Today on Radical Personal Finance, we continue our disability insurance series. We're going to talk about why is it so hard to compare disability insurance policies. Also, should you buy long-term disability or short-term disability? We're going to talk about benefit periods, elimination periods, and continuance provisions such as non-cancellable and guaranteed renewable policies.

Exciting stuff on today's show, if you're a nerd who cares about spending your money wisely. Welcome to the Radical Personal Finance podcast, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.

My name is Joshua Sheets and I'm your host. And today I try to equip you with some very important financial knowledge so that you can protect yourself with disability insurance and not get taken to the cleaners in the process. The last episode in this series, we talked about why disability insurance is important.

I gave you my sales job on it. I heard, I just got a note on Twitter from one listener that said, "All right, Joshua, you convinced me." So at least I convinced one person to go ahead and consider buying disability insurance and that makes me very happy. So I'm happy about that.

So I've convinced you, hopefully, at least some of you to consider it, but now I've got to equip you with the knowledge to be able to make a good decision for that. And this is one of the more challenging areas of insurance to teach on because there is so much variability in the product line and there's so much variation between different companies, between different policies, et cetera.

And this is going to be one of the areas where you will need somebody knowledgeable in your camp, which is a convenient time for me to do today's ad, which is Paladin Registry. Paladin Registry is a registry service for financial advisors. I went and found them when I was looking to figure out where can I send you guys who are looking for financial advisors, where can I send you to at least get a start and have a hope of finding somebody who's competent and who's caring and who is hopefully honest and will deal with you forthrightly.

The best place that I found so far is RadicalPersonalFinance.com/Paladin. It's in a relationship I set up with Paladin Registry. Paladin Registry is a financial advisor referral service set up by their founder, Jack Waymire, who was frustrated with the same thing I was frustrated with. How can we vet financial advisors?

So they went through and they developed a point of vetting financial advisors, checking their backgrounds, checking their qualifications, checking their work history, checking their disciplinary actions, et cetera. And only advisors who get through that rigorous screening process are listed in the registry service. So if you're looking for a financial advisor, consider going to RadicalPersonalFinance.com/Paladin.

That link will auto-forward you through to a landing page where you'll put in your name, your address, your phone number, the amount of assets that you have, and any other pertinent information to the areas that you're interested in. Paladin will take that information and they will filter it to find an appropriate advisor for you.

If you've got $100,000, they won't send you to an advisor who has a million dollar minimum. If you've got $5 million, they won't send you to an advisor who's only got a $100,000 minimum. So they will filter that through appropriately and they'll put you in touch with a couple or three good advisors in your area that you can start with.

I can't promise you two things. I can't promise you you're going to find a great financial advisor there, but I can promise you it's a good place to start your search and interview those advisors. A good interview with a financial advisor should be like a job interview. You're interviewing them to do a job for you.

So interview them, ask them your questions, and see if they might be a good fit. The second thing I can't promise is that they're going to be experts in disability insurance. They might not. And this is leading us right into the very first point on my outline here, which is why it's so hard to work and find and compare work in the areas of disability insurance.

It is tough, and as I said in the last show on this topic, many advisors just walk away from it. They throw up their hands. I've had multiple advisors who told me to my face and just kind of professional content, I just don't even bother talking about disability insurance anymore.

It's too hard to sell. Nobody wants to buy it. They don't understand it, et cetera. So I don't even bother to talk about it. Well, in my mind, that's a breach of duty. It's a breach of professional duty. I think it's a breach of professional duty if a financial advisor who's working with a family who needs disability insurance and doesn't at least work very diligently to get them to buy it first before anything else for the reasons I articulated in the last show in this series.

But it's also just – well, but it's a reality. Comparing disability insurance is hard and that's one of the reasons why you don't hear it discussed either with advisors or even in a public format like today. Tell me when the last time you heard an in-depth discussion of disability insurance on a financial radio show or a financial podcast of any kind.

