Disability Insurance...how much do we "need"?

[saywhatnow]

DH's company will provide about $4200 after taxes in the event of a disability (will pay until age 65). We have also purchased a supplemental policy through our own insurance company that will provide an additional $1664 (not taxed). We'd be at a total coverage of $5864, after taxes. This is a less than DH makes now. If I was able to continue working my current full-time job and the kids were in public school (the will start private next year), we could afford to stay in our current house and be kind of tight financially. We could also downsize our life (smaller house, not as nice cars) and be absolutely fine.

My concern is I THINK we'd be fine but I can't KNOW. As I'm thinking through it, all the what if's come into play...what if he's so severely disabled we have crippling medical costs? Will we really be able to save for a comfortable retirement, kids' college?

What is prompting all of this is we have the option to increase his disability coverage (roughly add another $1500 of coverage for about $700 per year). I'm not sure that I think we need that. Sure, we could insure ourselves up to our eyeballs but when do we say, enough is enough. Thoughts?

[Deleted]

Does that total include the amount of SSDI he'd be eligible for?

[nonsenseabound]

Most people have 60% of their salary covered.

[saywhatnow]

Oct 20, 2014 14:43:30 GMT -5 nonsenseabound said:

Most people have 60% of their salary covered.

Yes, this is what his plan states but it doesn't clearly state if it is 60% of his base salary or 60% of his base and commissions. I went with just base salary to be safe in my calculations.

[saywhatnow]

Oct 20, 2014 14:41:01 GMT -5 @ameliapond said:

Does that total include the amount of SSDI he'd be eligible for?

Actually, no. Not sure how much he'd be eligible for or how that would effect how much his employer would pay.

[mich1]

You will need to contact his HR to determine if the 60% income is offset by SSDI. They frequently are with employer provided disability, and the total he would receive is 60%, which is SSDI and his employer contribution to bring it up to 60%. This income is taxable.

To roughly determine what your SSDI would be, look at your last statement, it should be on there. It is about equivalent to what you would receive from SS at your retirement age.

One thing you might want to check into is find out how your husband's employer handles his health insurance. Mine continued to pay until I could go on Medicare (you need to be disabled 2 years). If your husband is carrying health insurance for the family, you might be on the hook for the entire premium.

[Deleted]

Your husband is way, way more likely to be disabled than to die early.

If the supplemental coverage seems too expensive, look at a shorter benefit period (2 years vs to age 65) as most claims are resolved by that time.

There's also riders you can add to cover retirement contributions- if he's disabled, the ins. Company will continue to make contributions at the same level on his behalf.

I just really love insurance.