Justin wants to be sure that his family's expenses would be covered if he were to become disabled for a period of time. His estimated household expenses for the coming year to be approximately $4,800 per month, and if necessary, he could temporarily cut expenditures for job-related expenses ($50), savings ($725), and other discretionary spending ($700). His wife Monica is a stay-at-home mom, so one alternative would be for her to return to work. However, she might not be able to earn enough to cover the additional child-care expenses. Justin's salary is $65,000 and his employee benefit plan includes 30 paid leave days, as well as disability insurance that pays 65% of his salary after 90 days. If the family has an emergency fund of $10,000, does he have sufficient disability income protection?

Question

Quizplus · Accepted Answer

Justin's monthly expenses are $4,800. He can cut $50 + $725 + $700 = $1,475 in expenses, leaving $3,325. His disability insurance will pay 65% of his salary, which is $65,000 * 0.65 = $42,250 / 12 = $3,521 per month. After the 90-day waiting period, Justin will have a surplus of $3,521 - $3,325 = $196.

Justin Wants to Be Sure That His Family's Expenses Would