Teach Me About LTD Insurance
December 12, 2021 10:48 PM Subscribe
Long-term disability insurance is an "adulting" topic that has slipped through the cracks for me. I am considering purchasing it for the first time, but I am uncertain how to make a good choice. How do I get there from here?
My employer (USA) does not provide me with long term disability insurance. While dealing with some health mysteries, I have become worried about my financial future should I ever become disabled. I thus had the idea of purchasing LTD insurance for myself. However, before I started googling, I knew next to nothing about it. Now I what I know is:
• “Own occupation” policies are preferable to “any occupation” policies.
• Coverage amount is based on my income at the time I take out the policy, but it’s possible to add riders allowing an increase in coverage amount should my income increase.
• It’s also possible to add riders allowing me to claim disability but also do some work not prohibited by the disability.
• Apparently plans purchased individually are more likely to be paid out without trouble than plans provided by employers.
What I would still like to know includes:
• Is my above understanding correct?
• If I were to be diagnosed with a chronic condition that has the potential to leave me disabled in the future but does not currently leave me disabled, could I still (after diagnosis) purchase coverage that would cover that disability down the road?
• Where should I look for plans? I’m seeing references to brokers, but I’m not sure how brokers work for individuals. How do I find a broker I can trust? Do I have to pay them?
More generally, is this a reasonable thing to do? I get the impression that LTD insurance is most often purchased by high earners. I am certainly not a high earner. I’m just trying to avoid the risk of poverty. I’m kind of confused as to why LTD insurance isn’t as common as life insurance (aside from the obvious factor that it’s more expensive). I’m a single person in my 30s without dependents. My death wouldn’t be financially ruinous for anyone, but disability sure could be. Is there anything else I should consider?
My employer (USA) does not provide me with long term disability insurance. While dealing with some health mysteries, I have become worried about my financial future should I ever become disabled. I thus had the idea of purchasing LTD insurance for myself. However, before I started googling, I knew next to nothing about it. Now I what I know is:
• “Own occupation” policies are preferable to “any occupation” policies.
• Coverage amount is based on my income at the time I take out the policy, but it’s possible to add riders allowing an increase in coverage amount should my income increase.
• It’s also possible to add riders allowing me to claim disability but also do some work not prohibited by the disability.
• Apparently plans purchased individually are more likely to be paid out without trouble than plans provided by employers.
What I would still like to know includes:
• Is my above understanding correct?
• If I were to be diagnosed with a chronic condition that has the potential to leave me disabled in the future but does not currently leave me disabled, could I still (after diagnosis) purchase coverage that would cover that disability down the road?
• Where should I look for plans? I’m seeing references to brokers, but I’m not sure how brokers work for individuals. How do I find a broker I can trust? Do I have to pay them?
More generally, is this a reasonable thing to do? I get the impression that LTD insurance is most often purchased by high earners. I am certainly not a high earner. I’m just trying to avoid the risk of poverty. I’m kind of confused as to why LTD insurance isn’t as common as life insurance (aside from the obvious factor that it’s more expensive). I’m a single person in my 30s without dependents. My death wouldn’t be financially ruinous for anyone, but disability sure could be. Is there anything else I should consider?
(Also UK). My wife became unable to work due to long term disability and Friends Provident refused to pay out on her LTD insurance. I think that's just what they do and you should plan on needing to sue them for the money if it ever becomes necessary. They harassed her with private detectives and endless unsatisfiable requests for further proof. She was never able to return to work before she died. In the end we settled with them for a small lump sum to drop the claim, but it was far less than they owed. You could try asking them what proportion of claims they pay out to attempt to avoid this, but IMO the whole insurance industry is a scam.
posted by richb at 2:29 AM on December 13, 2021 [5 favorites]
posted by richb at 2:29 AM on December 13, 2021 [5 favorites]
The lesson on display here is to hire a disability insurance lawyer specialist before you sign up for disability insurance rather than after.
posted by srboisvert at 3:42 AM on December 13, 2021 [2 favorites]
posted by srboisvert at 3:42 AM on December 13, 2021 [2 favorites]
In the US, long-term disability insurance has been a mess, with insurers dropping out of these kinds of policies altogether because of miscalculations about how much benefits would cost them. This New York Times article brings up some of the issues. It particularly focuses on people who have had the insurers hit them with huge, unaffordable rate increases after they'd been paying into the policies for years. So another thing I'd look into is whether your rate can be locked in or increases can be limited.
I did not get long-term care insurance when I was healthy and would be unable to get it now. I did get cancer insurance, even though every financial advisor in the world says not to, and that has been an absolute godsend that will provide some coverage for long-term disability for me.
posted by FencingGal at 4:41 AM on December 13, 2021 [1 favorite]
I did not get long-term care insurance when I was healthy and would be unable to get it now. I did get cancer insurance, even though every financial advisor in the world says not to, and that has been an absolute godsend that will provide some coverage for long-term disability for me.
posted by FencingGal at 4:41 AM on December 13, 2021 [1 favorite]
I have no experience on the personal insurance side of this.
