Disability Insurance Needs Calculator
Calculate exactly how much disability insurance you need to maintain your lifestyle if you can't work. Most people need 60-70% of gross income replaced. See your recommended coverage instantly.
How Much Disability Insurance Do I Need?
Disability insurance replaces your income if you become unable to work due to illness or injury. The "right" amount depends on your income, expenses, existing coverage, and financial obligations. This calculator uses industry-standard guidelines (60-70% income replacement) to estimate your needs.
What We Calculate
- Income Replacement Ratio: Typically 60-70% of gross income (tax advantages make this equivalent to net pay)
- Employer Coverage Offset: Subtract existing group disability benefits
- Recommended Monthly Benefit: How much you need from individual policy
- Estimated Premium: Approximate monthly cost (varies by age, occupation, health)
- Coverage Gap Analysis: Are you underinsured with just employer coverage?
Why 60-70% Replacement Ratio?
Disability benefits from individually-paid policies are TAX-FREE. 60-70% of gross ≈ 100% of net take-home pay.
No commuting costs, work clothes, lunches out. You need less income while disabled.
Most insurers won't sell you more than 60-70% to prevent "moral hazard" (staying on disability when you could return to work).
$100k income → $70k benefit (tax-free) ≈ your current $70k net after taxes. Perfect replacement.
Shocking Statistic
- • 1 in 4 workers will become disabled before retirement (Social Security Administration)
- • Average disability lasts 2.5-3 years (LIMRA)
- • Yet only 48% of workers have any disability insurance (EBRI)
- • Don't rely on Social Security Disability - strict criteria, 65% denial rate, $1,537/month average (2025)
Frequently Asked Questions
Do I need disability insurance if my employer offers it?
Maybe - employer coverage is often inadequate:
Short-Term Disability (STD):
- Covers 40-70% of salary for 3-6 months
- Useful for temporary disabilities (surgery recovery, pregnancy)
- NOT sufficient for serious long-term conditions
Long-Term Disability (LTD):
- Typically covers 50-60% of salary (often capped at $5k-$10k/month)
- Benefits are TAXABLE if employer pays the premium (reducing real value to 35-45% of salary)
- Coverage ends when you leave the company
- "Any occupation" definitions after 2 years (they can force you into lower-paying jobs)
Individual policy benefits: TAX-FREE, portable (keeps coverage if you change jobs), "own occupation" protection (pays if you can't do YOUR job), higher benefit caps.
How much does disability insurance cost per month?
Typical cost: 1-3% of gross income
Cost varies based on:
- Age: 30-year-old pays $100/month. 50-year-old pays $300/month (same $5k benefit)
- Occupation class: Office worker (1-2% of income), manual laborer (3-4% of income)
- Elimination period: 90-day wait = cheaper, 30-day wait = more expensive
- Benefit period: To age 65 (most common) vs 5 years (cheaper)
- Riders: Cost-of-living (COLA), residual disability, future increase options add 10-30%
Real examples (healthy, office worker):
- • 30-year-old, $5,000/month benefit, 90-day wait: $100-150/month
- • 40-year-old, $5,000/month benefit, 90-day wait: $150-225/month
- • 50-year-old, $5,000/month benefit, 90-day wait: $250-350/month
What is the difference between "own occupation" and "any occupation" disability?
Own Occupation (Best Protection):
- Pays if you can't perform YOUR SPECIFIC job
- Example: Surgeon loses hand dexterity, can't operate → gets full benefits (even if they could work as a general practitioner)
- More expensive but worth it for specialized professions
- Often available "true own-occ" for life or "own-occ for 2 years, then any-occ"
Any Occupation (Weaker Protection):
- Pays ONLY if you can't perform ANY job you're reasonably qualified for
- Example: Software engineer has back injury, can't sit at desk → insurer argues you can work remotely or teach → NO benefits
- Much harder to qualify for benefits
- Common in employer group policies after 2 years
Recommendation: High-income earners and specialized professionals should pay extra for true "own occupation" coverage for life.
What is an elimination period and how does it affect cost?
The elimination period (waiting period) is how long you must be disabled before benefits begin. Think of it like a deductible, but measured in time instead of dollars.
Common elimination periods:
- • 30 days: Benefits start after 1 month (expensive - 40% higher premium than 90-day)
- • 60 days: Benefits start after 2 months (moderate - 20% higher premium than 90-day)
- • 90 days: Benefits start after 3 months (most popular - best value)
- • 180 days: Benefits start after 6 months (cheaper - 25% lower premium than 90-day)
- • 365 days: Benefits start after 1 year (cheapest - 40% lower premium, but risky)
Best strategy: Choose 90-180 day elimination period and keep 3-6 months emergency fund to cover the gap. This saves 25-40% on premiums vs 30-day elimination.
What riders should I add to my disability insurance policy?
Essential riders (highly recommended):
- Residual/Partial Disability Rider: Pays proportional benefits if you can only work part-time or at reduced capacity. Critical - most disabilities are partial, not total.
- Future Increase Option: Lets you buy more coverage later without medical underwriting (as income grows). Essential for young professionals expecting salary increases.
- Cost-of-Living Adjustment (COLA): Increases benefit with inflation during long-term disability. Important for young people (could be disabled 30+ years).
Optional riders (consider):
- Catastrophic Disability Rider: Extra 25-100% benefit for severe disabilities (total blindness, loss of limbs). Low cost add-on.
- Student Loan Rider: Pays student loan minimums during disability (good for recent grads with debt).
- Retirement Protection Rider: Insurer contributes to retirement account while you're disabled.
Skip these: Return of premium (expensive, low value), accidental death/dismemberment (buy separate term life instead).