Announcement

Collapse
No announcement yet.

employer vs own disability insurance

Collapse
X
Collapse
First Prev Next Last
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • employer vs own disability insurance

    I have had my own LT disability insurance for a few years now (my prior employer didn't offer any decent LTD insurance). I recently started a new job and my new employer offers me a very good LT disability insurance (comparable if not better than my own), with much less cost for me. Would it be reasonable to just drop my personal policy and take my current employer insurance? It would save me about $400/month. Would appreciate any advice.

  • #2
    I wouldn't as your personal policy follows you wherever you go and your employer policy stays with your employer. If you drop your personal policy and separate from your employer after a period of time, you'll be left without DI and then you'll have to get your own policy again at likely a much higher premium. Having your own policy is great insurance (pun intended) to have.

    Comment


    • #3
      Originally posted by CordMcNally View Post
      I wouldn't as your personal policy follows you wherever you go and your employer policy stays with your employer. If you drop your personal policy and separate from your employer after a period of time, you'll be left without DI and then you'll have to get your own policy again at likely a much higher premium. Having your own policy is great insurance (pun intended) to have.
      Would premium be higher because I would be older? I thought disability in that sense was different from life insurance. I guess I'd have to do the math, obviously it would be too many assumptions (how long I would be with current employer, etc...). But if I can save about 5k/year for a few years, then hypothetically I leave my current employer to another one which doesn't offer good LTD, then the increase in premium if I obtain my own LTD would have be way higher than now in order to justify keeping it for all this time.

      Comment


      • #4
        Originally posted by soundsystem View Post

        Would premium be higher because I would be older? I thought disability in that sense was different from life insurance. I guess I'd have to do the math, obviously it would be too many assumptions (how long I would be with current employer, etc...). But if I can save about 5k/year for a few years, then hypothetically I leave my current employer to another one which doesn't offer good LTD, then the increase in premium if I obtain my own LTD would have be way higher than now in order to justify keeping it for all this time.
        I don't think it's necessarily age, per say, but it's probably a fair assumption that you aren't getting healthier as you get older. Health is a big driver of premium price. I'm sure a DI agent could explain all the factors that goes into a premium much better than I can. With insurance, we also think about the worst that could happen. Something could potentially happen where you don't qualify for disability but prevents you from obtaining your own policy. Now you're stuck at your current job or looking for jobs where you could be added onto their group policy. Life happens. For me, having my own DI is important as I know I'm covered for as long as I need it regardless of what happens.

        Comment


        • #5
          Be sure you are comparing apples to apples. Your personal LT DI premium is paid aftertax so if you have to use it, benefits are tax-free. If you make a claim on employer provided DI, the benefits are taxed. I agree with CordMcNally, keep your current policy. Assuming you can get another Individual DI policy in the future if necessary is a leap of faith. Besides being older, what if your health changes? There are several threads on this forum of members who can’t get reasonably priced DI for a variety of medical reasons.

          Comment


          • #6
            Originally posted by GasFIRE View Post
            Be sure you are comparing apples to apples. Your personal LT DI premium is paid aftertax so if you have to use it, benefits are tax-free. If you make a claim on employer provided DI, the benefits are taxed. I agree with CordMcNally, keep your current policy. Assuming you can get another Individual DI policy in the future if necessary is a leap of faith. Besides being older, what if your health changes? There are several threads on this forum of members who can’t get reasonably priced DI for a variety of medical reasons.
            I did compare apples to apples and the benefits are also tax-free with the employer provided DI (it's paid after tax).

            I get the consensus is to keep my own policy. My only point was just trying to understand how much more expensive it would get for me if I stop my own policy now and get a new one let's say in 5 years if I leave my employer. I guess there are too many assumptions on this equation so it's hard to come up with a formula.

            Comment


            • #7
              "I did compare apples to apples"
              Are you sure?
              • What happens if the employer changes DI carriers and contracts?
              • Typically, the employer policy has some catches in determining the amount of DI income.
              • I think by necessity DI policies will have differences. Actuarially, the loses are statistically base on the individuals more so than the number of contracts. The business model is loss prediction based, not volume. Of course your employer could subsidize it, but that would be taxable income.
              Sometimes even one word completely changes the interpretation of the coverage. My suggestion would see if you can get both policies reviewed by a good DI Vendor.
              I know Scott has and hourly fee for consulting. I guess it comes down to is a Google Doc equivalent to a Google DI Insurance Pro. You could seriously get a current quote and find out what a new policy would cost. If you were serious, they might compare the policies for free. Things may have change since your original that would also be a problem in the future. Long way around of suggesting get a DI specialist to review the contracts. Probably worth the time and money.

              Comment


              • #8
                Originally posted by soundsystem View Post
                I have had my own LT disability insurance for a few years now (my prior employer didn't offer any decent LTD insurance). I recently started a new job and my new employer offers me a very good LT disability insurance (comparable if not better than my own), with much less cost for me. Would it be reasonable to just drop my personal policy and take my current employer insurance? It would save me about $400/month. Would appreciate any advice.
                A few things you will want to look at on that employer policy is if it is a 'group' policy or if they are linking together 'individual' policies, that will make a huge difference. Employer policies typically have the following issues that make them less attractive:
                They can be changed by the employer or carrier and you as the 'certificate' holder have no say in it.
                99% are not true own specialty definition of disability, meaning that upon doing any post disability work they will reduce your benefit payout and some even have a 24 months clause triggering you to have to do anything they think is reasonable thus they get to control you.
                They all have benefit offsets which reduce your payment from the carrier because you are receiving money from things like workman's comp, social security benefits (payable to you, your spouse, and kids).
                Some have language in the elimination period of "total" and or "continuous", which can be problematic to ever qualify for a claim.
                Upon returning to work what is the provision for "re-establishing your employment position". Some of these will say once you are back working full time, which to some carriers might mean 30 hours or so, that is a real problem if you were working 50-60 hours before a claim because you may be back working 'full time' but have 1/2 the income.

                If it is an individual policy then it really depends on the language and features you select in the policy as to how it forces the carrier to perform at claim time.
                If we can help further just let me know.

                Comment


                • #9
                  Very helpful comments here. Thanks everyone.

                  Comment

                  Working...
                  X