I've never heard it that I know of. The deepest it goes is maybe should you buy long-term disability or short-term disability insurance. But that's just scratching the surface of the options and it is tough and that's again why we don't hear it discussed. Today's show is going to go right over the heads of many of you and I don't think necessarily you need to grasp all of this information.

But I'm going to do my best to keep it simple so you at least can develop an understanding of the vocabulary. So when you're working with an insurance agent, you can feel a little bit more confident in understanding the presentation that's being made to you. The first thing to start with is vocabulary in any area of learning.

If you look at the historical model of learning, which is most popular, it's not the only model but the most popular one is expressed in the classical trivium, which was the idea of grammar, logic and rhetoric. The first stage of learning is grammar, is learning the grammar of a subject.

So today's show, that's essentially what we're doing. I'm going to teach you the grammar of disability insurance and I hope that it will be helpful to you. But it's tough to compare among – it's tough to compare among companies because there is such a variation of products. It's also tough because there's a variation of the internal policies and everything is based in a disability contract upon the actual contract.

There are some standardized products that fit – that you can compare things like prices among. But even those, if you brought me a disability policy and I wanted to beat it on price, I could beat it on price almost every time and you might never know the option that I changed internal to the contract unless I told you, unless you read the contract.

And since unfortunately people don't read insurance contracts, you would probably never know. So it's just challenging to adjust among these things. I'm going to talk – I could talk in the future about many different types of products. But today, we're just talking about individual disability insurance, individual disability insurance.

And the reason I'm talking about why it's so hard to compare is to demonstrate to you that you can't just shop based on price. In the life insurance marketplace, if you're going to shop for 20-year term and you're going to shop that with other companies for 20-year term, 20-year term, 20-year level term is pretty much the same at most companies.

You can have a few riders, a few benefits change. You can add a little something here, take a little something away. I've covered that in previous life insurance episodes. But 20-year term is 20-year term. It's a pretty standardized product. But individual disability is not individual disability across the market.

It's all of these things, which makes it very difficult to compare companies and prices and policies. But let's start with the biggest question that I usually hear. "Joshua, should I buy long-term disability insurance or should I buy short-term disability insurance?" This is one of those words that many people have heard about and this is one of the debates that does happen to a small degree in the personal finance world, long-term disability versus short-term disability.

So let me explain what these are. A long-term disability insurance policy is a policy that will pay you money over the long term if you're disabled for a long time. A short-term disability insurance policy is a policy that will pay you money for a short time if you're disabled for a short time or if you're disabled for a long time.

It will just only pay you in the beginning. That's how it works. Now, the first thing you need to understand about this is that the shorter the period of time that you're measuring for disability, the more likely the disability is. Almost all of you listening to this show will have had at some point in your work life a day in which you couldn't work or at the very least an afternoon in which you couldn't work.

Perhaps you had a headache. Perhaps you started throwing up at 11 o'clock in the morning at the office and you got in your car and you stumbled home and you went to bed. Now, you may have been better the next day, but almost everyone in the audience has experienced at least an afternoon off of work or a day off of work.

I don't know if it's 100%, but I would feel pretty confident that it's close to 100% of people have experienced this. What you can see in my example that if you've had a day off of work due to sickness, you're thus disabled because of your sickness. You're not able to do your work.

You're disabled. You have been disabled at some point in the past. So it's very likely that at some point in the future, you will be disabled and not able to complete a day of work. That's very likely. Now, if we extended that period out a little bit, say from one day of missed work due to sickness or injury to one week of missed work due to sickness or injury, there would still be many of you who have experienced that, but it would quickly drop down from 100%.

Many of us have been out of work for a week or close to it. Perhaps we were out of work for a week if it was close to Memorial Day or Labor Day, but the point is that the percentage of people who've experienced that has dropped down, but it's still pretty high.

And you can most likely concede to me the point that it's pretty likely that at some point in the future, something will happen that will knock you on your back for a week. Thus the probability is high. If we extended that out to a month, the numbers would drop dramatically.

