Protecting your FIRE

I don’t see much in the way of coverage of this topic as it relates to FIRE, however, I think protecting your assets for your family can be just as important as accumulating it. This can be especially true if you are preparing for FIRE with your spouse or partner.

Whether you are just starting out or have been in the workforce for years, in addition to the documents discussed in (reference HCP POA article) consider taking advantage of life insurance and long term care (disability) insurance.  These coverages typically can be low cost or even free employer sponsored group rate plans that are available when you are hired or during annual enrollment.

Many might discount the need for insurances thinking that what they have accumulated will be enough for the surviving spouse (but that may not be the case).  If you were still on the path to FIRE, your spouse may need to drop out of the workforce for a period of time to care for you or your children. Without the previous income, the path to FIRE for your spouse may be shifted significantly from accumulation to distribution to meet current needs.  Having the insurance as a buffer will close the financial gap to insure things go a little more smoothly.

Both Mrs. P2F and I have had two times our salary in annual employer coverage because it was provided for free.  For a number of years I also was enrolled in additional coverage through work. However, about 20 years ago, I realized that carried some risk because if I lost or left my job, that coverage would be cancelled or I could elect to continue paying the premiums but at a higher rate.  Instead we obtained coverage through a private insurer and then cancelled the employer coverage (important step not to cancel your work coverage until after you have secured another policy).  At the time, we elected to each get policies equal to ten times our salaries.  Since then we have not increased the dollar amount of the benefit as our needs have slowly declined and our assets have increased.

Disability insurance is also something many don’t take advantage of when starting a job or during annual benefit enrollment.  Here’s something to think about – if you were to become disabled today, how would you provide for yourself and for your family.  Monthly Social Security Disability Insurance benefits in 2018 are about $1,200.  Keep this in mind if you think it’s tough to survive on your take home pay now. To get a sense of what your disability benefits may be from Social Security log on to www.ssa.gov/mystatement.

If you’re just starting your career or changing jobs use the opportunity to sign up for disability insurance. The premiums are usually very reasonable and you’ll be protecting yourself and your family should you become disabled.  Statistically speaking, you are more likely to become disabled during your working career than you are to die while employed.

Similar to life insurance Mrs. P2F’s employer provides a modest LTD policy free of charge while mine provides a low cost basic policy.  About 10 years ago, my employer switched the provider and enhanced the plan with a second level of coverage that I elected to purchase.  This higher level of coverage would provide us nearly 67% of my pre-disability salary and annual bonus on an after-tax basis.  It’s an extremely rich plan and provides me a level of confidence that if something were to happen to me, our FIRE plans would not be derailed.

If you previously declined coverage, consider joining during the next benefit annual enrollment.  If you’re concerned about medical underwriting (also known as evidence of insurability), think about enrolling the next time your employer has a special enrollment period.  Occasionally employers will switch insurance carriers or change the coverage levels (like my employer did a number of years ago) and the medical underwriting is waived.

Protecting what you’ve accumulated and ensuring that your path to FIRE continues for your survivors is important. In the case of long term disability it can make the difference in allowing you to continue your journey as well.

I would like to hear what you may be doing for life and disability insurance.  Do you think it’s worth your money?

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