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Disability insurance advice

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  • Disability insurance advice

    I'm just dipping my feet in the water on this for the first time, which is pretty shameful being that I'm 6 years into practice and have no disability coverage.

    But I do understand the urgency and am hoping to get coverage started this week.

    I could not find answers to my questions using the thread search, I apologize if it's in there and been asked a million times (feel free to link a prior thread if you can find one).

    I would love to hear if any of my physician colleagues have strong preferences for any one disability insurance company over another. I'm leaning towards quotes from either Guardian (but confused on whether premium is worth the money over select) or Ohio National.

    My gross salary is around $800k. Am I irresponsible to just get $20k/month disability insurance? I do not own a home, my student loans are paid off and I have about $100k invested with plans to be at $1 million in 3 years and $2 million in 5 years.

    Would appreciate any advice.

    Also, are quotes likely to be the same from a given company independent of the agent who provides the quote? Or is there variability between agents if you shop around?

  • #2
    Get as much as you can and drop it after 5 years if you are where you plan to be. Not really such a huge difference between the top companies. Guardian has been doing this longer than OhN.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      You're replacing lost income post-tax.  If you can live off of $240,000 post-tax a year, or p much $300,000 pre-tax a year (give or take), then $20k/mo *could* be fine.

      Consider using an agent to comparison-shop across insurers to get the best policy for the best price.


      • #4
        Why get the maximum, Johanna?

        Insurance is a losing investment.  Why buy more than is needed to prevent catastrophe?  If the OP is 35, took the maximum policy, and were disabled next month, he would be looking at over $14 million ($800k *60%= $480k*30 years) in tax-free insurance payments between now and age 65, potentially more depending on what riders his policy had.  He almost certainly doesn't need that much.  So, in the best case, he paid extra in premiums to get benefits that he didn't really need, and in the worst (and far more likely) case, he paid much more than he needed in premiums to insure against a catastrophe that didn't happen. It seems to me the goal is to pay as little in premiums as is necessary to sustain him if he's disabled.  But, I seldom disagree with you, so I'd love to hear your reasoning.

        To the OP- I would say run your own numbers for what you'd need, recognizing that most policies would pay until age 65, far after you may be financially independent.  My DI plan would replace less than half of my current pre-tax income.  Yet, if I were disabled tomorrow, my lifetime DI payout would be much greater than my anticipated remaining lifetime earnings (I'm not planning on working until 65).  I really doubt you need anything close to the maximum policy you'll be offered.


        • #5

          Why get the maximum, Johanna?
          Click to expand...

          My presumption was that $240k was the maximum offered. If he has been offered a policy for $40k/mo., I'd backpedal a bit. He's living on $800k, including savings, and will probably be FI (or close to it) in 5 years. Should he become disabled during that period, he would be living on 30% of his salary, tax-free, which equates to around $650k. Given that he's earning $800k, he should be able to reach his goals in only a few years more. With a $20k/mo policy, my guess was that there is relatively little savings to be had by reducing to, say $15k/yr, maybe a thousand or two, and I recommended it for 5 years only. If he hasn't reached his goals in 5 years, he can re-evaluate.

          At an $800k salary with no 2nd income, it just doesn't seem to be worth it to me to take a risk while he can be underwritten for that much. He can have the policy written to be able to reduce the coverage later if he wants.

          So, if he can actually get $40k/mo, I agree that is probably more than he needs. Perhaps the OP can weigh in with more info.
          Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


          • #6
            The discussion about how much OP needs in IDI needs to be centered around how much OP needs monthly to meet OP's goals. I'd worry that 6 years out making 800k/yr and having saved only 100k means OP is living on a very high percentage of OP's income and would need that replaced if disabled. Then again, I don't know if income has always been that high, what OP spent money on in those first 6 years (e.g. A massive student loan burden?), etc. if OP got disabled next month and only had 20k/mo benefit post tax, would that completely derail OP's financial/life plan? Seems to me like it would based on OP's stated savings goals.Better to over-insure at least for a few years and re-evaluate. Also easier to cut down on benefits than increase them in the future.