Disability Income Insurance Can Replace Your Earnings if You Can't Work Disability income insurance is intended to replace your earnings if you are injured or ill and can't work for an extended period of time. All insurance requires premium payments and, as a general rule, the more generous the provisions, the expensive the premiums. Taking the time to gather information about your sources of disability income and doing some simple arithmetic not only helps you determine the amount of coverage you'd need, but could reveal sources you forgot or didn't know about. The more you already have available, the coverage you have to purchase, and the less coverage you have to purchase, the the premium you have to pay. To arrive at the amount of disability income you would have to provide for yourself, you'll compare your earnings to the benefits you'd receive from government, employer, or private programs. The is how much you'd be short-and it is extremely unlikely that you wouldn't be short. 1. Start with your pay. 2. Determine if you'll be eligible for Social Security disability. Remember that you will only be eligible if you expect to be disabled for at least 3. Determine if you'll be eligible for disability benefits from other government programs. Remember that if you're hurt on the job, you will probably be eligible for disability under. 4. Ask your employer about company-sponsored disability plans with benefits. Many companies provide fully paid programs as part of their basic benefits packages. An example is sick pay. Also, although they are not exactly disability pay, see if you have paid vacation or personal days coming to you. 5. Include any proceeds you may have coming from a group disability plan in which you participate. Compare the sum of your figures from Steps 2-5 to your pay amount in Step 1 to determine the amount you would need to maintain your current income level. Note that since other sources of income unrelated to your disability continue, you including them here in your analysis of the financial changes you can expect as a result of your disability. Computing Monthly Disability Needs Van wants to estimate his monthly disability income needs in case he is injured or ill and can't work for an extended period of time. Van has gathered the following figures, on a current, per-month basis. - Van's gross pay is $5,400 and take-home pay is $4,000. - If Van is eligible for Social Security disability, his benefit will be $2,000. Van expects to be disabled for 5 months. - Van is not eligible for any other government programs. - Van's company does not provide disability benefits. - Van is not enrolled in a group disability income insurance plan. Complete the following table for the third month of Van's disability