How the Disability Insurance Calculator Works
This calculator determines how much disability insurance coverage you need by calculating your income replacement target (typically 60% of gross income), subtracting any employer-provided disability coverage, and identifying the monthly coverage gap. It also estimates how long your emergency savings would last and approximates your monthly premium.
Why You Need Disability Insurance
- 1 in 4 workers will become disabled before reaching retirement age
- The average long-term disability claim lasts about 34.6 months
- Social Security Disability Insurance (SSDI) covers only about 40% of pre-disability income on average
- Most employer short-term disability plans only last 3-6 months
- Disability is the leading cause of mortgage foreclosures
Types of Disability Insurance
Short-term disability (STD) covers 60-70% of your salary for 3-6 months. Long-term disability (LTD) kicks in after STD expires and can last 2 years, 5 years, or until age 65. Individual policies offer better coverage than group plans because benefits are tax-free when you pay the premiums.
Frequently Asked Questions
How much disability insurance do I need?
Most experts recommend coverage that replaces 60-70% of your gross income. After accounting for any employer-provided disability benefits, you need individual coverage to fill the gap.
How much does disability insurance cost?
Individual long-term disability insurance typically costs 1-3% of your annual salary. For someone earning $75,000/year, expect $62-$188 per month depending on the benefit period and elimination period chosen.
What is the elimination period?
The elimination period is the waiting time between becoming disabled and when benefits start (typically 30, 60, 90, or 180 days). A longer elimination period means lower premiums but you need more savings to cover the gap.
Does my employer provide disability insurance?
Many employers offer short-term disability (3-6 months) and some offer long-term disability. Check your benefits package. Even with employer coverage, you may need individual supplemental disability insurance.
Is disability insurance worth it?
Yes. Your ability to earn income is your most valuable financial asset. A 35-year-old earning $75,000/year will earn over $2.25 million by age 65. Disability insurance protects this earning potential for a relatively small premium.