Comments on: Why You Need Disability Insurance

By: Borrowing Money is the Same As Buying Risk

Borrowing Money is the Same As Buying Risk — Wed, 13 Oct 2010 20:00:39 +0000

[...] What if I lose my job in a year and can no longer make payments? What if I decide I’d like to downsize my lifestyle and take a lower paying job doing something I love? What if I got sick and had to live on long-term disability? [...]

By: stamperitis

stamperitis — Wed, 17 Mar 2010 18:16:15 +0000

We don’t have disability insurance due to the over $465/month it would cost my husband and that would be for the crappy type insurance! His job is physical and around heavy equipment and poisonous fumes. We can’t afford it and his employer doesn’t pay it. Watching the news we know that you don’t get anything from workman’s compensation either! For those that say what if the worst happens? Well, I guess first to go would be the RRSPs and then the house.

By: Lillie

Lillie — Mon, 15 Mar 2010 13:55:33 +0000

My company offers disability coverage for its employees. Fortunate for me, I haven’t had to use it but I do know of a younger employee who did. I will certainly raise more questions about the benefits for our current policy. Too, for future reference, I will definitely keep in mind the difference between the “own” and “any” since that certainly makes a big difference.

By: Bill in NC

Bill in NC — Sat, 13 Mar 2010 20:38:12 +0000

As Emily noted, you’ll probably have to fight any insurance company in court to get disability benefits paid.

The NY Times has had recent columns on disability insurance, with one commenter noting you’ll easily spend a couple hundred hours of attorney time on getting disability benefits.

By: Justin Lukasavige

Justin Lukasavige — Sat, 13 Mar 2010 04:06:26 +0000

Wow, very informative post. I’ve encountered so many people who have no clue what disability insurance even is.

By: beth

beth — Sat, 13 Mar 2010 03:39:42 +0000

I agree with Emily. I seriously researched disability insurance a few years ago. I wound up not buying any. It would have been about 350/month for what I would call a “Cadillac” plan from a company that was top-notch. The problem is that my work is sedentary (computer stuff) so the risk of my becoming disabled enough not to do my work was relatively small.

By: Robert

Robert — Fri, 12 Mar 2010 23:00:55 +0000

Most employers offer some form of disability insurance, but it’s rarely adequate.

By: Emily

Emily — Fri, 12 Mar 2010 20:31:27 +0000

@Adam: Right, I realize there is some fraud in the insurance world. But at times there is also fraud on the part of the insurer trying to wean somebody off of benefits. I work for an ERISA litigation firm. The firm represents people who have been denied benefits (whether health insurance or disability insurance benefits, among others). It is disheartening to see the tricks insurance companies play on people who truly are disabled and whose doctors are unequivocal in their support of disability
I’m young (24) and I recognize that were I to become disabled in the next few years because of some unfortunate circumstance there is no way I would have enough money in the bank or investments to carry me through the rest of my life. Despite this knowledge, I’m still grappling with the question of whether buying disability insurance is worth it. My personal thoughts for now (independent of my ultimate decision on whether to buy insurance) is that it never makes sense to just rely on disability insurance or SS (or even both). Whatever I decide to do I think I will try to put an action plan in place that has a diverse set of options to carry me through in the event that one option (ie. insurance benefits) doesn’t pan out. That, of course, is somewhat easier said than done.

By: Frugal Dad

Frugal Dad — Fri, 12 Mar 2010 19:51:47 +0000

@Emily: You bring up good points. In fact, my mom suffered an aneurysm and stroke at 53, a year before she passed away, and was declared “totally and permanently” disabled by three physicians (primary, neurosurgeon and rehabilitiation doctor). We still had to submit countless claims, forms, etc. and wait the six-month waiting period (she only had long-term disability).

However (and this will make me sound like the devil’s advocate), there is a lot of fraud in the disability insurance world, so companies must do their due dilligence to only pay benefits to those who really need them. That said, it does seem as though there is little regard for non-physical, or non-obvious, I should say, disabilities such as mental conditions and other illnesses.

Oh, and #3 you listed above was a real kicker for me. When Mom was FINALLY approved for SSI disability, her insurance benefit was slashed by the same amount, effectively canceling the SSI benefit.

By: Emily

Emily — Fri, 12 Mar 2010 19:45:24 +0000

Adam,
While I agree with you that it is important for people to plan ahead in case of a disability, encouraging people to buy disability insurance with so little information is a mistake. Insurance companies are ultimately out to make a profit and they don’t usually pay benefits without a fight. See my post http://musingsofasinglegal.blogspot.com/2010/02/you-cant-beat-system.html about frustrations with insurance. I’m not saying people shouldn’t purchase disability insurance (or participate in their employer sponsored plan) but there are some other important considerations you left out. You may be better off socking away a lot of money into a low-risk investment and increasing your emergency fund.
1.) Just because you have disability insurance does not mean you will actually receive benefits if you become disabled. This is especially true if your disability stems from a condition that is harder to prove (ie. Chronic Fatigue Syndrome or Fibromyalgia). It is also incredibly difficult to prove disability if you have a sedentary occupation – hard to show that you are unable to sit for 8 hours a day.
2.) Many policies have exclusions or limitations for certain types of conditions (like mental illnesses).
3.) Many policies will reduce the amount of benefits you receive by Social Security (including dependent SS benefits).
4.) If you are approved for benefits, this does not mean your benefits will continue without interruption. The insurance company could terminate you after a period of time.
5.) While you can appeal a decision an insurance company makes (and ultimately pursue litigation) this increases the amount of time you are without benefits. It is important to have substantial savings to tide you over in the event this happens.
6.) Insurance companies will resort to surveillance and other methods in order to terminate or deny your benefits. Good Morning America recently ran a series on Hartford’s use of surveillance of a woman eating a chip to terminate her benefits.
7.) Many policies (in states that have not outlawed it) have discretionary authority which makes it incredibly difficult for a court to overturn the insurance companies decision.

This is just a brief overview of some of the problems. If you are considering insurance I recommend doing research on ERISA law and the insurers track record.