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There is a major reason for young professionals to buy disability insurance that often gets over looked: portability. And given the nature of the Millennial Generation, this aspect of DI can not be stressed enough.

I saw a statistic that said that 85% of the Millennial Generation will switch jobs at least four times. This is substantial, even greater than what Gen X experienced. With this shifting in jobs and careers reaching an all time high, it is critical for a young person to do what they can to protect their insurability so that they do not become stuck in a position and unable to leave because of dependency upon the benefits.

Paralleling this is the fact that many young people start life in a technical field (such as engineering), that requires training and education, often because of being pushed by their parents. After experiencing their chosen field though they realize that they hate it, and transition out of it. Very often they found their own company (like I did), or decide (a la Monty Python) “and now, for something completely different.” Unless they have planned ahead though they can become uninsurable for a period until they have an earnings history, leaving them exposed for a period while ramping up their new venture. Thus they are most vulnerable at the worst potential time.

Furthermore, when this new business owner (or photographer, or writer in my case) can qualify for disability coverage, it is often at a lower occupational class (a measure of risk based on what you do, that reflects your premiums. Engineers and accountants are the lowest risk people on the planet. Demolitions experts not so much.). Business owners are higher risk because of the higher stress and the sales aspects that are inherent in being self employed or in a start-up. Thus, delaying the purchase of disability insurance ultimately costs the young client more, and potentially reduces the strength of their benefits substantially.

But if they purchase portable disability coverage and leave being an engineer, according to the insurance company they are still a boring engineer for risk purposes, even if they decide they want to try and become the second coming of The Macho Man Randy Savage (ooo, yeahhh!).

Many people found their own gig because they want the freedom and flexibility it can create. Purchasing portable disability insurance early in your professional career lays the groundwork for that freedom in the future. It is a very small price to pay to have more options later.

 

Every day we hear about the housing market, how new homes are not being built and that foreclosures have dropped X percent from their all time highs of a few years ago but are still above historical averages. Which still means that there are a LOT of houses being foreclosed on. Here’s some news though boys and girls: it is not all because of the big bad bankers selling loans that they shouldn’t have or companies laying off entire divisions (although Detroit due to economic concentration in one industry can blame the auto industry for their woes).

One fact that is getting lost in all the short term economic noise:homes have always been foreclosed on for a variety of reasons. And the number one (before the bankers messed it up) was disability.

Home ownership has long been part of the American Dream, but if you become disabled it can become a nightmare, because few Americans have protected themselves financially if they can’t work due to illness or injury. In 2007, before all the mortgage madness, almost HALF of all residential foreclosures were due to income disruption caused by disability. HALF!

I am not a big fan of throwing additional restrictions and requirements on people, but if I were a bank I would require anyone taking out a mortgage to have disability insurance, just to protect my loan. They require life insurance through PMI, why not DI?

 

Since it’s Disability Insurance Awareness Month (DIAM), let’s explore some of the more interesting aspects of disability insurance. At least from a nerdy “I am actually a closet actuary” point of view. One thing about disability insurance that doesn’t get talked about enough is “Why do women pay more than guys?”

I have asked a bunch of insurance people about this in the past and over half were just like “duuuhhh, I dahnno.” And these are the guys that should understand it so that they can get it in their clients hands!

Without getting all uber nerdy (yes, I actually did consult some of my friends that are actuaries on this to get the real mathematically based answers), it is this simple why DI costs more for a woman than a man: because they get disabled more! I know, rocket science. But why?

One is the fact that they can get pregnant and I as a male actually can’t (no, I am not going to try and pull a Schwartzenegger). My wife was on hormone therapy for a while when we were trying to get pregnant, and it did mess up her system a bunch. Not enough to disable her, but in extreme cases that does happen. She was however on full bed rest for several months with our second kid, almost long enough for her disability to kick in. And post partum we had no issues but I know several other new mothers that have had problems, severe enough to keep them out of work for extended periods. Enough to trigger a disability claim. So that is a major reason.

Another is that guys are stupid. Yes, we are stupid enough to do stuff that could get us killed (“hey, watch this!”). We don’t become disabled from this stupidity all that often, but our stupidity and Superman complex carries over into everything else we do. Which includes believing we are invulnerable, and not going to the doctor until it is too late. So instead of becoming disabled like an intelligent female does since they go to the doctor, we men just drop dead. That is why life insurance costs more for us because we live roughly eight years less because of this.

There are other factors that can contribute to the difference in costs between male and female disability insurance, but they are minor in the grand scheme of things. So there you have it: the primer on non-sex neutral disability pricing.

Does this mean if you are a female you should just say “It’s too expensive, guess I won’t get it.” NO! The easiest way around this is to get with other people at your place of employment and purchase your individual disability from a company that offers a multi-life discount (such as Northwestern Mutual, MassMutual, or Guardian). By doing so you can get a discount that generally is large enough to cover the actuarial difference between the sexes, thus eliminating the penalty for actually taking care of yourself. Women are more likely to cooperate in this manner because, well, you’re women and do things together for the common good better than the testosterone fueled alpha males.

Americans are overtired, overworked, and overstressed.  I say this as I sit here writing before 5:00 in the morning because I have so much work to do, sucking down coffee like I own a plantation and need to consume the supply to keep prices up.

I found a scholarly article from the National Academies of Science Press that shows 50-70 MILLION Americans are sleep deprived.  That is a huge number, and a major productivity drag on the economy.  It can also lead to an array of personal health issues ranging from just being grumpy to mental break downs and heart issues.

Combine that with the fact that the average American is working longer hours to just financially survive, which leads to poorer diets (i.e. more “Heart Attack in a Sack” meals from fast food places), less time for physical activity, and less relaxation.

And even though they finally got Bin Laden, there is still an amazing amount of stress in our Society (especially if you have young kids and/or a business).    It is literally the perfect storm of negativity.

Luckily, we have not seen a spike in disability insurance claims like many of the experts (and actuaries in insurance home offices) feared, but we have seen somewhat of an increase.  And it will probably get worse in the future because of the interaction of these three O’s (overworked, overtired, overstressed) that will slowly be alleviated over a few years but are becoming the new normal for Society.  So what do we do about it?

2 things.  First, try to reduce the effects of them before you snap at your wife like I did last night (I apologize again Ambre).  Take a five minute walk a couple times a day to clear your head.  Squeeze in a few minutes of excercise in the morning to wake up instead of having 60 ounces of coffee.  Try to not let work overtake your life (very difficult if you love what you do).  Literally stop to smell the roses or watch a sunset, because a few minutes of calm will counter much of the crap in the world.

Secondly, hedge your bets.  Buy disability insurance to protect against the economic disruption that could happen if the 3 O’s overtake you.  But not just any DI; get non-cancellable and guaranteed renewable so that your prices are locked in.  When the actuaries tell the finance guys in the insurance companies that they need to raise prices, you will be protected because your contract will have guaranteed premiums.  And make sure that you get a policy with favorable provisions for stress related issues.  Many policies say you need to be in a mental facility to recieve benefits, and this is NOT what you want.  If you are going to get coverage, don’t get something that is filled with holes!

The overworked, overtired, and overstressed American worker has always existed, but has reached epidemic proportions that will not disappear.  There is no shot (coffee, liquor, or medical) to make it instantly go away.  So do what you can to alleviate the symptoms, and CYA with a good DI policy.