Liz Weston
Appearances
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Well, Sean, your chances of becoming disabled are actually much higher than dying during your working years.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Really? Today's 20-year-old has a one in four chance of being disabled before retirement, which is about twice the risk of dying, according to Social Security actuaries. Workers' compensation covers only work-related illness and accidents, and a lot of disabilities aren't job-related. But what if you have decent savings already?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Well, that's great, but a 2018 Federal Reserve study found only 40% of U.S. households had liquid savings equal to three months' expenses, and less than 30% had enough for six months. On top of all that, the average Social Security disability benefit in 2023 is $1,483 monthly. That adds up to less than $18,000 a year. Yikes. That will not get you very far if you're unable to work.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
I had a great conversation with John Ryan, not to be confused with our earlier guest, Ryan Brady. And John is the founder and CEO of Ryan Insurance Strategy Consultants. That's coming up in a moment. Stay with us. Hey, John, it's great to have you on Smart Money.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So we're going to talk about some various kinds of insurance that folks might have as options on their employer-sponsored benefit plans. And I'd like to have you help us out first on disability. So what exactly is disability insurance and why would somebody need it?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay. And I hear that people are much more likely to be disabled than to die during their working years. Is that true?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So you mean that a disability is less likely to happen to you if you have an office job, which makes sense, than if you have a blue collar job or where you're out working with machinery or something else that could hurt you.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
That's good to know. So what does employer-provided disability insurance usually cover?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Yes, one place where people tend to be critically underinsured is their income. How would you get by if you could no longer do your job? How would your loved ones manage if you're no longer here? Disability and life insurance can help fill the financial gaps if something bad or something worse happens to you.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So there's short-term disability and long-term disability. Can you talk about how those work?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And then the long-term can run for a certain number of years, or as you said, all the way up till retirement age.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Are there differences between what kind of disability you would go on or qualify for if you're unable to do your specific job versus if you're not able to do any job?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay. And actually, I wanted to get into that a little bit because people, if they're working and they're injured at work, they're typically covered by workers' compensation insurance. And John, we should talk a little bit about what that is and how it relates to disability coverage.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Yeah, I think it varies a lot by state, so it's good to look up, but it doesn't cover anything that happens off the job, right? Correct. And when it comes to Social Security, I understand that's pretty hard to get.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So today we're going to look at all the different types of insurance that can protect your income because open enrollment is a great time to review your options.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And speaking of employer provided disability insurance, is this coverage portable? Does it follow you to your next job if you quit this one?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And what should people know about buying an individual disability policy?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Even more rigorous than life insurance.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Interesting. Now you said medication search. So somebody is actually keeping track of what medications we take that we are insured for. And so there's a big database somewhere that these companies can check?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
There's a database for everything.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
All right. Well, let's move on to hospital indemnity coverage. This is something that our listeners might know of because of a certain duck in those advertisements. Is this something that's generally offered by employers in a benefit package?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So even though you don't recommend it necessarily, can you explain what it is, what hospital indemnity insurance does and what purpose it serves?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So it's basically like they're just giving you cash, essentially.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And finally, John, let's have you explain critical illness insurance for us. Pretty much what it sounds like, right? Insurance in case you get a critical illness.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So once again, if you can get the disability policy, this might be a backup.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay. What's the extent of the benefit that you usually get from this insurance? Like cancer or Parkinson's or something like that could keep you out of work for months, if not years. How long do the payments go on and how much are they usually?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
We're going to start with life insurance, and our guest is fellow nerd Ryan Brady, who covers insurance. Ryan, thanks for being here. Great to be on, Liz. Thanks for having me. All right, give us a scoop. What even is life insurance? How does it work when you're getting it through an employer plan?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So if you have like a family history of cancer or something like that?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
I assume there's a pre-existing condition clause though, right? If you already have cancer, can you get this coverage?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
