Disability Insurance Calculator
Find the gap between what your employer covers and what you'd actually need if you couldn't work.
Your income
60-70% is a common target, since disability benefits are often tax-free if you paid the premiums.
Additional Coverage Needed
$3,600/mo
Estimated cost: ≈ $864/yr
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The Risk Most People Underinsure
Life insurance protects your family if you die; disability insurance protects your income if you can't work — and statistically, a long-term disability during your working years is far more likely than an early death. Yet most people either skip individual disability coverage entirely, or assume their employer's group policy fully covers them. It often doesn't. This calculator finds the specific dollar gap between what you'd actually need and what your employer already provides.
Worked Example
| Factor | Amount |
|---|---|
| Gross monthly income | $6,000 |
| Target replacement (60%) | $3,600/mo |
| Existing employer LTD benefit | $0/mo |
| Coverage gap — what an individual policy should cover | $3,600/mo |
At a commonly cited rule-of-thumb cost of roughly 1-3% of the covered annual benefit, closing a $43,200/year gap ($3,600 × 12) might run somewhere around $432-$1,296 per year — actual pricing depends heavily on your occupation, age, and health.
Employer group LTD
- Often free or low-cost as a workplace benefit
- No individual health underwriting required
- Frequently capped at 50-60% of income with a dollar maximum
Individual policy
- Portable — stays with you if you change jobs
- Can be underwritten for your specific occupation class
- Costs more, and requires health underwriting
Closing the gap matters most for
- Higher earners, since group LTD dollar caps hit them hardest
- Self-employed or freelance workers with no employer coverage at all
- Single-income households with no second earner as a backup
- Physically demanding or specialized occupations where a disability more directly ends a career
Worth knowing: Check whether your employer pays the LTD premium or you do via payroll deduction — if your employer pays it, your benefit is typically taxable income when you receive it, which effectively lowers your real replacement percentage below the stated one.
Frequently Asked Questions
How much disability insurance do I need?
A common target is 60-70% of your gross monthly income, since benefits are often tax-free (if you paid the premiums yourself) and most people spend somewhat less once they're not working. Subtract any employer-provided long-term disability benefit to find the coverage gap an individual policy should fill.
Why only 60-70% instead of 100% of income?
Two reasons: individually-purchased disability benefits are typically tax-free, so a lower percentage still roughly matches your prior take-home pay, and insurers cap coverage below 100% intentionally, to preserve an incentive to return to work when medically able.
Does my employer's disability coverage already cover this?
Often only partially. Many employer group long-term disability plans replace 50-60% of income and are capped at a maximum monthly benefit, which can leave a meaningful gap for higher earners — this calculator's gap figure shows exactly how much.
Is short-term or long-term disability more important?
Long-term disability is generally the bigger financial risk, since it can last years or become permanent, while short-term disability (weeks to a few months) is more survivable with an emergency fund. This calculator focuses on the long-term coverage gap.
How much does individual disability insurance cost?
Roughly 1-3% of your annual income is a commonly cited rule of thumb for the annual premium, though actual cost depends heavily on your occupation, health, age, and the policy's specific terms.
Is this calculator a substitute for a disability insurance quote?
No — it estimates your coverage gap and a rough premium using common planning rules of thumb, not an underwritten quote. Actual premiums and available benefit amounts depend on your occupation class, health, and the insurer's guidelines.
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