Best of Blog Posts for week of July 15th

MarketWatch takes a look at How the Bubble Destroyed the Middle Class

Investopedia says Why Extreme Couponing Won't Work For You

DoughRoller tells us How to Build a Website for Your Business

FreeMoneyFinance discusses  10 Ways to Waste Money on a Car

GetRichSlowly examines The Blurry Line Between Experiences and Stuff

Buy 2 Get 1 FREE - Video Games on Amazon

Amazon is having a Buy 2 Get 1 Free sale for select video games right now.

Here is the : list of specific games that are eligible.   They have a lot of popular PS3, Xbox 360 and Wii titles.     If you're in the market for specific games then this could be a good deal for you.   

On the other hand buying video games used is generally a cheaper option, so I'd consider that before buying new. 

This article may contain referral links which pay this site a commission for purchases made at the sites.

Cumulative Bond Default Rates

Data from the Municipal Bond Fairness act has cumulative historic default rates for various ratings of municipal and corporate bonds.

Here is the table :

CUMULATIVE HISTORIC DEFAULT RATES [in percent]
	Moodys		S&P
Ratings Categories	Muni	Corp	Muni	Corp
Aaa/AAA	0	0.52	0	0.6
Aa/AA	0.06	0.52	0	1.5
A/A	0.03	1.29	0.23	2.91
Baa/BBB	0.13	4.64	0.32	10.29
Ba/BB	2.65	19.12	1.74	29.93
B/B	11.86	43.34	8.48	53.72
Caa-C/CCC-C	16.58	69.18	44.81	69.19
Investment Grade	0.07	2.09	0.2	4.14
Non-Invest Grade	4.29	31.37	7.37	42.35
All	0.1	9.7	0.29	12.98

Source. Moody's, S&P.

A few things strike me about this. First of all the cumulative default rate for junk bonds is awfully high. On the other hand the cumulative default rate for investment grade bonds is quite low. There is a significant difference in the risks of default between high rating and low rating bonds over their lifetime.

How Much Does Long Term Disability Insurance Cost?

I am thankful that I have long term care insurance provided free benefit by my employer.    However many people do not get such a benefit for free.   According to BLS data only 33% of employees in the private sector have access to a long term care insurance plan through their employer.

First of all we have to answer :

What is Long Term Disability Insurance?

Long Term Disability Insurance (LTD) pays you a monthly or annual cash benefit if you become disabled such that you are no longer able to work.    Policy terms differ but a typical policy may pay 60% of your wages from 1 year after the point of disability up until you hit age 65.   Generally policies will pay a % of wages with a cap.  For example an LTD policy might pay 70% of wages with a cap of $5,000 a month.    Policies also often exclude short periods so they only kick in if the disability is long term in nature.  If you are disabled for 6 months then the LTD policy may not take effect.   This is a pretty brief explanation of the nature of LTD.

LTD not LTC

Just a quick note, Long Term Disability insurance is not to be confused with Long Term Care insurance.   LTD is if you are disabled and unable to work and will pay a cash benefit to help replace your lost wages.  LTC is to help pay for specialized medical care such as you may receive in a nursing home during your elder years.   These are two different things entirely.

Group Rates versus Individual Plans

If your employer happens to offer LTD policy coverage as a group rate then it will probably be much cheaper than if you were to buy a policy on your own.   Employers like mine that do provide LTD coverage often do so without requiring an employee contribution.  However some employers offer LTD as a optional policy.  

Ok, So what Does LTD cost then?

Unfortunately I don't find easy to access references that cite solid numbers for LTD policies.   There are many examples out there, but they are based on just a few examples.   At best all I can do is then cite some references that give some example costs.   This will at least give a ballpark idea of what LTD can cost you.

Costhelper gives a rough cost estimate of 1-3% of your wages.    By this they mean that the premium cost would be about as much as 1-3% of your income.   Generally disability insurance is tied to your income so if you make a higher income you'll want a higher disability insurance rate.   If you assume a 2% rate then someone making $50,000 a year would pay $1,000 a year for the disability policy.

SmartMoney wrote an article Do You Need Disability Insurance? and there they say for individual policies:
"Here's one example from MetLife: A 40-year-old male non-smoking business executive would pay $1,150 in annual premiums for $3,500 per month in benefits delivered up to age 65 with a 90-day waiting period."

The insurer Unum says "Here is an example of an individual policy that may be purchased through an independent insurance agent. A 40-year-old professional man who makes $50,000 a year would pay about $1,700 a year for a policy that would pay him $2,900 a month for up to five years for a covered disability."
 
Insure.com discusses The Basics of Long Term Disability Insurance and say for group policies that:
"The average annual premium for a new group LTD policy in mid-2009 was $238 per person based on a 158-person group, according to King."

Generally speaking then group policies can often be had for a few hundred dollars whereas individual policies may cost $1000 to $2000 range.    The exact costs will differ based on age, gender and occupation.