I’ve always been of the opinion to buy term life when you need it, i.e., when one has income to protect. (And to me, unless an 18-year old has dependents to support, not sure I see the need.) And then drop the life when there is no longer a need to protect income, i.e., after retirement. (That excludes those who have life policies in a trust to pay estate taxes.)
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" $100/day isn’t going to cover round the clock," - Right. But it would take the sting out of things when there starts to be the need for a few hours of daily assistance. In some cases, it would be enough to delay the need for assisted living / nursing home.
Note to anybody considering Hospice help for terminally ill parents -
In our area (maybe everywhere?), Hospice patients qualify for very many free services including visiting nurse, CNA helpers etc. It is not the right answer for every family (for example, you would no longer call 911 in emergencies, just Hospice helpers)… still worth researching. I will be forever thankful for the friends that encouraged me to contact Hospice to help with my mother’s last months.
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Another reason term life may make sense is when losing a spouse with a pension would seriously cut the amount of money available to the surviving spouse.
Hospice is amazing. They were very helpful during my FIL’s final weeks. However, we changed hospices when the first did not medicate my FIL properly (they messed with his Parkinson’s meds, which the doctor who never actually examined him said he didn’t need … but not getting the meds was a really bad thing for him). He was in assisted living, and our second hospice worked really closely with the AlL staff.
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It was good I had significant enough insurance in place when I had aggressive Stage III cancer - and it was in my lymph system. I had 50-50 long term survival, but had a dramatic turn around point when I was on a definite upswing on my cancer journey. The money would have been a big help with having the home continue to run well.
Right now much personal dwelling real estate is going to prices not even thought about a few years ago. If one is retiring to a lesser priced area, can reap a lot of gain in their current dwelling. I have been shocked by our area real estate market, with few homes available and a lot of demand.
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So is the purpose to buy term life insurance in your 20s so you get a good rate (vs to have a payout in case the person dies in their 20s)?
Right now, my early 20-somethings don’t own anything/have any debt. But I can see getting it at an early age for the better rate.
We bought term when we bought our house (so about age 30) and knowing we planned to have kids in the near future.
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I think 20’s is too early for term, unless you have kids by then. Wait til your 30’s, get 30 year level premium term, and that will carry you through to retirement or close.
That’s how we did it anyway 
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Agreed. Life insurance is to protect an income source for dependents/survivors, not get a good rate. A single 20-something doesn’t have a need to protect much.
If I had it to do over again, I would have purchased two policies, one larger 20-year level (to get kids thru college), and a smaller 30-year for surviving spouse when ostensibly kids would be gone and expenses would be lower.
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Lol I purchased my 20 year term in my 20s, but I already had both kids. Younger s was almost 2. We have some whole life and are covered at work, but H is terrible with managing $$$ so I got a fair amount extra to make sure he’d be ok if something happened to me. (I make 2/3-3/4 of our income.) It was so cheap it was definitely worth the piece of mind. I also got the same policy on H, but he was in his early 30s. It was still cheap but not as low as mine.
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We had term life for me as soon as we had kids but not for my wife as I did the bulk of the earning. If I had died young, she would have needed a lot of financial help – hence something like $3.25 M or $3.5 M in term insurance in an irrevocable life insurance trust. If she had died she had died young, while it would have been horrible emotionally, it probably would have been not a big event financially. I would have needed more help with the kids and probably housekeeping. But, I would not have been paying expenses associated with my wife. In that stage of her artistic career, she was usually cash flow positive but barely and had losing years. So, on net, the loss of income would have been negligible.
I set up a 412i that had to have whole life in it, so we had some of that and I let some of the term insurance go. Over time, we had enough money that we did not need life insurance.
I have always had significant disability insurance. Still do, though there is a question as to whether it makes sense at this point. I’m still working hard and earning a fair bit.
@shawbridge as soon as I was out of the woods on the cancer, I ditched the disability insurance. No matter what you pay on premiums, if you have partial disability they are going to be a pain on trying to collect. However that may be a business expense or run through the company, just like some of your other expenses.
The concept of disability insurance is good, and for those that have it through their employer (ST and LT) that is a terrific benefit. And of course is really needed for a main breadwinner with dependents. I imagine the likelihood of LT disability is much smaller risk than death. Term insurance is much cheaper if young and healthy. Disability insurance probably is more health/age scrutinizing.
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I’m pretty sure the likelihood of LT disability is greater than death at most if not all ages. I’ve heard people talk about how we get life insurance, but many don’t get disability insurance, which they probably should.
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Wouldn’t it depend on whether you and others who depend on your income would have financial difficulty if you became disabled?
