Like life insurance, disability insurance is designed to protect you and your family in the event you lose your income. Life insurance protects an income loss is due to death. Disability insurance (or DI) covers loss of income is due to sickness or injury.
Determining the amount of disability insurance you need requires crunching some numbers, just like with life insurance. To put it briefly – this involves calculating how much you make and how much you have that needs protecting. This process is called a needs analysis. You and your agent should take some time to analyze how much DI coverage you can obtain, and determine the policy that best fits your needs.
First – and most obvious – is your income, which can be established from a federal W-2 form or tax return. Some other information that is important for this analysis would be:
• Where you live, your occupation, married, number of kids;
• Other insurance (health, life, etc.), coverage amounts and beneficiaries;
• Worker’s compensation and Social Security eligibility;
• Business information like location, job title and duties, salary, fringe benefits like group insurance and vacation/sick days;
• Personal assets like homes, cars, savings and investments; and
• Liabilities, like monthly expenses (including debts and maintenance).
Once your agent or broker compiles all of this information, he or she can determine a suitable amount of disability coverage you will need to care for your family and allow you to recover fully. The amount of insurance can be determined by the average duration of a disability based on age at the time of the disability (which was covered in a previous post).
For more information about a needs analysis and how you can get one for yourself, visit www.DoctorDisability.com and make contact with us. We’ll help with this process so you understand what we do with the information and why it’s important in getting you the best coverage for you and your family.