Julie Rios has take-home pay of $3,410 per month and a disability insurance poli
ID: 2796278 • Letter: J
Question
Julie Rios has take-home pay of $3,410 per month and a disability insurance policy that replaces 60 percent of earnings after a 90-day (3-month) waiting period. She has accumulated 80 sick days at work. Julie was involved in an auto accident and was out of work for four months. How much income did she lose, and how much would be replaced by her disability policy? How else could she replace her lost earnings? If after four months Julie could only return to work half-time for an additional three months due to continuing physical therapy, how might she benefit from a residual benefits clause? How much will she receive in disability benefits for this period?
Question - Before applying sick day benefits and disability income benefits, Julie would lose $________of income.(Round to the nearest dollar.)
Explanation / Answer
Julie's take-home pay = $3410 per month
Disability benefit = 60% of $3410/month = $2046
Disability wait period = 90 days
Disability benefits are not paid out immediately after the accident but after a wait period of 90 days
Number of sick days accumulated = 80
Number of days out of work = 120
She loses pay for 40 days only
After the accident, Julie still gets paid for 80 days in lieu of her sick leaves. But disability benefits start only after 90 days so for the next 10 days she doesn't get anything until disability benefits start.
Total income lost = $3410/ month * number of months not paid for = $3410 * 40/30 = $4546.67
Disability benefit received = 60% of $3410 * (number of months out of job due to disability - 3 months wait period)
= 60% of 3410 * (4-3) = $2046
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Residual benefits clause covers any partial loss of income and the disability benefit is paid out in that proportion.
So if her loss of income for the next three months is 50% of her pay, she will receive 50% of the disability benefit she was receiving which is equal to 50% of $2046 = $1023 per month
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Before applying sick day benefits and disability income benefits, Julie would lose $_18755__of income.
She would lose full pay for first four months and halfpay for the next three months.
So her total loss of income before sick leaves and disability benefits = $3410 * 4 + $1705 * 3 = $18755
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