What Are Pre-Disability Earnings?

Pre-disability earnings are the amount of qualifying income that a disability insurance polic♏yholder was earning before an injury. Pre-disability earnings are used to calculate how much disability income a policyholder will qualify for in the case of an injury. An injury may prevent the policyholder from working at all or prevent the policyholder from working full time.

Understanding Pre-Disability Earnings

Individuals buy disability income insurance so that they have some level of income in the event of an injury. Without disability income insurance, a worker may rely on 澳洲幸运5官方开奖结果体彩网:Social Security Disability Income (SSDI) or have no income source at all. This can be disastrous to families, particularly if the person injured is the sole income earner in the family. The typical percentage range for most disability policies is between 50 and 75% of the claimant’s pre-disability income.

Determining a Wage Baseline

Pre-disability earnings are the baseline used to calculate disability benefits. The calculation uses policyholder earnings on their last full day of active work, although some policies may use average earnings over a period. Pre-disability earnings do not include bonuses, 澳洲幸运5官方开奖结果体彩网:commission, overtime pay, or the employer’s contributions to a 澳洲幸运5官方开奖结果体彩网:retirement plan. They do include personal contributions to a retirement plan anꦉd rꦺegular salary.

The amount of disability income that a policyholder is eligible for may be set as a monthly maximum or as a p🏅ercentage of pre-disability ea🦩rnings.

Disability policies often allow an individual t🐼o also purchase a residual benefit, which allows the policyholder to receive partial benefits if they return to work part-time. The amount of residual benefit depends on the pre-disability income less any income that the policyholder can bring in through part-time work.

Several factors influence the final premium for disability income insurance. Policy premiums generally range from 1 to 3% of 澳洲幸运5官方开奖结果体彩网:gross income. The older the applicant, the higher the premium. The minimum age for applying is 18, and the maximum age is usually 60. Unlike 澳洲幸运5官方开奖结果体彩网:life insurance, the rates for disability insurancಞe for females is higher per unit of coverage than the rates for male applicants. Smokers can expect to pay more, as can those in poor health.

Example of Pre-Disability Earnings

A pol🦄icy indicates that the benefit is set at 75% of pre-disability earnings. This means that a policyholder making $80,000 a year and no longer able to work can receive a monthly benefit of $5,000 (75% * $80,000 / 12).

When looking for a disability policy, it's sensible to request that your benefit in the event of injury be close to your full take-home pay before you were disabled. The average recommended long-term disability insurance benefit should be between 60% and 80% of your after-tax salary.