this all feels a bit overwhelming. And like, if I'm not insured for all the worst case disasters that could ever befall me, I'm in trouble. So is there such a thing as too much insurance against life?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Oh, that's super helpful.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Why are women considered a higher risk?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Put you on the spot here, John.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
So it's actually based on what the insurance companies are experiencing, not just because they've decided that women are flaky.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Very good. So the rules of thumb you were giving us are really helpful. Is there anyone that doesn't need disability coverage?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay. So if you are approaching retirement and you're all set or you're Elon Musk, you probably don't need disability insurance.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
John, thank you very much. We really appreciate your help.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Yeah. The bigger problem is that people get overwhelmed with all their choices, and then they don't do anything to protect themselves and their loved ones, or they don't do enough. Our guests gave us some great information about how to think through this coverage and fit it in with all the other stuff that we want to do with our money.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And of course, we have lots of resources on the NerdWallet site to help you figure all of this out.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
We're talking about pets. Oh, my favorite topic. Well, pet insurance, at least. It's one of the many benefits you'll find companies offering during open enrollment, along with things like gym memberships, adoption assistance, and we can't forget, insurance for caring for your eyes and teeth.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And remember to follow, rate and review us wherever you're getting this podcast.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay, good. Now, at what point in your life do you want to start contemplating getting this kind of insurance? Should it be earlier in your career, mid-career?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Oh, and I think I know why.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
I think a lot of people are in the same boat. They don't think about it until the first kid comes along or sometimes when they buy a house and have a mortgage with somebody else and they realize, oh, if something happens to me, they wouldn't be able to keep the house.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Now, we've been talking about this as a benefit of employment. Don't some employers just give you some life insurance, almost whether or not you want it? And how much is that usually?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Ryan, is that generally enough coverage? And if not, what kinds of coverage could you get maybe through supplemental insurance from your employer?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And we'll have a link to that in our show notes. Now, Ryan, do you have to do a medical test to qualify for that extra coverage?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Yes, and in this week's episode, we're going deep on insurance that's supposed to help you protect your income if something happens to you and you can't provide for yourself or your family. In other words, you are either disabled or you die. Liz, nobody wants to talk about this stuff. I know, I know, but everybody really, really needs to.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Okay. Now what happens to all of this if you decide to quit and go work for another company? Can you take these policies with you?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And you mentioned when people are older and less healthy, group insurance can be a better deal. It sounds like the flip side of that is if you are younger and healthier than your average coworker, you might be able to get a better deal on your own.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Now, let's say you bought these policies and you're covered when you die. Is there anything that can happen that could keep your loved ones from getting a payout?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
If you're contemplating getting more life insurance and you're automatically offered, how do you decide between going for a supplement through your employer or getting outside insurance? What are the upsides and downsides of these options?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
All right. Well, I feel like we have a good handle on life insurance. So let's move on to another aspect of employer benefit plans. And this one has a much grimmer name. It's called accidental death or dismemberment insurance. So how does this work and who should consider it?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Sean, this is so incredibly important and too many people ignore it. Insurance of all kinds is meant to protect you from costs you couldn't easily pay out of pocket. But too many people who need certain types of insurance just don't have it. And others get talked into buying policies they don't need, right? Yeah. Absolutely.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And what would make you or your survivors ineligible for the benefit? We talked about life insurance exclusions, and I assume they're similar here?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
That sounds like a lot of restrictions. Is this actually a substitute for life insurance?
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Ryan, you've given us so much great information. Thank you for taking the time to talk with us about these issues today.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
There's a reason life insurance salespeople don't have, shall we say, the most positive of reputations. But that doesn't mean you should stay away from the concept altogether. Now, we're not here to tell people what to do, but I think it's worth hearing the case for having some sort of financial backstop if that thing you think will never happen to you happens to you.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
And that's because you love them and you don't want to leave them in the lurch.
NerdWallet's Smart Money Podcast
Preparing for Worst-Case Scenarios: Choosing the Right Insurance Policy to Protect Your Income
Yes. If you do need life insurance, one of the most important things is to make sure that you have enough. Insurance agents can make whole life sound pretty awesome, but it's definitely not for everyone, and the expense could tempt you to skimp on coverage.