Disability Disagreement

[MoneyMoth]

My wife and I have been embroiled in this battle for close to a decade now.

She thinks that it is foolish to continue paying the premiums on a disability insurance plan that we will (hopefully) never need.

I think this is one of the rare times where I am 100% correct and that nobody pays into an insurance policy hoping to use it. But we need it.

Perhaps the forum can play the role of tiebreaker?

My wife states that given our lifestyle (e.g. I am very boring) and our ability to cut back to the bone, disability insurance is unnecessary. This is a purely financial argument for her as she does not want to continue paying $400/month in premiums. Her argument is that if god forbid I were to become disabled, we would move in with her parents (who would serve as caretakers), eliminate the remaining debt (see house below), use the remainder of our nest egg ($2M+) as financial support, and she would return to work (she is a physician but is not currently working).

I, on the other hand, am deeply uncomfortable with canceling our disability insurance on the eve of moving into a new home with a mortgage of $2M. Yes, I don’t scuba dive, or bungee jump, or hang glide. But I drive an hour to work daily as part of my commute. And I’m working with patients in a state with a rapidly climbing COVID-19 infection count. We have 2 kids both going to private school. We have no other debt. I would prefer to have the mortgage paid off before cancelling my disability insurance policy (which I estimate should be done in < 5 years). My wife states she would have no problems selling the new house (even at slight loss) and pulling the kids (they are both very young) out of school in the event catastrophe strikes which is why the disability insurance is unnecessary.

Is my wife obviously wrong as I believe she is?

Or is there a weakness to my argument?

Thanks in advance

[okayplayer]

I am keeping mine until FI (by the 3.5-4% rule).

I do think there is a point of diminishing returns when you are within 5 years or so of the age in which the policy no longer provides benefits. I would have a low threshold to drop the policy then, even if not quite FI.

[Cubicle]

I like the thought of keeping the policy. For $4,800 per year it buys a lot of piece of mind. Show her everything else that you spend >$4,800 yearly on & compare what's more useful.

[MoneyMoth]

I am keeping mine until FI (by the 3.5-4% rule).

I do think there is a point of diminishing returns when you are within 5 years or so of the age in which the policy no longer provides benefits. I would have a low threshold to drop the policy then, even if not quite FI.

We were FI with our previous paid off home. My wife has no doubt she can throttle the spending (by selling the new home) like a light switch. So in her mind, we are still FI.

Just thinking of the new home, and the mortgage, and the property tax, and the maintenance gives me heartburn. I think it’s a terrible time to consider canceling the disability policy.

[billy]

If you're FI you don't need it by definition. If you're not, keep it. Its not the "we'll move in with inlaws, one person works" that you're insuring against, its the long term disability that also forces the caretaker to be unable to maintain a full time job that you are insuring against- think cancer with multiple complications and recurrences. Add the childcare/daycare required, plus the stay at home spouse needing to re-enter the workforce while explaining to the new job that she wont take call, and may need days off to accompany the spouse to appointment/treatments that you are insuring against. FMLA doesnt kick in until shes worked at her new job for a year, so if you get disabled she wouldn't have protection if she started working to support you but needed days off to care for you. My wife has a very rare cancer, lets just say I've seen the reason to have insurance despite the extremely low odds of needing to use it. For under 5k a year I wish I had her get disability insurance. If the roles were reversed (since im the higher earner) we would've been crushed financially if she was the caregiver and I didn't have disability insurance. 4.8k /year wont make or break you. In the rare event you need it, not having disability insurance on the earner (you) might.

[billy]

also your age matters. If you were 60, my answer would differ from above

[G]

We were FI with our previous paid off home. My wife has no doubt she can throttle the spending (by selling the new home) like a light switch. So in her mind, we are still FI.

Just thinking of the new home, and the mortgage, and the property tax, and the maintenance gives me heartburn. I think it’s a terrible time to consider canceling the disability policy.

are there any riders that you can cancel? do you have group DI that you can cancel?