Far fewer of you have been disabled for a month. I've never been disabled for a month and far fewer of you ever have and far fewer of you ever will. If we drop it or extend it out to three months, now the numbers plummet even more. If we extend it out to a year, the numbers plummet even more.

If we extend it out to five years or 10 years of disability, the numbers plummet even more. And so the shorter the amount of time of disability, the likelier it is that you'll be disabled. The longer the time of disability, the less likely it is that you'll be disabled.

Now to compare likelihoods, just consider your own personal experience. I dare say that most of us know at least somebody who's been permanently and totally disabled. Or if you don't know them, you know of them. One simple example, just consider people with learning disabilities. Consider people who have lifelong conditions like Down syndrome or some other similar thing.

Consider people that you know who may be struggling with muscular dystrophy or consider somebody that you know who may have had a back injury and had to change their job. All of those things count as disabilities. But still, it's much less likely that you'll be disabled for a year than that you'll be disabled for a day.

Now should we buy insurance for that? Well here's where we go to the significance of the disability. If you were out of work for an afternoon, would that impact your financial situation seriously? The answer is no, only at the most basic of employment levels where people are working a minimum wage job and they're stretched to the max does an afternoon of missed work spell the difference between being current on a bill or being late on a bill.

Most employers, especially many of you listening who are in salaried positions, most employers will not even acknowledge the absence. Now some employers will. A day of missed work for many people is not a big deal. Again, it's only at the most basic poor levels of society at which a day of missed work is going to upset a financial plan.

If you go out to a week, some people can absorb a week of missed work and missed pay. Some people can absorb a couple weeks and some people could absorb a few months. When you start to go out beyond a few weeks or a few months, the ability to absorb the financial impact of the disability is much more difficult.

Whether that's because of the challenge of having a year's worth of savings, most US Americans can't put together four or five hundred bucks for an emergency. I can't remember. I was reading some of the numbers that came out recently. I think it was from the Federal Reserve. They're talking about, what's it, 40% or 40% or 50% of US Americans can't put their hands on a thousand bucks.

Just did a quick web search to try to clarify that. I guess some of the news articles, it looks like 62% of Americans have less than a thousand dollars in their checking and savings accounts. So a couple of stories and ways to spin that data. Let's just keep it simple.

So the majority of US Americans don't have a thousand dollars. Well, in that kind of situation, if you miss a few weeks of work, it's pretty tough and it leads to missed payments, bounced checks, etc. So that can be very, very challenging for many people. But even in these shorter periods of time, there are other systems of support.

Family and friends, church groups contribute money, will help out. So these shorter amounts of disability, shorter time periods of disability, there is an ability to work through them. Much harder to work through a year. People's charity and their ability to help is often stretched thin the longer it goes.

So when looking at long-term disability versus short-term disability, I think it's important to have a practical perspective on this. Usually short-term disability is defined as a disability that lasts anywhere from a week or two weeks up through a few months, three months, although it could go as long as a year.

So anywhere from this couple weeks to three months is usually considered to be a short-term disability. Long-term disability is usually considered to be from three months out through as long as perhaps age 65 or age 70. Used to be able to get a lifetime disability insurance policy where if you got disabled, you would get a benefit for life.

Now most of the – that's no longer available to my knowledge. Has not been available for many years. It went away a decade or two ago. And now the latest you can go is usually through about age 70. Many policies are renewable until 65 and conditionally renewable until 70 as long as you're still employed with limited periods.

I'll cover conditional renewability toward the end of today's show. So disability – that's the difference between the short-term disability and long-term disability. Now let's put our thinking hat on for a moment and let's not make any blanket statements about whether you should buy one or shouldn't buy another. And let's think about who should buy one and who should buy another.

But first, we got to talk about premiums. The total benefit that you can get from a short-term disability policy is relatively small but the likelihood of using it is relatively high. So let's assume that you are going to get a policy that pays you after two weeks and pays you out through a total of three months of disability.

Well if your policy is going to pay you say $3,000 for three months, the total maximum benefit from the policy is $9,000. That's a relatively small risk for the insurance company. Thus, the price of short-term disability insurance policies is usually relatively low. The biggest player in this space is Aflac, the little duck.

