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If you can answer these questions to your satisfaction (or if you already have some form of DI), then you don’t need to worry about thinking about this. However, if you don’t like your answers, or if you are unable to answer the second question, it’s time to think about some type of disability insurance. Remain- ing unprotected is one of the surest ways to not reach your goals, and perhaps devastate you and your family financially.

Determining Your Need The point of disability insurance is to replace all or most of your income should something happen that would render you unable to earn a living. Since most plans would allow you to receive your ben- efits tax-free, you really only need to concern yourself with replac- ing your net income (what you bring home after taxes). By looking at what benefits you currently have available to you, you can esti- mate what your need is and how much coverage you should pur- chase in an individual plan.

The first thing you should do is look at last year’s tax return. Take your gross income and subtract all taxes paid, including social secu- rity tax. Don’t include any income you receive from dividends or from outside sources, just refer to your job income. Then divide this total by 12 to calculate your monthly net income.

Then, estimate your social security benefits. Not all people are eligible, so don’t be surprised if you find out that you won’t be able to receive them. If you are eligible, you can receive an estimate of your benefits on the social security Web site (see previous footnote), or by calling your local social security office. It’s important not to rely on this, so although you can use these figures to help estimate your need, please keep in mind that 40 percent of all claims are denied. The likelihood of receiving benefits is very small, and it takes five months to begin receiving them. There are other types of benefits that you may be eligible for through both the government and other types of group policies. I’m not going into these here, but

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