Disability Insurance Calculator

Calculate how much disability insurance coverage you need to protect your income. Determine coverage gaps and estimated premium costs.

Income & Coverage Details

$
%

Typical range: 60-80%

%

Percentage of income covered by employer LTD

$

Housing, food, utilities, insurance, minimum debt payments

months

Months of expenses saved

Enter your income and coverage details to calculate your disability insurance needs.

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Pro Tip

If your employer offers voluntary LTD, consider paying the premium yourself with after-tax dollars. This makes benefits tax-free if you ever claim, effectively increasing your net replacement ratio by your marginal tax rate.

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Understanding Disability Insurance

Disability insurance replaces a portion of your income if you become unable to work due to illness or injury. Over the course of a career, you are far more likely to become disabled than to die prematurely -- about 1 in 4 workers will experience a disability lasting more than 90 days before reaching age 67.

Most policies replace 60-80% of your pre-disability gross income. Benefits are typically capped below your full salary to maintain an incentive to return to work. If you pay premiums with after-tax dollars, benefits are generally tax-free. Employer-paid premiums mean benefits are taxable.

Short-term disability (STD) covers the first 3-6 months after a disability. Long-term disability (LTD) kicks in after the elimination period (typically 90 days) and can pay benefits for years or until age 65. Own-occupation policies pay if you cannot perform your specific job; any-occupation policies only pay if you cannot perform any job.

Employer group LTD plans typically cover 60% of salary up to a benefit cap (often $5,000-$10,000/month). Individual policies can supplement this coverage but are more expensive. Social Security Disability Insurance (SSDI) has strict eligibility requirements and average benefits of about $1,500/month.

Disability Insurance Coverage Formula

Coverage Gap = (Income × Target %) - Existing Coverage

Where:

Target % = Desired replacement ratio (typically 60-80% of gross income)

Existing = Employer LTD, Social Security, other sources

Gap = Additional individual coverage needed

Premium = Typically 1-3% of the monthly benefit amount

Example

Professional earning $7,000/month with no employer coverage:

  • • Target coverage (60%): $7,000 x 60% = $4,200/month
  • • Existing employer coverage: $0
  • • Coverage gap: $4,200 - $0 = $4,200/month needed
  • • Estimated premium: $42-$126/month (1-3% of benefit)

Frequently Asked Questions

How much disability insurance do I need?
Aim for 60-80% of your gross monthly income from all sources combined (employer plan, individual policy, Social Security). If you pay individual premiums with after-tax dollars, the benefits are tax-free, so 60% replacement may be sufficient.
What is the elimination period?
The elimination period is the waiting time between becoming disabled and when benefits begin (similar to a deductible). Common options are 30, 60, 90, or 180 days. Longer elimination periods reduce premiums but require more savings to bridge the gap.
What is the difference between own-occupation and any-occupation?
Own-occupation pays if you cannot perform the duties of your specific occupation. Any-occupation pays only if you cannot perform any job for which you are qualified. Own-occupation policies are more expensive but provide significantly better protection, especially for specialists.
Does my employer plan provide enough coverage?
Usually not. Employer LTD plans typically cover 60% of base salary (excluding bonuses) up to a benefit cap of $5,000-$10,000/month. Benefits are taxable if the employer pays premiums. High earners often need supplemental individual coverage.
How long do disability benefits last?
Short-term disability typically lasts 3-6 months. Long-term disability can provide benefits for 2, 5, or 10 years, or until age 65. Policies that pay to age 65 provide the most comprehensive protection but cost more.