Remembering TCPaul, 2016-2019

to buy or not to buy disability / life insurance?

So, I am in my early 40's and married with a two year old. cheapbrass02/13/19
The typical lawyer answer is: it depends. Life insurance blawprof02/13/19
Agree on whole life being a poor way to invest. Get cheapes wutwutwut02/13/19
Don’t you have at least one or two friends that are life i persius02/13/19
Definitely get term life insurance. Your family would be fin cranky02/13/19
Disability insurance can be a life saver. I know a solo who greenhorn02/13/19
Nothing against disability insurance, but carefully read the toooldtocare02/14/19
Get both. Don't skip out on disability. Lawyering is tho 2tierreality02/14/19
1) life insurance you don't buy for yourself, but for your c dingbat02/15/19
The idea of the staggered policies is an excellent one (also 2tierreality02/15/19
I am in my mid 30s in a high COL state. Wife and I make over notiers02/22/19
cheapbrass (Feb 13, 2019 - 3:28 pm)

So, I am in my early 40's and married with a two year old. It just occurred to me that I should look into Life insurance and possibly disability insurance. Just wanted to see how other lawyers approach life insurance? Term? or Whole?

As far as disability insurance is concerned, lawyer work is not very physical. So potentially even if we purchase disability insurance and become disabled physically, the insurance company may still not pay out since we can still "work" (i've seen lawyer's in wheelchairs in court). So what's your opinion on this? Buy or don't buy disability insurance?

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blawprof (Feb 13, 2019 - 4:13 pm)

The typical lawyer answer is: it depends.

Life insurance: Yes
Disability: No (probably not necessary)

Just do term life and invest the difference yourself in a Roth IRA or beef up your IRA contributions. I think whole life is a scam. Make sure to get a portable policy and not one through your employer. With a 2 year old, get a 20 year term life. You would have gotten a better rate when the kid was first born and before your turned 40 but that ship has sailed.

I don't have disability insurance. I rely just on Social Security. You are right that lawyer work is not very physically demanding. I have a brother in law who is a firefighter and he is my age in his early 40s. He has had to gone on disability twice because of his back. He had back fusion surgery 2 years ago and has been on light duty. He hurt his back lugging around super-obese people.

Questions to consider:
Are you planning on having more children? Richard Gere just had a kid as a geezer but he's rich.
Does your spouse work?
What are your current debts, including mortgage on primary residence?
What is your current health like?
What is your current lifestyle (e.g. do you enjoy skydiving)?
What help would extended family provide if you died?
What are your basic monthly expenses?

Look at your Social Security statement for both survivor benefits and disability benefits when planning. That can be helpful. A lot of people overlook that.

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wutwutwut (Feb 13, 2019 - 5:42 pm)

Agree on whole life being a poor way to invest. Get cheapest term from someone reputable, save the rest like the prof says.

How much is enough? Good question. If you kicked tomorrow would your wife and baby be able to make due, long term, on a single $500K nut? Or $1 million? (Plus as mentioned, you can look up yourself on ssi.gov and find out, given your payment history, what your wife and child would be entitled to in survivor benefits.)

Re disability, if you're solo/self-employed vs. salaried at a firm, I'm not sure how they would figure that. Base it on last year's profits?

But in general I'd not be quite as sanguine about dispensing with it on first blush. Had a friend who was employed (salaried) and he really mutilated himself in an accident and wasn't able to work for 3 months. On all kinds of hard core pain killers besides being wheelchair bound (i.e., they wouldn't have wanted him at work in that condition anyway). The disability insurance replaced (I think, but not positive) 65% of his 150K salary.

But again, no clue how it would work if you're a solo. But insurance companies seem generally willing to write just about anything if the price matches their risk tables.

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persius (Feb 13, 2019 - 6:15 pm)

Don’t you have at least one or two friends that are life insurance salesman that should’ve hit you up by now? Usually starts with an invitation to lunch, “hey haven’t seen you in a while buddy. I hear you are a let’s do lunch“.

