance, the premiums quoted for coverage we considered worth having (highest amounts with highest caps) were so cost prohibitive we would not have been able to fund our kids’ private HS or private college. We made a choice to fund those instead of paying premiums and for US, it was the correct choice. Those premiums were way more than we could handle with our income at the time, as well as paying for our kids educations and we valued the latter much more highly.
Everyone has to weigh the balance they want to strike between insuring and not, with the premiums and terms involved. I do spend a LOT of time reading different policies before deciding whether or not it is something we want to purchase or not. I believe umbrella coverage is well worth having for high net worth folks. The cost is relatively low ($300-1500) for coverage of $1MM - 2MM, and helps us sleep well at night. LTC policies are just too expensive to me for the protection they purport to provide. I am happy folks have found policies that work for them with terms that they can live with–I never could and am now considered uninsurable for LTC and life insurance.
Wow, this web site puts the cost of nursing home care at $130+K/year in my area:
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html
Like @HImom, I looked at LTC policies for my mother a number of years ago and they have gotten worse for the consumer since then. I buy insurance for catastrophic coverage. I am happy to have a large deductible. When I last looked at the LTC policies, they all had caps on payment that were not that high and the premiums were very high. It seemed that it was better to self-insure (which does involve saving a fair bit).
Because I run my own company (it has employees) but am effectively self-employed, disability insurance is something I didn’t skimp on. I pay that with post-tax rather than pre-tax dollars so the benefits, if I ever needed them, would be in post-tax dollars. I found, like @AttorneyMother, that you have to be very careful about what is covered. Most cover less than one would think. The policy we have is pretty protective, but I think the premiums are pretty substantial. And, I believe the policy I have covers not my income but the amount I spend each year, which is a lot lower than my income. My FA says that our insurer is the best in terms of definitions and, I think, behavior. Similarly, our house insurance is with Chubb and they performed admirably during Hurricane Sandy and a subsequent problem with my wife’s studio. Other insurers might have given us a hard time just for fun and profit and Chub did not.
When we buy insurance, we pay a lot of attention to recommendations of our agent about which carriers are good to work with if you have a claim. As an attorney, have known many carriers who did not serve their clients well and prefer to work with “better,” more cooperative firms, even when premiums may be slightly higher.
We never had disability coverage and I only got a pittance for TDI when I gave birth to S. Fortunately we had savings and could live comfortably on H’s salary. We were fortunate neither of us, nor any of our loved ones needed to file disability claims, tho one of my sisters was disabled for about a semester. I don’t know what coverage she had, but she and her H were OK.
My LTC premium is not too bad but only for 5 years max and around $500 per day(IIRC). After that I will be covered using my out of pocket. AAA has umbrella reasonably cheap as long as your car insurance with them has high liability insurance, I think for $2M is around $800, for $5m is around $1400.
My kids told us to spend our money and so I have no intention of leaving anything but I don’t plan to be wasteful.
It isn’t the cost of nursing home care that scares me. Nobody wants to go into a nursing home. People (and that is likely to include me 
) do anything and everything they can to live at home – and the truth is that in-home care for someone who needs extensive care is more expensive than a nursing home. It is also (typically) not covered by Medicaid. My MIL’s LTC insurance didn’t come close to paying the full costs of in-home care, which ran more than $120K/year in her last two years – but it did let her live at home with assistance for more than five years. It would be substantially more expensive today because of the new rules related to overtime for home health aides.
We took a big elimination period (the longest offered) and opted for the 5% annual increase in benefits.
After all, the average home fire only does $45K in damage…but that doesn’t convince me to drop my homeowner’s insurance, even though we could easily pay for $45K in damages without doing much more than wincing.
For us the appeal of LTC ins was ability to stay at home (common use for the coverage). So far we have LTC for older DH, but not me yet. For me at younger age there is more to sort through regarding annual increases.
Interestingly I have a printed price grid from Genworth on my desk (for the past few month). It shows Home Care and Adult Day Health care approx same for us in CO as MA (where I compared as example - both Boston and Barnstable / not city). But Assisted Living and Nursing Home estimates are more than 50% higher in MA.
We keep homeowner’s insurance because the umbrella requires. Otherwise, i’d drop it.
Homeowner’s insurance is very important to me, to provide peace of mind if anyone happens to be injured on our property. Many of the insurers in lawsuits from cases early in my career were the homeowner’s carrier–providing legal defense for the homeowner and paying out if the case settled or ended in judgment.
In a 3 block radius we’ve had three homes lost to fires in the past 25 years: two were regular house fires, and one was the result of a small plane crashing into the house. I’m keeping my homeowner’s policy.
No fire in my neighborhood for the last 50 years. My block was built in 1950’s. They are all original construction. Replacing cost doesn’t worry me. Injuries would worry me. That’s why we have umbrella insurance. I don’t think my homeowner’s is enough to cover injuries. If my house catches fire and gets destroyed, we would sell the land and move. I know my insurance won’t pay enough to rebuild its original charm. Nobody can do the plaster wall as beautifuly as they used to. Or the wood work for that matter. What’s important to me is not insurable.