How Are Monthly Disability Benefits Calculated?


Quick Answer

Social Security calculates monthly disability benefits by counting the number of years worked and the amount earned and applying a median income for that occupation to determine an average upon which to base the monthly benefit. Other disability benefit providers may use entirely different methods to compute monthly benefits.

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Full Answer

The average median income calculation is called the Average Indexed Monthly Earnings, or AIME.

After determining the number of years worked and the average monthly earnings received, the years where the claimant had the greatest earnings are examined. Dividing the total amount earned in the years with the greatest earnings by the total months in those years, applying the AIME and then a factor to consider inflation and the cost of living adjustments during that time produces the monthly disability payment.

Monthly disability payments may also be provided by other sources, such as temporary disability insurance plans or private insurers. Temporary disability insurance is offered in a few states to provide disability benefits for injuries or disabilities that are not work-related and are not expected to last beyond a specified period. This benefit is normally funded through employer contributions and employee payroll deductions and is computed as a percentage of the injured worker's current salary. Disability payments by private insurers may be a specified amount, the person's current salary or portion thereof, or computed by some other means, as agreed upon by the parties to the insurance contract.

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