We’re in our mid 30s and we have no kids. We also have relatively little debt (compared to our current income), but I still worry about “what happens if one of us loses our job?”. Well we have enough in savings to hold us off for well over a year of unemployment for one of us, not even counting unemployment benefits, so that’s less of a concern.
But something else that has been bugging me is “What happens if one of us is incapacitated for a long period of time?”.
While some, or many, of us have the benefit of short- and long-term disability through our employers for nearly pennies on the dollar, some of us also have to consider what happens if/when we leave that job. Also, many of us aren’t aware that your disability plan may have a “social security offset”. That means that while you might think you’re getting, say, $4000 a month after 30 days of waiting, in reality, your company looks at what you’ll get from social security, then gives you the difference. That might only be closer to $1000-$2000. Can you survive on that until SS kicks in?
One of the problems is that applying for, getting approved for and finally receiving social security may take up to a year, and that’s what got me thinking that I need to check my own employer’s disability plan!. I also need to check my wife’s, but since I’m the main breadwinner, if I go down for a long time, it’ll be much harder for us, assuming we don’t have to zap our savings away with some big medical or other bills.
Plan Portability and Other Providers
Now I tend to stay away from talking about 3 subjects (taxes, investing and insurance) because I just don’t know enough to be a proper advisor, and all three require some type of certification, which I don’t have. However, this part isn’t difficult to understand, so I’m comfortable with discussing it.
So you’ve been with your company 5, 10 or even more years. But you find a better opportunity elsewhere. Well, consider that now you’re older, so some of your benefits, mainly those dealing with life and disability insurance, will be more expensive because they’re age-based. They’re still cheap and you should take advantage of the offering and pay for them, but consider what happens if and when you don’t have THAT job anymore. Then you’re older still and costs only go up.
So what are your options? I would advise researching third-party insurance providers to look at plans that cover you regardless of your employer. The plans are usually based on 1) age and 2) how much you make (or need to get each month in the case of disability). Health also plays a factor, but we’ll keep it simple with the first two.
Who are these providers? Well, the one that advertises the most, or sticks in my head, is the one with the lizard (this isn’t a sponsored post, so I’ll leave it up to you to figure that one out). But there are many, many providers like some banking institutions that have investment arms. And even other non-profit groups that you may already be a member of.
Because there are so many plan options and variations that depend on you, your age and health, your income needs, family size, assets and more, I’ll cut it short and just say you need to think about the long term. Also, it’s much cheaper to buy these plans when you’re young (think 20s and 30s). However, that’s usually the time when you’re thinking least about disability and life insurance. It’s only when you really start making money, get a career and probably start a family that you consider income protection and estate planning (another topic for another day).
So while I avail myself of my employer’s life insurance benefit and buy up as much as I can, I know that, with my history, I won’t be with them forever. That’s why I’ve bought life insurance outside my employer because it stays with me wherever I go, and I’ve locked in the rate (I’ve bought in my 20s and then again in my 30s and I’ve already seen the rate differences). Now I’m going to look into what some providers call “income protection” and then also “umbrella insurance” to cover what all my other plans don’t cover (again, another topic for another day).
How about you? Are you the type who thinks you’re fine with what your employer offers? Do you also have a family to consider? Have you personally experienced the sting of high rates as you age or have had medical problems?
Brought to you courtesy of Clever Dude