Should you experience a disabling injury or illness that prevents you from working, long term disability insurance can be a big help, to say the least. Long term disability insurance benefits will work as a type of income replacement while you are unable to work. Will, however, the benefits replace the full amount of your salary while you are out of work due to your disability? Exactly how much of your salary will you receive should you need to go on long term disability leave?
How Much of Your Salary Do You Get On Long Term Disability?
Like so many questions, the answer to how much of your salary will you get on long term disability is “it depends.” It really depends on your long term disability policy. Let us take a moment to review how long term disability insurance works to better understand this answer. For every month that you are unable to work due to your disability, as defined in your long term disability insurance policy, the policy will pay out a benefit in an amount that is prescribed by your policy.
You will receive a payment of benefits in the amount specified by your policy for as long as you remain disabled or until the benefit period stated in the policy runs out. When you are looking around for a long term disability policy that suits your needs, it is important that you are aware of what you want or need your benefit amount to be if you need to access your benefits. This means that, when you are looking for a long term disability policy, you need to know whether or not you will require an amount equal to your full take-home pay you were receiving before your disability, or whether you may need more or less.
On average, long term disability insurance benefits should pay out around 60-80% of your after-tax salary. This is a pretty significant range, however, and it is not a one size fits all situation. Keep in mind that you will likely need benefits that pay for more than just the bare essentials. You may also need additional funds to cover medical bills that your health insurance does not cover. This means that you may need more than just coverage for your mortgage, electric and utilities, food, and health insurance, among other things. The 60-80% mark is generally close to the equivalent of your take-home pay because the benefits are not taxed as income like your salary usually is.
So, when you are evaluating your coverage options, find out how much you have in fixed expenses every month. This number will be your baseline requirement for what your long term disability insurance should cover. Add in a bit for discretionary expenses for things like movies and other entertainment options. Then, add in for possible costs related to disability. This includes, as stated above, things that are not covered by your health insurance.
There are so many details to uncover and address when considering long term disability insurance. For help and guidance with all of your choices, please feel free to reach out to Disability Advocates Group. Contact us today.