What Do I Need to Consider When Determining My Disability Benefit?
There are many things you should consider when determining how much of a disability benefit you would like to receive from your disability insurance. Your estimated spending, income, and bills are a few examples of what should be considered when determining your disability benefit amount. You also need to consider what you currently have available financially such as investments, social security disability benefits and your partner's income.
Make a Worksheet to Determine How Much of a Disability Benefit You Will Need
Trying to figure out how much money you will need for disability insurance can be confusing. To get an accurate estimate it is best to make a disability benefit worksheet. Your worksheet would need to consist of a column of what your monthly expenses will be during a disability and then a monthly income column during your disability. Then you would simply need to subtract your total monthly income from your total monthly expenses and the result would be the amount of disability benefit you would need from a disability insurance policy.
When making your disability benefit chart remember that if you were going through a disability you would probably have some reduced expenses such as gas and transportation costs along with less money needed for work clothing and other work expenditures. So make sure your entries on your disability benefit worksheet are expense estimates during a disability and not current spending habits. Take a look at the sample disability benefit worksheet below:
Sample Disability Benefit Worksheet for Disability Insurance
- Column 1: Monthly Expenses During a Disability
Home or Rent Payment:
Home Repairs:
Home Gas/Water/Electric/Phone/Cable/Other Utilities:
Food:
Clothing:
Home/Auto/Life/Health & Other Insurance Premiums:
Credit Card and Auto Loans:
Auto Gas/Transportation/Maintenance Fees:
Child Care:
Spending Money:
Total Monthly Expenses:
Column 2: Monthly Income During a Disability
Partner's Income:
Employer Disability:
Social Security:
Income from Investments:
Miscellaneous Income:
Total Monthly Income:
Total Expenses (minus - ) Total Income = Your Total Disability Benefit Needed from Your Disability Income Insurance
Don't Forget the Tax Man
Before rushing off to your insurance agent with your worksheet, there is one additional area to consider when determining what disability benefit you will need from your disability insurance. With the changes in your income during a disability, there is likely to be a change in your taxes. You will probably have reduced wages and this will change both your state and federal income taxes. The tax on your investment income may change too resulting in an overall lower tax rate. And, your disability income insurance will be tax-free if you paid for it with after-tax dollars. For the most accurate disability benefit estimate it is best to take your worksheet to a tax professional or accountant. You don't want to wait until after your disability to find out that you don't have enough money. Most experts will agree that it is better to figure too high than too little when determining your disability benefit amount for your disability insurance.
