Disability Insurance Articles

How To Know If Your Disability Insurance Coverage Is Sufficient

2011-02-04

Your biggest financial asset is your income. If it ceases because of illness or disability, you have to rely on another source of income. Disability insurance rates are designed to replace your income in case you lose it. Before you seek disability insurance quotes, first determine what coverage you already have. Government programs offer some protection, but you will probably find that they limit the amount of benefits paid and the length of time they are paid. You may have protection through your work. (Remember, employer disability programs protect you, not your dependents.) Qualifying may be difficult. If you do qualify, you may still have to serve a qualifying period during which you receive no benefits or income. If you lose your job, you lose your coverage.

Second, determine your income if you stopped working. Add the amounts from investment income. You may be able to liquidate assets to cover living expenses. You may also receive alimony payments, child support payments, rental income, or income from a spouse.

Then total your monthly expenses. Start with rent or mortgage payments (your mortgage insurance does not pay you; it pays your lender), insurance payments, property taxes, and home maintenance fees including utilities. Include a realistic total of costs for food and transportation.

If others are dependent on your income, like children at school, allow for them. A miscellaneous category can include discretionary expenses, but you can also expect spending less on items like daily transportation to work. And just because you cease working does not mean you cease paying taxes. If you are unsure of your tax obligations, ask an accountant. In any type of disability, you will most likely incur extra expenses for treatment. Therefore, include medical expenses, although the actual costs will depend on your disability.

The big unknown is the length of your disability. You could be disabled for just a couple of months, or you could be disabled for life. Or you might be only partially disabled, capable of returning to work part-time or to another job with different physical requirements. The safest way to plan is to assume you will be disabled for life.

Once you determine your needs, you can look for disability insurance quotes. With all these factors in mind, you are ready to search disability insurance quotes and determine if the coverage they give you is sufficient. Take out a sheet of paper. Take your monthly expenses and subtract your current income. The difference is what you'll need. Higher benefits for a longer period mean paying higher disability insurance rates. If they are too high for your budget, you can revise your needs and lower the extent of your coverage.