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  1. Business

What if you can no longer work?

New York Times
New York Times
Published Oct. 13, 2014

In case anyone has forgotten, we're all basically on our own here in personal finance land.

It began with the transition from pensions to retirement accounts, when we had to start deciding how much to save and pick among scores of (often terrible) investment possibilities.

Then came health insurance, where employers once paid the premiums but now pay less while offering a confusing menu of plans.

So it should come as no surprise that long-term disability insurance, for illnesses or injuries that put people out of work, seems to be moving in the same direction.

More responsibility. Lots of choices. Confusing products. The repetitive pattern might be amusing in its predictability if it weren't for the millions of hours people spend trying to sort these choices out and the billions of dollars they lose picking the wrong products.

"Income replacement insurance" might be a better way to think of this coverage, since that's what it is designed to do. The "long term" means that it generally kicks in after at least a few months, a period that a separate "short term" disability policy might cover in the workplace. Individuals don't shop for short-term coverage on their own, since most people would rely on savings during a brief period of illness or injury if they didn't work for an employer that offered short-term coverage.

Long-term disability insurance usually replaces up to about two-thirds of your income if you can no longer do your own job (or any job, depending on the policy terms). Premiums tend to run roughly 1 to 3 percent of your annual income.

Given the high price, most people who consider buying the coverage on their own talk themselves out of it using logic that goes something like this: I'm white collar. The odds are with me. If I go down, my extended family and friends will help. I can use my retirement savings or home equity if need be and work longer or live on less or downsize.

This may be flawed thinking. Many of these same people do have life insurance, even though the odds of early death are lower than the odds of a long period of disability.

Into this comes a start-up called PolicyGenius. Its two founders, Jennifer Fitzgerald, 36, and Francois de Lame, 31. Their five-minute insurance checkup, with its friendly user interface, is well worth taking if you don't mind revealing some personal data. But it's their attempt to sell long-term disability insurance online that is especially groundbreaking.

The company's quote generation process and long-term disability education guide are the best I've seen by far, but that's not saying much since so few companies even try to sell the policies without a live conversation.

The quotes PolicyGenius provides from insurance companies and the side-by-side policy comparison charts are a model of clarity, though the founding pair have very little experience actually selling the policies so far. Even the youngest doctors and dentists, who are big purchasers of long-term disability policies, tend to default to buying coverage from whatever agent their slightly older colleagues use.

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