Supplemental Disability (EXTRA)

[tripods68]

Right now, I pay $32.22 a month for 55% income replacement. Our Union negotiated a Supplemental Short Term Disability with New York Life Ins. The new increase will be:

75% replacement income while on 1 - 6 months on disability.
85% After 6 - 12 months.

For example:
Salary
$4000.00 replacement @ 55% = $2200 a month.
$4000.00 replacement @ 75% = +$800 (1 to 6 months)
$4000.00 replacement @ 85% = +$400 (6 to 12 month)

The Supplemental insurance extra cost will be $40.74 a month. That's a total $72.96 a month ($32.22 + 40.74). This goes up every year as I get raises.

I've been back in forth thinking if i should buy extra or not. But then again, I have disability and EF about $13K we continue to build upon every year. I don't know what should I do. I would rather keep that $40.00 a month towards EF instead. I just can't decide. Help?

[Seeker]

tripod--

I think this is a difficult decision without more info.

Things you need to consider :

Does your SO provide an adequate income (to meet expenses) if something does happen to you?

How dangerous is your job?

How likely that you may utilize disability insurance at all?

How many people doing what you do over the last year, have been injured with a work-related disability?

What kind of disability is there the possibility of (some disability may hamper your ability to work at all, forevermore?)

Would 2200/month cover expenses for a short-term disability? Coupled with your SO?

Would the additional funds really make a difference long-term as far as current expenses?



You also haven't decsribed your pay raise that the Union negotiated (if they did). The $32/month difference should be a small fraction of the entire picture.

While this is almost $500/year you pay now (just for disability)... it maybe rising to $875/year for that additional coverage.

If your "raise" more than covers that, and your risk is "high," and you have family, then maybe you should go for it anyway.

It's really your choice. You need to make a risk assessment, income and outgo (budget) assessment, and determine from there.

[tripods68]

That figure was just a sample. I work in Office environment. The likely developing disability while working is slim, but if so this would fall under Worker's Comp anyway which is separate from a short term Disability.

My actual based salary is $4446.00 per month (exclude bonus & OT) 55% of that would be $2445 per month. I get 5% annual increase per year. The biggest thing is I want our mortgage and utilities covered while on disability. Here's the breakdown of what it would cover.

$1900.00 Mortgage include PITI
$300.00 Utilities (sewer, water, gas & electric)
$150.00 Cable/Internet/Land line
$ 95.00 Gas (I wouldn't be going anywhere)
$2445.00 Total

The rest of $1641.00 (include food, car ins, loan, etc) remaining expenses our EF covers it. We have $13K EF balance now, which give us about 7.9 months of cushion (13K divided 1641.00 = 7.9 months), assuming both of us stop working. Contributions to ROTH & 529 will stop. This is the worst case scenario of course.

The conservative scenario. My wife works FT. Her net income $5000.00 a month, more than enough to cover our monthly expenses. We won't have to exhaust our EF at all. This is likely the scenario to happen but you never know. Again, our disability coverage is outside non-work related injury, like a routine knee surgery due to skiing accident for instance.