The Forgotten Insurance

My dad said my name today… Normally, this would not be such an amazing feat. There were times in my life when I dreaded hearing him yell my name because it meant I had been caught doing something wrong. Now, I’d give anything for it. It had been so long since the last time he’s spoken my name that my wife has never heard him say it before.

My dad is a proud man, who took care of his family, saved diligently and always ran the numbers. In his working years, he started as an accountant, became a CPA for over a decade and then worked his way up to the CFO position of a medical supply company. He had been able to provide a good life for his wife, 2 kids, and 2 dogs in a safe town with good schools. He’d done it all.

Unfortunately, a silent enemy would soon worm its way between the happy family photo to slowly pick apart everything he had built. This enemy would inch so slowly into the picture that no one even knew that something was wrong until it was too late. It began its demise with remarks so trivial, they could be attributed to common human errors.

“Don’t forget to put your dirty dishes in the refrigerator.”
“You mean the dishwasher, Dad?”
“Yes… the dishwasher.”

As time passed, these small things occurred more often and over varying topics until they were too frequent to ignore. His diagnosis was given as early onset Alzheimer’s in 2001 when I was 12 years old and he was only 49 years old. My dad never accepted this to be true and decided to move forward as if it had never happened. It was a bad dream that he would surely wake up from.

Throughout my high school years, the disease progressed and my father found himself out of work and unable to get another job. His resume was amazing and he was head hunted constantly…. until the interview. He had a hard time making sense over the course of an entire conversation anymore, so no interview ever ended in the job offer the way they once did.

During this time, my parents had to spend down their hard earned savings in order to keep us afloat and pretend that nothing was wrong. Over the course of approximately 7 years after my dad stopped working, they had spent through all of their retirement accounts, my brother’s college fund and most of my college fund. Finally, in the fall of 2008, they were able to get rid of the biggest depreciating asset of them all, the house. It was sold for ~50% of its highest market value after sitting on the market for 3 years.

The sale of my childhood home covered the debts my parents had and left my mom with less than $75,000 in assets at age 54. Between her income and the SS disability my dad received the bills were barely covered. My mom has held everything together and managed to save a small amount even as my dad’s mental state decreased and his level of needed care increased. For lifting this burden on her own, she will forever be my hero, but… did the burden have to be so heavy?

Disability Insurance

My dad never admitted, even to this day that he was sick. Since he never faced it, he never planned for it. There were no contingency plans for my mom and more importantly, no long term disability insurance to help with the expenses. Between daycare, the in-home aids, medicine and other supplies, this amounts to thousands of dollars every month. Some of this is covered by her insurance through work. Most of it is not.

There are two kinds of disability insurance, generally. These are short term disability insurance and long term disability insurance. Many employers offer plans for both. Short term disability plans typically cover from 3 to 6 months as a portion of your current paycheck and is commonly used for things like maternity leave, recovery from surgery and anything else where you maybe cannot work now, but will be able to get back to work soon. The way I see it, having just the employer coverage for short term disability while also having an emergency fund of 3 to 6 months worth is a good level of coverage in the short term. Having that emergency fund ensures that you are covered, whether or not you remain with your employer.

This is our personal plan forward for disability coverage and back up funds

Long term disability (LTD) coverage is a different animal entirely. There are policies ranging from covering for a few years, to the remainder of your working career. Some employers offer this too, however, I would be a bit more wary of this. Using my dad as an example, he was currently looking for a new position when his disability need began so coverage through his prior position would not have helped him.

How LTD Could Have Helped

Running through this hypothetical situation has the MASSIVE benefit of hind sight. However, I wanted to talk about how regardless of the amount of LTD my parents could have potentially had, the effects would have had compounding benefits. Generally speaking, they would have prevented the need for my parents to have to spend down all of their retirement assets. This would have allowed for greater compounding over the last 11 years since the sale of house.

This greater compounding could have allowed my mom to live in a paid off home and given her the freedom to retire at the age of 65. Thus, greater reducing her expenses as they relate to the care of my dad since she would be able to stay home with him now. As it currently stands, she fears that she may never be able to retire.

Protect Your Family

LTD is generally much more expensive than life insurance in the long run. This is due to the fact that you are THREE TIMES more likely to need disability insurance than you are to need your life insurance policy.

Approximately 30% of all people age 35 – 65 will suffer a disability for at least 90 days, and about 1 in 7 can expect to become disabled for 5 years or more.

Source: Health Insurance Association of America; The New York Times, February 2000; As published in The JHA Disability Fact Book, 2003 Edition

I don’t say this to scare you, but facts don’t lie. The financial implications of not only losing an income earner, but also having to pay for their medical expenses and care, potentially forever, are far more devastating than death. This is especially true if you have a disease like Alzheimer’s that runs in your family.

I’m not saying that you have to drop everything, run out at get LTD right this very minute, but I strongly urge you to think about what your family would do if you were no longer an asset to your family’s earning potential, but a liability. Take a look on Policygenius or another insurance comparison site to see what the rates are for your background. I also recommend this very good overview of disability insurance from Nerdwallet, including important questions to ask yourself to see if you need coverage. Remember, your plan should be personal to you based on your financial picture, medical history and the level of risk that you are willing to accept.

At the end of the day though, it’s not about the money. It’s about making sure that your family is protected, whether or not you’re able to bring home the bacon, allowing them to focus on what’s really important.

My dad said my name today…

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