You've all seen their commercials. Many of you at your workplace have the opportunity to participate in a short-term disability insurance program with Aflac or with another company that your company has engaged with. Usually these policies cost anywhere from a few dollars to a couple dozen dollars a month, relatively low premiums.

But the major reason the premiums are so low is because the total maximum benefit is relatively low. If you actually consider the cost of insurance, because it's so likely that many people will be out of work for a couple of weeks due to a sickness or injury, because that's so likely, the risk of needing it is relatively high.

And so the cost of insurance is relatively high when compared to the actual benefit received because the likelihood of needing it is high. I hope this is clear. Let me flip it and talk about long-term disability insurance. Long-term disability insurance, the potential maximum benefit for most people who are buying a long-term policy is generally pretty high.

If we just simply calculated here the – let's just even skip an inflation benefit. Let's just say you have a benefit for $4,000 a month. You're a 35-year-old worker and you've got a 30-year benefit period. So we can do 4,000 times 12 months a year times 30 years. Even if you didn't have an inflation rider on your policy that would allow the benefit to go up over time, that would be a total benefit of $1,440,000, $1.4 million.

So the total maximum benefit available to you, the total maximum value of the policy of $1.4 million is very high, especially as compared to our $9,000 short-term disability policy. But the likelihood of your collecting on it is relatively low because the likelihood of being disabled for more than three months and being disabled up through – totally disabled for the rest of your career from 35 to 65, that's really low.

So when you actually look at premiums, the challenge you face is figuring out what's a good financial move and what's not. Short-term disability policies will cost you anywhere from a few dollars a month to a couple dozen dollars a month. Long-term disability policies will usually be in excess of $100 a month, anywhere from $100 a month to a few hundred dollars a month.

For some people, it could be up over a thousand or multiple thousands. But there we're dealing in the world of $25,000 benefit policies a month. We're dealing in the world of high-income professionals. So for the most of you, it would be in that middle range of anywhere from under $100 to a couple hundred dollars a month.

So the challenge that you face is that people easily and quickly jump to buying short-term disability almost as a – well, sure, I'll go ahead and take this because they can conceive of being out of work for a month and because it's only a few dollars a month. But I consider short-term disability insurance to be very high-priced.

And people will usually be slow to buy long-term disability insurance policy because it's going to be a couple hundred dollars a month. But I consider it to be very low-priced when compared to the maximum benefit and when compared to the problem. So let's talk about the problem of a short-term disability.

You're out of work for a month. You have no insurance. Problem is there, but for most people, it's relatively low. You can get through being disabled for a month even if you don't have much money. You can put some payments on a credit card. You can borrow money from friends or family.

You can rely on the charity of friends or family. You can just simply eat up all the food in your pantry and be late on a few bills and try to catch up in the future. Now can that be very difficult? Yes. I'm not saying it can't be difficult on a household.

I am saying that compared to the problem of being disabled for five years, it's a minor inconvenience. So I would much rather people work and prepare for a long-term disability insurance policy – excuse me, for a long-term disability event because that's the catastrophic event versus the short-term. In general, I would recommend to people that they buy long-term disability insurance.

Now should they also buy short-term disability? I think it's worth considering for those people who are living paycheck to paycheck and who don't have an emergency fund of any type, especially in things where – I mean Aflac does huge business. Places where people are in the construction industry, places where people are in very basic jobs.

You're making $13 an hour, making $13 an hour living paycheck to paycheck. Well, here a short-term disability event can be very difficult. To allocate $20 a month towards a disability policy that if you hurt your – break your leg or something and you're out of work for a couple of months will pay out, that could be a very wise move.

But it probably shouldn't be the first thing. And again, you come into this challenge of how much money is actually available. Does the person making $26,000 a year earning $13 an hour, can they actually go ahead and allocate $100 a month towards a long-term disability policy? Hard to say.

