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In: Finance

Sara works at a firm that does not offer disability insurance to employees. She is considering...

Sara works at a firm that does not offer disability insurance to employees. She is considering buying a disability policy on her own. What is the maximum percent of her salary that an insurance company would typically offer as a benefit? a. No more than 75% of her salary. b. Approximately 25% of her salary. c. No more than 100% of her salary. d. Approximately 60% of her salary.

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Expert Solution

Short-term disability plans typically pay benefits for when someone is out of work for less than or up to 13-26 weeks depending on the plan. The payout is typically 50-60% of one’s salary, but some policies can go up to 80% of the salary.

Long-term disability plans typically pay benefits for when someone is out of work more than 30 days (or even longer). It’s best to coordinate coverage between LTD and STD so that once sick pay and STD benefits have run out, LTD benefits start immediately. LTD can range from several months to several years of coverage and typically also replace 60% of pay.

So, according to above,the answer should be (d) Approximately 60% of her salary.


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