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cranky (Feb 13, 2019 - 8:55 pm)

Definitely get term life insurance. Your family would be financially devasted if you were to die. I got a policy from Prudential. I don't have disability insurance. Neither does my former boss who was also a solo and said that the policies are pretty lousy and cut down on benefits if you qualify for SSDI anyway.

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greenhorn (Feb 13, 2019 - 9:25 pm)

Disability insurance can be a life saver. I know a solo who in his 50’s developed cancer. It was stage 3 or 4 when he was diagnosed. He spent the better part of a year fighting it eventually he went into remission.

The problem was that during that year he basically lost his practice. He couldn’t go to court, see clients, doing lot of legal work. He tried, and he got help from sympathetic friends and colleagues (I covered court appearances for him and helped as much as I could) but in the end, clients were clients and his practice was a shell of what it once was.

Disability insurance would have helped him he’s getting back on his feet, and thankfully he’s healthy. But disability insurance is a must have.

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toooldtocare (Feb 14, 2019 - 1:43 pm)

Nothing against disability insurance, but carefully read the terms before signing the dotted line. A friend is an MD, and I've been regaled with stories of how some policies require proof of issues that modern medicine didn't anticipate. It's been pretty interesting to learn how tough it can be to prove disability. But all companies/policies are different, both in what they require and what coverage is provided, so just review carefully before signing on.

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2tierreality (Feb 14, 2019 - 7:38 pm)

Get both.

Don't skip out on disability. Lawyering is thought intensive work that requires a well-functioning noggin. One bad bump to the head and you could become a drool machine.

See my recommended minimums below:

For disability: 80% of after tax salary, taking estimated social security benefits into account.

For life insurance: a term policy with the total death benefit of 10x current salary.

Bonus: make the life insurance payable to a family trust for the benefit of your spouse and children, so if your spouse remarries your "replacement" won't have access to any of the money, and so any leftover money will go to your kids when she dies.

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dingbat (Feb 15, 2019 - 10:17 am)

1) life insurance you don't buy for yourself, but for your children/spouse. If anything were to happen to you, the money is there to take care of them.

- for your children, get term insurance (on yourself), because thirty years from now they should be self-sufficient and won't need your care anymore.
Total coverage should be enough to make up for your lost income. For a 2 year old, 15 times your after-tax salary should get your two-year-old to 17 even without factoring in any interest. 10 times your after-tax salary if your spouse will be able to manage money reasonably well. (if you also want to pay for your kid to go to college, you should increase coverage accordingly)

- to be really smart, get two or three staggered policies. For example, If you decide to buy $1.5 million of term insurance, you could buy a $500k 5-year term, a $500k 10-year term, and a $500k 15-year term. It'll be a lot cheaper than a $1.5m policy, and it accurately reflects that if you croak five years from now your child will need less support than if you croak tomorrow

- for your spouse, determine to what extent you'd like to care for him/her. Staggered term is the most cost-effective way to reach those goals

- burial insurance: do not buy a $25k policy, but increase the rest of your coverage by the amount you want set aside for your burial. Low cost policies generally don't have a lot of underwriting, and therefore have a relatively high premium. When you're at the high end of a low-dollar product, it's not unusual for the cost to be higher than getting more coverage to be on the low end of a high-dollar product (for example, $90k coverage often costs more than $100k)


2: disability. This you're buying for yourself. If something were to happen and you could no longer work, you'd want to be taken care of. From an insurance point of view, lawyering is incredibly low risk, so the premiums are very low. Get sufficient coverage that you can maintain a lifestyle you'd be ok with. I agree with 2tierreality that 80% of your after tax salary should be fine

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2tierreality (Feb 15, 2019 - 1:34 pm)

The idea of the staggered policies is an excellent one (also, it's what I do myself).

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notiers (Feb 22, 2019 - 6:46 am)

I am in my mid 30s in a high COL state. Wife and I make over 300k but it’s split pretty evenly - she does well. I have a little over 2 million in coverage. She has a little less. Term policies till we’re 75. It’s not all that expensive. Also have disability policy. Through work - but I pay for it myself - so the benefit isn’t taxed. If your employer pays the premium it gets taxed. Total cost of insurance per month is probably around $300.

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