Disability insurance - two higher earner household

[medicoFIRE]

So how many of you out there that just do group disability with work and forgo the separate individual portable policy? I would absolutely have it if I was sole breadwinner but wife also has high income and we both have employer group DI. I’m not sure it makes sense in our situation. I’m not looking for peace of mind either because I don’t think that way (right or wrong).

I just don’t think it’s worth the cost. Our group policies will cover anything catastrophic. I understand if I switch jobs that I wouldn’t have it, but I would pick another job that offered group if I happened to switch.

We are early in career so low net worth. Definitely not FI. I understand the fear based reasoning for buying it, but at what point is group disability enough? The group is 60% replacement up to 10k a month for both of us free through our jobs. My thought process is more about protecting from catastrophic issues like paraplegia and the like. Thoughts?

[Scott at MD Financial Services]

You should read the policy and make sure you are comfortable with all of the triggers to qualify for benefits and to stay on benefits. The big things to read are:
What quantifies as a day in the elimination period.
The full definition of disability.
The offsets/benefit reductions to the benefit payout.
Taxation.
Hope that helps.

[Codfish]

Relevant post here-

https://www.whitecoatinvestor.com/disability-insurance-for-two-doctor-couples/

[medicoFIRE]

Thanks. To be honest never really gave it much thought. I’m only thinking about it now because a couple of colleagues were talking about it recently. I just figured group would be enough in a dual high income household. Ultimately I suppose it’s up to how much each person is willing to roll the dice. If I didn’t have group disability I would probably buy it on my own.

[Tim]

“Our group policies will cover anything catastrophic.”
Agree that the fear based reasoning is not the way to go. What will change is one (or two) will be involuntarily retired at an early age.
In the case of a catastrophic event, you really need to put a pencil to it . Your cost of living structure will drastically change. I am talking real costs due to needs. Everything from housing to home assistance you won’t find things cheap and you basically are potentially 24 hr availability depending on how your schedule works.
Add to the costs taxes and saving for retirement for the disabled individual and that 60% up to $10k shrinks a lot. Consider the potential of kids as well.
Things like this seem remote. Two physicians can afford it. One physician with a catastrophic disabled partner probably has not really comprehended the costs and impact on the standard of living. You don’t insure out of fear, you insure based on need.
Can you cover it? If not, get insurance. LTDI is a continuing event. Not a one time event.
No one comes running with scooters, hospital beds and home assistance. You are talking catastrophic change and a huge void, the working partner can’t be the caregiver.

Put a pencil to it. Work with numbers.

[nephron]

I couldn't get disability insurance on myself due to medical reasons. My wife has disability insurance through NWM that I helped her purchase after we became attendings that I have been trying to convince her to drop. I think that a lot of 2 physician couples could go without disability insurance. It is obviously a risk, but probably only for the first 5-10 years or so. You can obviously survive on one physician's income with some cuts in the budget. I think that most will have enough with 5-10 of maxing out your retirement savings in the event that you become disabled if you can rely on the other ones income. If you look at average risks of disability in the general population, you are going to come up with an exaggerated risk of disability for physicians as well. It's well documented that a fair number of people who file for disability just have difficulty securing employment rather then actually being disabled (eg correlation between unemployment claims and disability).

[childay]

Consider risk of divorce

[Notsobad]

Disability is easier to get earlier, and group disability can stack on top of it. I favor buying more earlier and then reassess every 5 years.

I have there disability policies. ( own specialty) I have group disability on top of that though the practice.

I may drop the private policies one by one, but honestly it is a small amount in relation to annual income. Probably don’t need it anyone but not emotionally ready to drop it.

[nephron]

Consider risk of divorce

risk of divorce >>> risk of disability. They should create divorce insurance, although the premium would be too high. It'd be like eye glass insurance, only people who needed it would purchase it hence negating the idea of it being an "insurance" product. Insurance isn't meant for things where the risk is 50/50.

[Ethan Abramowitz]

I have yet to work with a client that complained about being well insured at the time of disability. Conversely, I have worked with too many physicians over the years that declined to obtain IDI believing their employer LTD coverage was sufficient. Scott’s post above outlines a number of the issues that we see in LTD products. I would also add:
-The definition of “Covered Monthly Earnings”. This is used to establish your monthly benefit. Is it limited to base salary, or does it include total compensation?
- Does the policy contain exclusions or limitations for specific medical conditions?

I would suggest carefully reviewing your LTD coverage to ensure your subjective understanding of the coverage is consistent with the actual terms and definitions.

[Hoopoe]

I'm an ER doctor and my wife is a private practice dentist. We have a paid off home, loans all paid off, limited fixed expenses and are about 30% below our FI number (easily Coast FI) so I have thought about this a lot.

I am the higher earner so was heavily insured with group and private DI out of residency carrying around 13k of individual coverage and 5k of group coverage. My wife just had her employer DI covering 60% of income. We did the whole live like a resident thing now approaching 5 years and so no longer need DI coverage to cover retirement savings, just potential living expenses which have also gone down. My wife changed jobs a few months ago and and new job didn't offer DI as she is now an independent contractor. We didn't go with the extra expense of private coverage for her so I'm the only one covered now. I also dropped my individual DI down to around 6k just to have something and will likely carry this until we reach full FI number in a few years.

As you are early career I think you should have some sort of backstop, such as a $5k/mo policy. I might not like it, but I could live on that if there was an issue with group policy or some other coverage issue/divorce etc. On a dual physician salary you could easily afford that. It also falls into the "insure catastrophe" camp without being over the top. Alternatively, you should certainly look into a graded policy such as what Guardian offers. They are generally expensive but the policy starts out much cheaper than competitors and gets more expensive every year until costing as much as a fixed policy at 12 years and same total financial outlay at around 20 years (minus the time value of money). With a brisk savings rate you can be both well insured and drop the policy in 5-10 years without being silly this way.

[medicoFIRE]

I’m looking for catastrophic coverage. For example, if I am paraplegic or something. Or I get go blind in both eyes. Or if I am stroked out and have a peg tube and tracheostomy tube. Why would group disability not cover something like that? Someone please tell me a story of an injury like the above that was not covered by group disability. I understand that if I get some recalcitrant back pain or something I may not get that covered. I just don’t understand why the group disability would not cover those scenarios above. 10k post tax would be plenty to cover what we need and my wife would continue to work to support other expenses.

[medicoFIRE]

I guess at the end of the day, what I am asking for - specific examples when group disability failed someone. Like an example of something that was denied for group disability that would have otherwise been covered. Horror stories are welcome. It will take a lot to scare me so please don’t pull any punches.

[Scott at MD Financial Services]

What you are asking for is an extremely large spread of issues which have been noted above by several of us. What you should do is read your own policy (not the summary), pay very close to the smallest detail and then make sure you are comfortable with that. If you comfortable with it then great, if not then do something about it. Nobody is here to scare you into it.

[medicoFIRE]

It says something about plan being covertible or something. How do these work if you actually get disabled? Lets say you are totally disabled. Then Let’s say you are no longer employed for obvious reasons- being disabled. Do you still have to pay the premiums monthing to receive your disability? But that was covered by the employer… so how much do you pay if you are disabled? Same as the amount the employer paid for it?