A Supplemental Policy Is Enough

Lauren and her husband are on Baby Step 2 paying off law school student loans. They work for the government, and their disability benefits aren't very good. Should they get their own policies?

QUESTION: Lauren in Washington, D.C., and her husband are on Baby Step 2 paying off law school student loans. They each have 30-year term life policies. They work for the government, and their disability benefits aren’t very good. Should they get their own policies? Dave recommends a supplemental policy.

ANSWER: I would get a supplemental policy only. They furnish you 40% or 60% depending on which year it is. I wouldn’t get any short-term. Short-term is you being out of debt and building some wealth and having an emergency fund—mainly the emergency fund is your short-term. Short-term covers six months or something like that, and that’s basically gimmick insurance for people who don’t save money. Long-term disability is essential.

You don’t need much more than about 60–70% total coverage, because that’s all you’re getting home with anyway. Most policies are until age 65 or for life, but most of them also have other limitations in them now. One of those is what they call own-occ disability. You’re not going to be able to get that beyond a couple of years. In other words, if you’re able-bodied to do something else but you’re not able to practice law, then you would only get your money for two years or whatever the own-occ period is, and then you’d be expected to get a job.

You can’t get disability unless you have an income. You can’t keep disability if you don’t have an income. It’s based on you having an income. If you’re not earning an income, then they’re not going to play. I would buy disability for the moment, and the moment will change. Supplemental for now, and if you take another job, deal with that then. Usually, if you take another job, even if they don’t furnish it, they’ll buy it or they’ll let you buy it as a group within the company if it’s of any size. It’s the only insurance I furnish 100% of. It’s inexpensive. It’s nothing like healthcare. I think you might be surprised what you could buy it for in a white collar situation when you enter the marketplace and leave the federal government, if you ever do.

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