How Much Can You “Benefit”?
Determining the amount of disability insurance benefits you may qualify for is not always as simple as establishing monthly expense and monthly income numbers. There are other factors that go into establishing a DI policy for you – and believe it or not, the maximum amount is usually a percentage of your gross monthly income – and it’s not 100 percent. The typical amount is usually 70 or 75 percent of your income number, and this is determined by several factors:
•State Law – Most states have laws on the books that limit the amount of DI benefits that can be paid. The reason states have this provision in place is to prevent someone from faking a disability to receive benefits equal to their income for not working. The belief is that someone is less likely to partake in fraudulent activity – or prolong a disability claim – if they are receiving only a portion of their regular earnings on a monthly basis.
•Other Insurance Coverage – Most DI policy applications ask for information regarding any other group or individual policies you have; the amounts provided for on those policies will affect the amount a company will pay out, as state law again typically allows only a percentage of income to be replaced and no more. This process helps eliminate “over-insuring” through the layering of insurance policies. So make sure you know about your other coverages, especially the group plan you may have at work.
•Unearned Income & Net Worth – If you make a significant amount of money from unearned income (say, $15,000 or more per year) and/or you have a high net worth (your assets far out value your liabilities), you could be denied DI coverage or offered a low benefit amount, because you could be considered “self-insured” – especially with a high net worth, where you could survive a long disability by selling off assets.
In the end, however, receiving 70 percent of your gross monthly income – it turns out – may actually be close to your current take home pay. Thus, you would be whole again or very close to it. Talk to a professional at Doctor Disability for more information about how to determine the maximum amount of benefit you can get and finding the right policy for you and your family.