So I'm not opposed to either one. I consider long-term disability to be the more important one for most of you who can save and already have saved a few thousand dollars or a few months of expenses. Long-term disability is the major hole. And if I were starting off with nothing, I would probably buy a short-term disability policy until I got to the point of establishing myself and building up 10 or 15 or $20,000 in the bank.

But I just wouldn't plan on that being the major impact. It's a real tension here because you've got to make a guess on things that are ultimately unknowable. If being out of work for a month would sink you, probably go ahead and buy a short-term disability if it's available to you at your job or if it's offered to you as a benefit because you can pretty easily budget the $20.

But make it a goal to get the long-term disability as quickly as you can, as quickly as you can budget for it and make it happen because that's the truly catastrophic event. And then make it also a goal to, for the sake of efficiency, self-insure through a short-term disability need.

So once you have comfortably established yourself, you're building up your reserves, you're building up and you've got 10, 15, $20,000 in your emergency fund, then go ahead and consider dropping the short-term disability. Because relatively speaking, the price of the insurance is compared to the benefit, $9,000 and you're paying $30 a month for a $9,000 benefit, that can be a relatively high cost of insurance.

And a good rule of thumb for running our financial lives is to try to be as efficient as possible. You want to insure against the stuff – you want to self-insure against the stuff that you can afford to lose and then you want to insure against the stuff that you can't afford to lose.

Hopefully sounds a little wishy-washy. I don't know how to make it any less wishy-washy. That's the best way I know to approach the long-term disability versus short-term disability discussion. Let me define for you three different areas of terms. I want to talk about benefit periods, elimination periods, and continuance provisions.

And here we're going to get a little bit technical. Benefit period is exactly what I've been talking about and so is elimination period. But these are the technical terms that you will decide. The benefit period is how long, once you're disabled, do you receive benefits from the disability insurance policy.

You have different options. Like I said, you may have a policy that will pay you out for a month or three months. You may have a policy that will pay you out for two years. You may have a policy that will pay you out for five years. You may have a policy that will pay you out through age 65 or age 70.

The longer the benefit period, the higher the premium. The shorter the benefit period, the lower the premium. And the reason for this is because of the total potential benefit from the policy. Again, if you're getting a $4,000 a month policy, ignore inflation for a moment. Let's say you got a $4,000 a month policy for 60 months, five years.

Your total benefit that you might receive from the policy is $240,000. But if you're a 35-year-old worker and you have that same $4,000 a month and you get it until age 65, that's that $1.4 million number. Big difference in risk for the insurance company between $1.4 million and $240,000, especially when you look at the morbidity tables for disability insurance.

You'll see that once somebody reaches five years of disability, there's a much higher likelihood that that person is going to be disabled permanently for the rest of their life than that they're going to recover. That's different than somebody being disabled for a year. A year, you might be out for a year with back injury.

But you might be out for the rest of your life if you break your back. So if you're trying to save on premiums, one of the tools that a good insurance agent will do is they'll sometimes shorten up that benefit period. I've had to do this many times, sitting down, looking at a budget, young family, stretched finances.

They know they need disability insurance, but they also need life insurance and they also need to save money and they also need to pay off their debt, etc., etc. Well, what do we do? Well, sometimes I would love it if everyone had a policy that would pay them out through age 65 or 70.

But sometimes you can save substantial amounts of money by shortening that up to five years. And so I would shorten it up to five years knowing that I've covered most of the disability circumstances. The likelihood of being beyond five years is less, but I've covered most circumstances they're going to be in.

That will save us a lot of money on premiums by shortening it up to five years. So I've covered a three-year disability. I've covered – and in five years, if they were totally disabled, my theory was I could help them. They could figure something out to retrain, use the five years to try to figure out how to get into a different job of some kind.

But that's the benefit period. Just always remember the longer the period, the higher the premium. The shorter the period, the lower the premium. You should go with the longest period possible if you can afford the premiums or you could go with the shortest period necessary. If I were a 50-year-old worker, I had a lot of money for retirement, I only needed the five-year premium – well, five-year benefit period, then I would consider it.