5k/yr sounds like a great deal if the alternative is selling house, moving in with parents (?!), and your wife finding a new job with the snap of her fingers.

you are right, but perhaps you can assuage her with cancelling some stuff or setting a numerical goal.

I dropped some coverage when house paid off, more when I had enough net egg to drop to part time; I still hold a little bit, my thought was that it could pay for a home health nurse. Will drop it when I hit fatFIRE.

[Tim]

Two kids plus two adults don’t just “move in” with the parents. The DI is to cover the loss of income and minimize the disruption. The situation can be you are disabled but perfectly fine to lead a long life, just can’t do your job. You want as normal as possible life, just no income. Kids, college, retirement savings, maybe she goes back part time. That is your desire for disruption, not the catastrophic bare bones approach she is saying she would do. Maybe not sell the house. Maybe not move in with the parents. Maybe not pull the kids from school.
The DI is your insurance not placing 100% burden on the in-laws, her, and your kids. Seems like it’s worth $50k for 10 years to you. I think next time you see one of the “Wounded Warrior” Charity commercials simply say “What if the was me”. It seems worth it to you. Not a family argument, she might agree to a family decision. It’s not that much compared to the guilt you would feel. Your motive is to insure the burden placed on others.
Hope you never need it.

[White.Beard.Doc]

It seems like the difference in opinion between you and your spouse is based on what life would entail if you became disabled. Sometimes decisions are more about feelings and less about finances, although it looks like a purely financial decision.

The mention above of you getting cancer, needing your spouse to help you manage your illness and your treatment, and then at the same time planning to sell the house, move in with relatives, your spouse going back to work, etc. That sounds like a disaster of a life and maximal stress for everyone.

If you can afford to live in a 2M house, you can afford the disability payments.

I suggest you go back to your spouse and have a discussion about feelings, not finances. "Dear, my peace of mind has value to me. Please understand how I feel. If I were to get cancer and I needed your support and attention to undergo treatment, I want to know that you can be there for me and not focused on moving, selling the house, and finding a job. This disability insurance will allow me to sleep well at night. Is the other scenario where we completely change our housing and living situation possible? Of course it is, but just thinking about it makes me fearful, it makes me feel like our lives are unstable, at risk. Can you understand how I feel worried in my gut with that scenario of massive change that you envision? What is the value of my peace of mind?"

[CordMcNally]

Do her parents know that they'd become your caretakers? If not, tell them and they'll probably make the decision for you.

[Tim]

Do her parents know that they'd become your caretakers? If not, tell them and they'll probably make the decision for you.

Caretaker is reward/burden responsibility. There is no doubt it limits the freedom of choice due to additional responsibilities. Just balance a potential caregiver responsibility for taking care of her parents. Which one comes first? Them or you or one of the kids.? Hope for the best, plan for the worst.

[FIREshrink]

I'm 46 and FI and keep mine. It's a karma thing. My MIL is a fine person but if moving in with her is my disability plan I might rather be dead.

[endo4jc]

Why is your physician spouse not working?

[Anne]

Agree with above stating to keep it. So many reasons. Being disabled enough not to work but being able bodied enough to maintain much the rest of your lifestyle. Being catastrophically disabled and needing a caretaker—do you really want your MIL/FIL assisting you with toileting? The difficulty of your wife finding work as a physician (or non-physician work she enjoys) after a long hiatus. Risk of divorce after becoming disabled (spoiler alert: it’s high). Your peace of mind being worth the price.

But forum as tiebreaker only works if spouse agreed to that approach. Did she?

[jfoxcpacfp]

I must say, I was leaning toward your wife until you said "$2M mortgage". I believe statistics will say that you have a much higher chance of becoming disabled before age 65 than you do of dying. Anne's factoid is helpful - if you divorced, would her parents still want to be your caretakers?