Author Topic: Question: Long Term Disability Monthly Benefit Amount  (Read 1908 times)

SomedayStache

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Question: Long Term Disability Monthly Benefit Amount
« on: June 19, 2015, 11:24:55 AM »
I've gotten two long term disability quotes.  Both of the policies would pay out $3000 / month.  This is enough to cover our monthly spending budget, but is nowhere near the actual salary I'm making now (~$83,000 gross annually / ~$6,900 gross monthly).

Where did this $3000 number come from? 

The annual premium costs for the disability policy are quoting at between 1.5% and 3% of my gross salary.  This percentage cost seems in line with what I have seen other people claim their disability policies cost them. But I expected the monthly payout amount to be more in line with my actual salary.

Does anybody have some insight here?

MetalCap

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Re: Question: Long Term Disability Monthly Benefit Amount
« Reply #1 on: June 19, 2015, 11:51:07 AM »
SS,

I think there are a couple things intertwined in your question here.

If you're at a decent salary, most insurance companies will assume (or know if they know your company) that your company provides some sort of long term disability insurance.  A lot of times insurers will only try to estimate the gap between company insurance and salary.

The premium costs are not based on what you make but rather the likelihood of you using the plan.  Based on how healthy you are, the job you work etc, companies take that risk into account and determine at what level they will be profitable.  Different companies see you differently/focus on different industries/ have different risk profiles which creates the range of premiums.

As an aside, if your company policy covers your expenses (at no cost to you) it may not be worth it to purchase another policy, spending money to protect you from a non-existant shortfall if you wer disabled.

Gin1984

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Re: Question: Long Term Disability Monthly Benefit Amount
« Reply #2 on: June 19, 2015, 11:54:11 AM »
My husband's disability insurance payout was 60% of his salary, but that should be covered in your paperwork.

SomedayStache

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Re: Question: Long Term Disability Monthly Benefit Amount
« Reply #3 on: June 19, 2015, 12:48:55 PM »
My main question is why the monthly payout is so much lower than my salary - and wondering if this is typical.

As a federal employee I have no disability coverage through work at all.

SomedayStache

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Re: Question: Long Term Disability Monthly Benefit Amount
« Reply #4 on: June 19, 2015, 01:40:33 PM »
I asked this question to one of the agents I am getting a quote from and his answer was that federal employees actually do have a form of disability insurance.  It is the FERS disability retirement.  The calculators take this into account when determining a payout and that is why I am getting lower benefit estimates then I anticipated.

I need to look into this deeper because it might change my decision to apply for a private policy - but a cursory investigation shows that a FERS disability retirement(under age 62) pays 60% of salary (minus any SS benefits) for 12 months after which the amount paid drops to 40%.   Despite lots of googling of 'Federal Employees' and 'long term disability' I somehow did not run across this nugget of knowledge until now.