# Disability Insurance



## young_gun (Jan 20, 2010)

Hello everyone.

What are your views on disability insurance for my situation? I currently have no kids, wife, 28 years old etc and have enough emergency funds to last a few years. I've gone back to school full time for another 3 years. My main concern is if I hurt myself and I can't work anymore. I don't want to move back with my parents or have them feel they need to look after me.

I'm not looking for disability insurance that will only last a few years since I have an emergency fund and saved enough for going back to school full time. I was thinking of benefits that last until I'm 65. Prices seem to be around 60$/month.

Curious to know how you feel about this. Thank you for all the input and opinions.


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## Four Pillars (Apr 5, 2009)

My question is how will the disability be calculated assuming you have low or no income during the school years?

Most disability insurance that I'm aware of pays a percentage of your income.


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## MoreMiles (Apr 20, 2011)

Many professional (eg, lawyer, doctor, accountant) students are allowed to buy disability insurance for a future / expected income, without any proof of current income at the time of purchase.

If you want to buy early before working, you are essentially buying a privilege of enrollment while in good health. You want to make sure you add the rider "guaranteed insurability" and "cost of living adjustment for inflation" because you are buying for your future.


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## young_gun (Jan 20, 2010)

Hi Four Pillars,

The insurance broker I've talked to told me I qualify up to $1000/month benefit with my lack of income.

Thanks for the help.


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## the-royal-mail (Dec 11, 2009)

I don't recommend it. I don't see any point to adding yet another monthly expense on top of everything else. Your concern is valid, but in the best case scenario a $1000/mo benefit certainly won't pay for much in the event you can't work. You may end up going back to the dreaded basement anyway. What will $100 cover, rent, Internet and a couple of shirts?

Also, please note that you do not automatically "qualify" just because you have bought the insurance. These companies put you through rigourous approval process and you must continue to supply them with very specific documentation about your medical condition. They love to deny claims or terminate benefits post haste.

Lastly, I don't know how you would be able to get this while you are in school. Better check. Most people who get this are working for themselves. If you'll be working full time after school then your employer will likely be paying for STD or LTD at least. 

I don't know too many students who become disabled while in school, but weirded things have happened I guess.


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## Dave (Apr 5, 2009)

One tricky issue with disability insurance is when you will be paid:
- when you are unable to perform work in your own profession
- when you are unable to perform any type of work

Be very careful with the above.

Dave


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## Four Pillars (Apr 5, 2009)

young_gun said:


> Hi Four Pillars,
> 
> The insurance broker I've talked to told me I qualify up to $1000/month benefit with my lack of income.
> 
> Thanks for the help.


What does "up to $1000/month" mean? How is that amount determined?


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## humble_pie (Jun 7, 2009)

seems to be something else going on here. OP's motivations are not clear.

it seems odd for any student going to school to train for a better job & better circumstances in life to spend so much time & effort planning for a disability that will last for 37 years ... even getting insurers' quotes for such disability ...


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## the-royal-mail (Dec 11, 2009)

Thanks humble, you're getting good at spotting these things. We see threads like this occasionally. I am almost wondering if it's the industry using "buzz" tactics to create interest and discussion around a particular topic, to which their friends could reply with supportive posts. Maybe I'm wrong but I did get a similar impression to humble's.


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## MoneyGal (Apr 24, 2009)

It isn't uncommon for students in professional degrees to be solicited for and to buy disability insurance while in school. 

The future value of their human capital is pretty enormous, and they're simply hedging against a loss. In the same position, I might make the same choice. 

The PV of a dentist earning $200K per year starting at age 30 and retiring at 65 is 'round about $10M. (I used a handy-dandy human capital calculator...)


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## humble_pie (Jun 7, 2009)

oh, i see, MG. Makes sense. And i imagine that the youth of a student preparing for a professional career would make the premiums much lower than if he were to purchase such insurance years later.


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## young_gun (Jan 20, 2010)

Some people commented on my post. There isn't anything suspicious going on here. 

While I'm in school for another 3 years I'm not covered for any injuries/illness. For example, I have to maintain near perfect uncorrected eyesight. I could get hit in the eye playing sports on the weekend and damage my eyes. Is it common for people who are at school to get disability insurance in the unlikely event they get hurt before they graduate? Once I graduate, my actual job with come with disability insurance and won't have as much to worry about.

I'm training to become a marine navigator for commercial vessels in case people were curious.

Thanks for the help everyone.


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## Four Pillars (Apr 5, 2009)

Some people are just paranoid. 

I think disability insurance is a great idea for everyone - not sure why more young people/students don't get it.


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## MoneyGal (Apr 24, 2009)

Here are some stats on the probability of disability by age (the page is from an insurance company, but the stats are from the Society of Actuaries):

http://www.efmoody.com/insurance/disabilitystatistics.html

(The information is dated, but will have not changed significantly since 1985.)

The risk of disability during your working-age years is relatively high - much higher than the risk of death - and is significantly higher for women than for men (largely due to complications of pregnancy). However, disability is often a subjective, ambiguous condition and disability insurance is complex and costly.


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## Maybe Later (Feb 19, 2011)

Good point about complex and costly. Those two alone probably combine to keep many from starting that discussion about whether/ how much insurance to buy. A second is the uncertainty of it that can become almost paralyzing. As an example, it is relatively easy to work out if a couple or family be ok with the loss of a single spouse's income. But suppose that in addition to loss of income comes significant increases in daily living expenses. How does one estimate those to adequately prepare? It may be enough to keep more individuals from taking out policies - or assuming that they don't need it at all. 

A bit off topic, but it may get at why more people don't have it.


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## Henry (Jul 12, 2009)

OP: You have remember that the Canadian provinces have a social safety net. If you become severely physically disabled, you will most likely qualify for provincial disability assistance that pays around 800 to 900 dollars a month.

If you become somewhat disabled, you will not qualify for the disability insurance payment anyways. However, there should be government retraining programs that can help you establish another career.

I feel you are worrying too much. I feel the premium that you are paying is too high (720 a year and 2160 for three years) and you will stop this disability insurance after graduation.


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## young_gun (Jan 20, 2010)

Thank you for all the input. I've decided not to get disability insurance as it seems to be unneeded for what my original concerns were.

Thank you for the help.


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