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too much disability?

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  • too much disability?

    Hello all, looking for opinions on disability. I purchased my disability policy out of residency that had 7500 worth of coverage through the Standard. I did a two year fellowship and after that I increased my coverage to 15K/month for 500/mo. This is own occupation, 90 day wait period. I just switched jobs from academic to private practice and the group policy we have is basically the exact same other than a 180 day wait period and through Lincoln Financial. I have to enroll in this plan.

    This all seems like a lot of coverage. I thought to myself I could save that 500/mo I'm currently paying for my individual policy but I am concerned at some point we could drop that group policy and then I would have nothing or would need get re-covered at a much high rate (I would be a lot older). I am 2 years out of training and the only debt we have is our home and make about 400K/yr so the premiums is very affordable for us right now. My initial thought is to keep the individual policy but wanted to get opinions, thanks!

  • #2
    It's always smart to have your own individual policy since that one will stay will you no matter what and your group policy stays with the job. Once you start building your investments then you can look at how much you truly need.


    • #3
      Individual disability policies are typically far superior to group plans. Group plans typically are not own occupation and the pay out is decreased if you receive social security disability and from individual plans so the total you get from the group plan is the max subtracted from your individual plans and social security.

      You never know if you will get some diagnosis that will limit or exclude you from individual polices and if you then want or have to change jobs then you may be stuck without a policy.

      I would keep it for now, reassess in the future.


      • #4
        I would not get rid of the individual policy. I’m slightly underinsured and can’t increase my policy amount because of mild chronic condition. It has never affected work, but my agent has told me in so few words I will never got more insurance without significant riders. I believe 6k a year is a small price to pay for that security.


        • #5
          I am in a similar situation - had a policy purchased as a resident that doesn't cover my entire attending salary, but with the policy provided by employer am "over insured." For the reasons other posters indicated I am keeping my individual. It has the option to increase coverage and is "own occupation," 90 day elimination. I am also in the same situation with life insurance: my own policy is just enough but with employer's coverage it is more than enough. Like above poster said- piece of mind is worth it even though I could save by reducing my individual coverage (which would require going through the steps of getting a new policy, and doing new health screening etc...).


          • #6
            Your thought process is sound. As noted, your practice could drop the group policy or you may take another job in the future. Obtaining another individual policy if insurable will almost certainly cost more. Once you have an individual own occupation policy you should have a really good reason to cancel it. I obtained the maximum disability coverage I could get in the late 1990s, kept it for 20+ years and just recently cancelled it a couple of years ago. While I’ve been FI for a while now and could have cancelled it a few years earlier, I have no regrets. It’s INSURANCE, better to have it and not need it than not have it and want it.

            Although you didn’t ask, is the group policy premium paid pre- or after-tax? Disability payments are taxable if paid pre-tax. If you have the option, consider paying after-tax.