How Much Does Disability Insurance Pay?

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To protect your income, you could purchase a disability insurance policy that would pay you a monetary benefit if you become disabled. Depending on what type of disability insurance policy you buy, your financial benefit can vary. Understanding in advance how much you can be paid is important so that you are prepared if you become disabled.

Short-Term Disability

One type of disability insurance that you can buy is a short-term disability policy. This is a type of insurance that is designed to start paying as soon as two weeks after you become disabled and last for up to six months. With this kind of policy, you can expect to receive somewhere between 40 and 65 percent of how much you made before you became disabled. This helps replace a large portion of your income, but not all of it.

Long-Term Disability

Long-term disability insurance is another type of policy that you can buy that will provide you with a financial benefit if you become disabled. This type of insurance is designed to pick up where the short-term policy left off. For example, after you have been disabled for about six months to one year, you can start receiving a financial benefit of somewhere between 50 and 65 percent of what you received while you were still working.

Taxable Benefits

Once you start receiving disability benefits, it is important to determine whether you get to keep all of the money that you receive or whether some of it has to go back to the government in the form of income taxes. Whether or not your benefits are taxable depends largely on whether you paid for the policy or your employer did. If your employer paid for the policy premiums for you, then the benefits you receive are taxable. If you paid for the premiums out of your own pocket, the benefits are not taxable.

Checking the Policy

Before you choose a disability insurance policy, it is important to review the terms that are provided by the insurance company. When you know that you could receive anywhere between 40 and 65 percent of what you previously made, you realize how important it is to check each policy carefully. Buy the policy you can afford and that can give you the largest percentage of your previous income.

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