From the employer side, I know some.
The Long Term Disability insurance my work has is a solid policy and piggybacks onto the short term salary continuance policy we have. It's rare one of the employees has to go on LTD but it has been easy to navigate (as "easy" as health insurance in the US) and we haven't run into any denial of coverage issues. It pays out a percentage of your salary if you can't work due to doctor described issues for up to 36 months.
Long Term Care insurance is a different beast entirely, and based on what I've learned is kind of a racket. We (again, employer side, not individual) looked into adding this as a company benefit last year, and got such sketchy responses from the providers we chalked it as a bad deal for employees and decided not to offer it. And we had access to the richest plans at the best providers--and they still all sucked. Couldn't answer basic questions about what counts as a preexisting condition. Couldn't answer basic questions about portability. Couldn't answer medium-complex questions about premium structure and payments. So instead we put together an info session on the long term option of investing HSA contributions for medical care later in life. LTC insurance is not good even when you have access to the best plans is the primary takeaway.
posted by phunniemee at 5:47 AM on December 13, 2021 [9 favorites]
From the employer side, I know some.
The Long Term Disability insurance my work has is a solid policy and piggybacks onto the short term salary continuance policy we have. It's rare one of the employees has to go on LTD but it has been easy to navigate (as "easy" as health insurance in the US) and we haven't run into any denial of coverage issues. It pays out a percentage of your salary if you can't work due to doctor described issues for up to 36 months.
Long Term Care insurance is a different beast entirely, and based on what I've learned is kind of a racket. We (again, employer side, not individual) looked into adding this as a company benefit last year, and got such sketchy responses from the providers we chalked it as a bad deal for employees and decided not to offer it. And we had access to the richest plans at the best providers--and they still all sucked. Couldn't answer basic questions about what counts as a preexisting condition. Couldn't answer basic questions about portability. Couldn't answer medium-complex questions about premium structure and payments. So instead we put together an info session on the long term option of investing HSA contributions for medical care later in life. LTC insurance is not good even when you have access to the best plans is the primary takeaway.
posted by phunniemee at 5:47 AM on December 13, 2021 [9 favorites]
Long Term Care insurance is a different beast entirely,
And I see I accidentally wrote "long-term disability" in my post when I meant "long-term care."
posted by FencingGal at 6:01 AM on December 13, 2021
And I see I accidentally wrote "long-term disability" in my post when I meant "long-term care."
posted by FencingGal at 6:01 AM on December 13, 2021
One anecdotal experience in the US: A former coworker and longtime university staff employee, with long term disability as an optional benefit included - she purchased the LTD coverage - did not have trouble accessing it when she became disabled. I don't know if it was because her disability resulted in acute hospitalization (pulmonary embolus which prompted a deep coagulation investigation which identified a genetic condition.) She took FMLA first, but it became obvious that she could not return to work. In her case this was obviously pre-existing, though there were no previous clotting symptoms, so I can only conclude that the size of the employer and its clout with the insurer played a role.
She was hospitalized in the university where she worked and there was no ambiguity about the condition. She was only a few years away from retirement, when the payments will stop and it's presumed Social Security will take over. And it's at a set rate of 60% of her salary. I would not say she was financially "set" because 60% of her salary is not 100% and she has to draw on her 401k years before she expected to.
So it looks like it can work, but it is apparent some insurers will fight tooth and nail to avoid paying out. Is there any possibility of joining a group plan, so you would have more leverage?
posted by citygirl at 7:56 AM on December 13, 2021
She was hospitalized in the university where she worked and there was no ambiguity about the condition. She was only a few years away from retirement, when the payments will stop and it's presumed Social Security will take over. And it's at a set rate of 60% of her salary. I would not say she was financially "set" because 60% of her salary is not 100% and she has to draw on her 401k years before she expected to.
So it looks like it can work, but it is apparent some insurers will fight tooth and nail to avoid paying out. Is there any possibility of joining a group plan, so you would have more leverage?
posted by citygirl at 7:56 AM on December 13, 2021
My workplace offers a long-term care plan. I looked at it seriously, since judging by the experience of my older relatives I am likely to need long-term care at some point in my life. But the fees were high, and the maximum payout was lower than the actual cost of long-term care. Financially, it made more sense to contribute the same amount of money to a regular retirement account.
posted by yarntheory at 9:02 AM on December 13, 2021
posted by yarntheory at 9:02 AM on December 13, 2021
If I were to be diagnosed with a chronic condition that has the potential to leave me disabled in the future but does not currently leave me disabled, could I still (after diagnosis) purchase coverage that would cover that disability down the road?
Anecdata: The answer to this, in my case, was no.
