Disability Insurance Calculator
Your disability-income gap: take-home pay versus the after-tax group LTD benefit and Social Security, the monthly shortfall, the individual own-occupation benefit to buy, its likely cost and whether savings cover the elimination period.
| Take-home pay now | — |
|---|---|
| Group LTD benefit after tax | — |
| Social Security Disability | — |
| Monthly gap vs essential expenses | — |
| Monthly gap vs current take-home | — |
| Recommended individual benefit | — |
| Estimated individual premium | — |
| Emergency savings cover the elimination period? | — |
| Lifetime income at risk | — |
In short
Aim to replace 60–70% of gross income tax-free. Group long-term disability usually pays 60% of base salary, is taxable when the employer pays the premium, is capped monthly and ends when you leave the job; Social Security Disability is strict and slow. An individual own-occupation policy fills the gap for about 1–3% of income a year, with a 90-day elimination period that your emergency fund should cover.
Who this is for: US professionals and self-employed people deciding how much individual disability coverage to buy.
How much disability insurance do you need?
- Target: replace 60–70% of gross income — roughly your take-home pay — tax-free. Insurers will not issue more than that.
- Start with what you have: group LTD (60% of salary, taxable, capped), Social Security Disability (strict, slow, average about $1,600 a month), state programmes in CA, NY, NJ, RI, HI, WA and a few others (short-term only).
- Fill the gap with an individual own-occupation policy: 90-day elimination period, benefit to age 65 or 67, non-cancellable and guaranteed renewable, residual benefit rider, and a cost-of-living adjustment if you are under 45.
- Cost: 1–3% of income a year; women, older applicants, manual occupations and short elimination periods cost more. A 5-year benefit period cuts the premium by about a third.
- Pay with after-tax dollars so benefits are tax-free — a taxable 60% benefit is really 45–50% in hand.
Assumptions
- Take-home = income − 2026 federal tax (standard deduction) − employee FICA; state tax excluded.
- Group benefit = min(salary × %, cap); taxed at the brackets if employer-paid; SSDI added only if entered.
- Recommended benefit = larger of the essential-expense gap and 70% of the take-home gap, capped at 70% of gross income less the group benefit.
Worked example
Take-home about $6,305 a month. Group LTD pays $4,750 gross, but because the employer pays the premium it is taxable, leaving about $4,362. That is $838 short of essential expenses and $1,943 short of current take-home. Recommended individual benefit: about $792 a month tax-free (the most insurers would add on top of the group plan), costing roughly $158 a month. $15,000 of savings covers 2.9 months — borderline for a 90-day elimination period. Earnings at risk: $2.85 million.
Frequently asked questions
How much disability insurance should I have?
Enough to replace 60–70% of gross income tax-free, after counting group coverage and (cautiously) Social Security — usually the amount needed to cover essential expenses with some margin.
Is group disability insurance enough?
Rarely: it covers 60% of base salary, is taxable, capped, uses an "any occupation" definition after two years and disappears when you change jobs.
What does own-occupation mean?
The policy pays if you cannot do your own job, even if you could work elsewhere — essential for surgeons, dentists, pilots and other specialists.
How much does disability insurance cost?
About 1–3% of annual income for an individual policy; a 90-day elimination period, a 5-year benefit period or a group buy-up reduce it.
What is an elimination period?
The waiting period (30–180 days) before benefits start; longer periods cut premiums, so match it to your emergency fund.
Are disability benefits taxed?
Tax-free if you paid the premium with after-tax dollars; taxable if your employer paid or you paid pre-tax through a cafeteria plan.
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