It may be analogous to thinking, would there be any financial difficulties if you retired tomorrow? Yes, there could be differences in spending if you had a disability versus retired without disability, but that may be the first order baseline to think about when considering disability insurance.
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Likely reasons for the cost of disability insurance:
Disability insurance may also be subject to more adverse selection (for individual policies) and fraud, compared to life insurance.
Also, the statistical healthiness of youth is at least somewhat offset by the longer term of payout if one becomes disabled at a young age.
Many many people become disabled. I used to know stats, but I’ve been retired too long. Many fewer people actually die.
The issue with disability is that it may impact the spouse/partner from working fulltime as he/she used to, so there’s a double whammy on the family’s income. In addition, the disabled person may have expenses that are not covered by medical insurance – eg, installing ramps, fixing doorways, etc.
Disability really messes with your financial plan.
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Disability insurance is set up as ‘income replacement’. After 90 days; however what if one is between jobs - then the payout is only if fully disabled (if someone is a stay at home parent for a while, insurance wants to deny/scrutinize). They get ridiculous - like mine did with the cancer. Their in house physician – not a board certified oncologist; a MD who never saw me, just the disability form my physician completed – didn’t want to approve my disability because they didn’t want to pay out. No fraud. I paid for the insurance and they didn’t want to pay out a legitimate claim.
Once I was no longer at least 80% disabled, I didn’t get the full benefit of what insurance I paid for (I actually overpaid for the insurance benefit I received during disability because I didn’t receive partial benefits w/o income). But key was that I survived and did not move onto stage IV cancer and death.
Having company paid short term and long term disability insurance is a wonderful benefit to have. I believed I would always be in a career job; the disability insurance was based on the income I had when I took out the policy.
I know physician offices and law offices often cannot get quoted for company ST and LT disability policies due to claims/fraud.
However, if one is permanently disabled, one would also receive SS disability benefits and qualify for Medicare Disability if not covered by spouse’s health insurance. Due to so many fraudulently getting MC Disability, they now make it super hard for legitimate claims to go through w/o a lot of difficulty and law help.
One always has to have ‘emergency funds’ available for unfortunate circumstances.
Both my DD’s jobs have disability insurance in place with employer. I agree it is something to evaluate when there are dependents/children to raise.
This. So much this.
Dh became completely,irreparably, suddenly disabled from his executive job at 51.
LT disability and LTC insurance combined has made it possible for me to essentially work part time, instead of not being able to work at all. Without them, the financial devastation … I can’t imagine. The emotional devastation was bad enough. We still have significant in home care costs and other medical expenses - disability is expensive.
Of the two, term life v LT disability insurance, I would choose LT disability every time, twice on Sunday. It isn’t that expensive and if available through your employer doesn’t require an exam.
My recollection is that disability is orders of magnitude more likely than death.
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Before retirement, my employer provided 50% long term disability insurance. I paid a small amount monthly to increase to 66%, I think my husband had similar coverage.
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I’d disagree on the cost. I’m self-employed and pay about 10 times more for disability than for a similar amount of term life coverage or long term care insurance. Group policies get dramatically better rates than individuals. And long term care insurance is tax deductible whereas disability is not (if you want post tax benefits).
Since disability only pays out until retirement age, it’s a diminishing benefit that we will probably drop in a few years once the kids are through college.
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I hear you. I am self-employed and pay for my own insurance. I carry term and LT disability. Been paying for them for years.
It loses its importance the older I get, but with how expensive our budget is, I haven’t figured out when to stop my insurance. I figure we have to get through college and recalibrate. 5 years is a long time. Things change.
The LTC insurance payments run out in about 8 years, and his disability runs out at retirement age. We have to be very confident in our financial well-being after both of those end before I consider giving up the insurance. Plus I am superstitious. If I give it up, that’s when we will need it.
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Just make sure you know all of the fine print in all the LT policies as well as your employer’s. We pay for 50% of our ST/LT policy premiums. A few years ago I dropped the LT. It pays 40% of your salary after 90 days. But, if you’re still on the payroll, if you still are using sick time (some people have a year banked), it won’t pay anything. You can use leave without pay for that 40% and it will pay, but then you have to pay the employer’s portion of all your benefits which is roughly $1000/month.
If you retire on disability, our employer’s policy -which is not well advertised- is that for your pension you get to double your years of service and drop the age requirement. Your salary/pension is lower than if you stayed for 30 years, but still - not bad. And our pensions are roughly 40% of our salary. So once you hit 15 years of service, then the LT disability won’t pay anything. But they won’t tell you this unless you specifically ask the question in the open enrollment meetings. I was paying for nothing for several years. I only found out about the disability retirement because my underling had to retire on disability.
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