A specialist I saw for my chronic illness said this: "Long-term disability insurance is easy to claim but hard to keep; federal disability is hard to claim but easy to keep." He'd seen many people's LTD cut off by companies after some time.
Of course they are not interchangeable, and it's best if you can have both.
posted by jocelmeow at 9:18 AM on December 13, 2021 [2 favorites]
Anecdata: The answer to this, in my case, was no.
A specialist I saw for my chronic illness said this: "Long-term disability insurance is easy to claim but hard to keep; federal disability is hard to claim but easy to keep." He'd seen many people's LTD cut off by companies after some time.
Of course they are not interchangeable, and it's best if you can have both.
posted by jocelmeow at 9:18 AM on December 13, 2021 [2 favorites]
My employer offered a LTD policy which would extend the time one could be out on disability and still receive some portion of your salary--it was not expensive so I signed up for it. That ended when I retired.
In my late 40s I started looking at LTC care policies because my parents had signed up for them and encouraged me to do so as well. The two I found to be most trustworthy were offered through AARP (administered by Met Life) and the one offered by CalPers (the California State employees' retirement program). I was already obese, which was a strike against me and had asthma, another strike. So I ended up not getting either.
My parent's paid into their policies (think the payment for each was under $200 a month) until their death/disability. My father died quickly and never required long term care.
My mother, who was otherwise pretty healthy, had dementia and I cared for her at home for three years when she wasn't too bad and then for another three with the help of health aides when she got worse. The policy paid about 2/3 of the cost. I had to do some paperwork each month to get paid, but it was not difficult. Finally, we needed to put her into a care facility with a dementia-specific wing (locked doors, higher number of aides, etc.) We chose a "nice" place (I spoke to the County Ombudsman and he recommended it as one with few complaints). The cost was around $10,000/month. The plan paid about $6,000 of that. Mom had sufficient income/savings to make up the difference. She passed away about a year later.
When I retired, my financial advisor encouraged me to look at LTC policies again. The process is very invasive meaning that they go deep on your medical records and they share what they find among all agencies offering the policies--if you are turned down by one, you will be turned down by all. I found an agent who was willing to talk through the process/criteria with me without making a record (she worked for the firm that handled the policy offered through my Alumni Association). The only thing she could recommend for me with my various ailments would be a policy that would require me to "invest" $250K with them--and she couldn't guarantee that I would qualify for that. It would pay out indefinitely (a portion of the cost) and came with a person who would do all the paperwork (again, my Mom's took me about 15 minutes a month to put together the invoices for care and mail in with their cover form). She did have a suggestion that it is better to have a home visit from a nurse to do all the medical checks rather than doing that over the phone--the nurse will do a more accurate assessment.
If you can find a similar "friendly" agent willing to go off the record, that would be good.
posted by agatha_magatha at 9:32 AM on December 13, 2021
In my late 40s I started looking at LTC care policies because my parents had signed up for them and encouraged me to do so as well. The two I found to be most trustworthy were offered through AARP (administered by Met Life) and the one offered by CalPers (the California State employees' retirement program). I was already obese, which was a strike against me and had asthma, another strike. So I ended up not getting either.
My parent's paid into their policies (think the payment for each was under $200 a month) until their death/disability. My father died quickly and never required long term care.
My mother, who was otherwise pretty healthy, had dementia and I cared for her at home for three years when she wasn't too bad and then for another three with the help of health aides when she got worse. The policy paid about 2/3 of the cost. I had to do some paperwork each month to get paid, but it was not difficult. Finally, we needed to put her into a care facility with a dementia-specific wing (locked doors, higher number of aides, etc.) We chose a "nice" place (I spoke to the County Ombudsman and he recommended it as one with few complaints). The cost was around $10,000/month. The plan paid about $6,000 of that. Mom had sufficient income/savings to make up the difference. She passed away about a year later.
When I retired, my financial advisor encouraged me to look at LTC policies again. The process is very invasive meaning that they go deep on your medical records and they share what they find among all agencies offering the policies--if you are turned down by one, you will be turned down by all. I found an agent who was willing to talk through the process/criteria with me without making a record (she worked for the firm that handled the policy offered through my Alumni Association). The only thing she could recommend for me with my various ailments would be a policy that would require me to "invest" $250K with them--and she couldn't guarantee that I would qualify for that. It would pay out indefinitely (a portion of the cost) and came with a person who would do all the paperwork (again, my Mom's took me about 15 minutes a month to put together the invoices for care and mail in with their cover form). She did have a suggestion that it is better to have a home visit from a nurse to do all the medical checks rather than doing that over the phone--the nurse will do a more accurate assessment.
If you can find a similar "friendly" agent willing to go off the record, that would be good.
posted by agatha_magatha at 9:32 AM on December 13, 2021
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posted by are-coral-made at 12:12 AM on December 13, 2021 [1 favorite]