So that's how the benefit periods work. And you can choose these. It's a choice. If you're an agent or a financial planner, you should look at this as a flexible thing and figure out what's right for the client, especially when we get to some of the other benefits. There are ways to work with certain companies.

There are ways to shorten the benefit period while still having a catastrophe plan for the longer period. We'll get to that when we talk about social insurance substitute benefits. Next, elimination period. The elimination period is kind of like a deductible. The elimination period is this. How long do you need to be disabled before the policy kicks in and starts paying you money?

The key thing here is the shorter the elimination period, the higher the premium. The longer the elimination period, the lower the premium. This should be intuitive to you now because by recognizing that you're much more likely to be disabled for a month than you are to be disabled for a year, you can recognize that the risk to the insurance company is much less if you have a one-year elimination period versus a one-month elimination period.

Thus, your insurance will be cheaper. When you're looking at the elimination period, you've got to treat this just like you treat a deductible on other types of insurance. How much money do you have and how much time can you get through? In essence, this is what we do by steering people who are middle-class people, have savings, have reserves, have credit cards or lines of credit available to them.

This is why we steer them to a three-month elimination period versus steering them to that one-week elimination period because it results in a substantial decrease in cost and they can get through that three months. They can handle that as a deductible. Most people can get through three months if they have to.

But this also implies a planning point. Many of you are very good savers. Many of you have significant amounts of capital and reserve that's liquid and easily available. Well, in this situation, if you're simply trying to plan for a worst-case scenario, a catastrophe, you might choose a very long elimination period in order to save premiums.

You might choose one year or more if you can find a policy but one year is often the maximum. You might choose a one-year elimination period knowing that this policy will only pay out in the worst-case scenario where you're disabled for more than a year. But you might be confident knowing that, "Hey, if I am disabled for more than a year, this thing is going to pay out through 65," and that would be something worth considering.

Now the premium savings here, you will have to ask your agent to run some cost comparisons. Generally, I would always just do a three-month period for most people because if you're disabled for three months, most people are going to want to go ahead and start receiving that benefit period.

But it is an option for you to have a longer elimination period if you just don't like insurance, "I don't want to waste money on insurance. I have lots of liquid cash," okay. Sign up for a one-year elimination period but have a very long-term policy. That way, you've covered the catastrophe of not being able to work for a very long time without buying too much insurance that you're going to be upset about paying the premiums.

Next, let's talk about what we call continuance provisions. So these are fundamental to the way that the insurance policy works and they're a little bit confusing. There are two major words that are used. One is called non-cancelable and the other is called guaranteed renewable. Now you would think – and what this is is what rights does the insurance company have to cancel your policy on you or to change the terms of the policy?

That's what these provisions are covering. You would think that non-cancelable means that the insurance company can't cancel your policy on you and you would think that guaranteed renewable means that the insurance company is guaranteeing that they have to renew the contract for you at the current premium rate. You would think that but for whatever reason, you'd be wrong because it's exactly the opposite.

So what guaranteed renewable means is as long as you pay the premiums for the insurance policy, the insurance company cannot take the contract away from you. I'm going to repeat that again. Once you have the insurance, as long as you pay the insurance premiums, the insurance company cannot take the policy away from you for any reason.

Let's talk about how important this is. First of all, you get the disability insurance policy and then you get a little older. You get sick. You get hurt. You're not disabled. But now all of a sudden, you're a higher risk. So because the policy is guaranteed renewable, as long as you pay the premiums, the insurance company can't take it away from you.

That's very important and it's an important component of disability insurance policies. Almost all – I have to cover myself because there's always some area of the market that I don't know and somebody that accepts. But almost all disability insurance policies are guaranteed renewable. That's why you got to get them.

Individual disability insurance policies are guaranteed renewable. There are some other things that are interesting in the terms of that contract that you should also pay attention to. I'll repeat it again. As long as you pay the insurance premiums, the insurance company cannot take a contract away from you for any reason.

