Did you know that typically, short-term disability covers 60% of your paycheck for up to 6 months? Read more about the basics of group disability insurance from Mike Smith at CPS Horizon Financial so that you can feel prepared before renewing your benefits.
For more information on how WFA can help you determine how much life or disability insurance is needed, call us today at 414-727-8181.
Understanding Group Disability Insurance
- If your employer pays for both short-term and long-term disability insurance, consider yourself lucky. Typically short-term disability covers 60% of your paycheck for up to 6 months. Benefits may be capped; so it may not actually be close to 60% of your paycheck, and benefits will be taxable. Plans vary, so check with Human Resources or your employee handbook.
- Long-term disability insurance (LTDI) offered and paid by the employer typically covers 60% of pay and has a monthly cap of $6,000 to $10,000. Benefits start after 6 months of a disability and can last until age 65 or 67, should the disability be deemed permanent. Benefits will be taxable.
- One should determine whether taxable benefits equal to 60% of your paycheck is enough to maintain the current lifestyle and pay bills. If not, find out if your employer offers supplemental long-term disability insurance through payroll deduction. This will likely be cheaper than the open market and should be strongly considered.
- If supplemental LTDI is not available, go to the open market and consider purchasing an affordable policy to work in conjunction with the group LTDI. In contrast to an employer group plan, proceeds from a private LTDI policy are tax-free.