How To Calculate Whether Disability Insurance Is Worth It

Buying disability insurance is something that a lot of people overlook. They think nothing like that is possible for them and they decide to use the money for something else. However, your current disability coverage through your employer may not be enough to fit the bill if you were disabled. How do you determine whether you need extra disability coverage or not? Let's look at a few factors to help you decide.

Employer Benefits

If you currently work in the United States, there is a good chance that you are covered at least in part by your employer. Many states require that they at least have some sort of short term disability benefits. Depending on which state you live in, there is a good chance that state law requires some type of disability benefits. In many states, they require at least 26 weeks of coverage while others are 52 weeks.

The first thing you need to do is figure out what your state law provides as well as your employer. Go to your human resources department and ask them exactly what your disability benefits cover. They should have a pamphlet or some kind of information to give you. Once you do this, you will have a better idea of exactly what would happen if you were in an accident or became sick.

Federal Benefits

Another source that you should check is the federal government. Most people are familiar with the retirement benefits that you receive from the social security administration. However, many people do not realize that they also pay out disability payments if you have been paying into the system. The amount that you get is determined by how much money you make and how much money you have paid into the system. If you are relatively new to the workforce, you will not have much coming to you. If you've been working for 40 years, your payment would be substantially higher.

Periodically, the social security administration office will send you a summary of benefits in the mail. It will tell you exactly how much you would receive if you were to become disabled. If you have received one of these recently, the figure should still be close to that. If you haven't, call the SSA and ask them. They should be able to provide you with this information upon request.

Is It Enough?

After you have investigated both sources of disability benefits, you need to decide if it is enough to cover you. Both of these forms of disability are short term. What if you were to be disabled permanently? Where would your income come from then? Add up all of the bills that you have and determine how much you need per month to survive. If the amount that you would receive from these two sources is less, then you need to look at disability insurance.

The cost of disability insurance is small in relation to the possible benefits that you would receive. If you will not consider it for yourself, think about how your family would be supported if you could not work. Consider whether disability insurance is in your best interest.