So one example I've seen many times and I've often told people, if you have a safe office job and you're going to go out and start an entrepreneurial business. Well, when you're starting an entrepreneur, as an entrepreneur, you're not going to be making a lot of money in the short term.

Thus, you won't be able to get insurance coverage. So if you're going to start a business, get your disability insurance now because you're not going to be able to get it in the early years of entrepreneurship. Get your disability insurance and you'll be covered while you're building your business.

This could also be applicable to some of you who are changing jobs or industries. If you have a safe, secure office job, get disability insurance. If you change to a job in a different place, a job of a different occupation, as long as you pay the insurance contract, the insurance company can't change the terms on you.

So if I were a middle income office professional, knowing what I know about insurance, I would buy disability insurance. Now at the time of application, you can't have any intention of changing jobs. Depending on the company, the application will specify that. You will sign and affirm that you don't have any intention of changing jobs in the forthcoming period, whether that's 90 days or whether that's two years.

Just depends on the insurance company. You got to read the contract, read the application. But if I had the safe, secure office job and I were working, I would get my disability insurance. Then if later on, five years later, I decided to go and get a job as a skydiving instructor or I decided to go and get a job on a North Sea fishing boat or I decided to go and get a job as a roofing contractor, I would keep and maintain my disability insurance coverage.

Now under many contracts, the way that they determine disability is it's whatever disability you're doing at the time of – excuse me, whatever work you're doing at the time of disability. So under many contracts that I sold in the past when I had an insurance license, I would sell the contract and I would always clarify this for my clients, why it was so important and so valuable.

Because the way the contract is written, it's whatever job you're doing at the time of disability. So you're working a safe office job. You get the coverage and then you go and you start a job as a roofing contractor. Well if you fall off a roof and if you're disabled from roofing, the job that you're doing at the time of disability, not at the time of application, then under the terms of the contract, you would be covered and you would have benefited from a significant coverage.

I don't know that a roofer is even able to get disability insurance coverage or you would have been able to benefit from an inefficient – inappropriate pricing model, a pricing model – pricing differential to your benefit because the cost of insurance for somebody who is a skydiving instructor is going to be much, much higher than the cost of insurance for somebody who's sitting in a cubicle.

So it's very important. That's why the contracts are guaranteed renewable. This can also come into play in a couple of areas where things like travel. If you anticipate traveling, I had a situation with a client one time. The husband was in – was a construction office worker. He was an office worker for a construction company and the wife was a nurse.

And in doing their planning, I recommended to them disability insurance. Now, he had some group long-term disability insurance in force. So I recommended to them a supplemental policy for him and then I recommended to the wife a primary individual disability insurance policy. Well, in looking at it, they chose to buy the primary disability insurance policy for the wife and then they chose to not buy the supplemental policy for the husband.

Well, a few years later, three or four years later, they decided to leave their careers and move to Africa as missionaries. Well, because of the disability insurance contract that I had placed for the wife, that disability insurance contract was good. They were going to be doing – she was going to be working as a medical missionary in a very rough country in Africa.

Well, under the terms of the contract, she would still be covered if she were disabled even though they're living and working full-time in this very difficult country in Africa. That was a valuable provision for her because they could pay it under US-American rates. They could pay it under the safer conditions and they wouldn't even have been available.

He was looking into getting disability insurance. I was able to find him one quote, actually placed it with Lloyds of London and I was able to get him one offer from Lloyds of London. However, the benefits were so small and the prices were so high that it just simply didn't make financial sense and I recommended to them that they not do it, that they just simply face that risk and self-insure or just care for it in another way.

So they didn't buy that policy. But if earlier they had taken my recommendation and my advice to buy the supplemental policy, numbers are unclear but at this point in my memory, maybe it was a couple thousand bucks a month, then they would have been able to maintain that policy even though they had moved from the United States working as an office work to working as a medical missionary in a difficult country in Africa.

So these are some interesting aspects to that guaranteed renewable provision which make it so valuable and this is one of the reasons why I am a strong proponent of helping people get coverage and helping people get individual coverage at an early age. At an early age before they face any difficult circumstances.

In my own family, I've had two family members that have been disabled with carpal tunnel syndrome and it's a common thing. Now both of them are doing better now but both of them have resulted in lost work due to not being able to use a computer and had to do crazy things to be able to use a computer due to overuse and repetitive strain injury.

So these types of things matter and they matter not just when you're working on a ladder every day, they matter when you're sitting in an office. Let's go back and talk about non-cancellable. If you buy a contract that's non-cancellable, that means that the company does not have any right to change the pricing of the policy.

If you buy a policy that's only guaranteed renewable, that's not non-cancellable, then the company has the right to change the pricing of the contract on a class basis. Meaning they can't zero in on Joshua Sheets and say, "Well, Joshua Sheets, we don't like what he's doing and we think that we're going to increase the premium for him because he gained weight or he got sick or he got hurt." But they could look down and say, "Look, all males between the ages of 30 and 40 in Florida were experiencing an inappropriate level of risk and so we're going to increase the premiums on all of them." They could do that.

And so the only way that I could avoid that is by buying a policy that's non-cancellable. Non-cancellable means the premiums are locked in. However, non-cancellable is going to be higher in premium costs than guaranteed renewable. In my work, I sold very few non-cancellable policies. Almost all the policies I sold were guaranteed renewable.

However, that's not a blanket recommendation. There are industries, for example, physicians, might very seriously want to consider paying the additional money for a non-cancellable contract. You might also want to seriously look into the specific insurance company that you've chosen to work with and see if you're comfortable with only a guaranteed renewable contract or if you need that additional layer of protection of a non-cancellable contract.

Finally, conditionally renewable is the last continuance provision. Conditionally renewable, many policies will be in effect for up to age 65. And you'll see this where they're conditionally renewable through age 70 if you're still working. And then at that period of time, the benefits, the terms of the contract will often change.

They'll drop the benefit period to usually two years is the standard thing. And so those are the things that allow you to make sure that the policy is going to continue in force. So this is just the basic starting line of giving you some vocabulary of disability insurance. I hope these things are interesting.

I hope that in light of the sales job that I did on the previous episode, you can start to see now a little bit of the flexibility. I hope also you can just see how, why it's so difficult for people to be able to make blanket recommendations. There is no one size fits all in insurance period, but there's especially no one size fits all solution in disability insurance.

You may safely discount advice when you hear people say, "Oh, only do this." Because as I've pointed out, hopefully you've heard the scenarios where I've indicated why I would buy short-term disability insurance and not long-term disability. Why in some situations I would buy long-term disability and not short-term disability.

Why in some periods at times I would buy a shorter benefit period, a longer benefit period, a shorter elimination period, a longer elimination period, a guaranteed renewable contract, a non-cancellable guaranteed renewable contract. All of these things matter and you have to look at your individual situation to be able to make an appropriate decision on the subject.

So I hope this is useful to you. Thank you so much for your great feedback. Two things as we go. Thank you to those of you who sign up and support the show as a patron. Lots of benefits for that for you there. Number one, you just simply put money in my pocket, which I thank you sincerely for.

Pay me some wages for this work that I'm doing and releasing to you freely. Thank you for that. I wish that many more hundreds of you would do that. It's very important that many more of you continue to do that so I can continue to keep my incentives aligned with your incentives.

I don't have to bring on lots of advertisers and things like that in order to reach my financial goals that will get in the way. So radicalpersonalfinance.com/patron. Also remember that I am now offering phone consulting. If you would like to consult with me on a topic like this, this would be a good one.

Go to radicalpersonalfinance.com/phonecall. Feel free to book a call with me if you want to put me on the phone line and talk with you and your insurance agent. If you just want to review something and you want to say, "Joshua, does this pass the sniff test? I'm getting a recommendation of this.

Does this make sense?" I'd be happy to do that type of work. So radicalpersonalfinance.com/phonecall and you'd be able to reach me there. Thank you all so much for listening. Be back with you soon.