Comprehensive Guide
Learn more in our Insurance Guide.
How it works
Disability income replacement analysis measures the monthly shortfall between the money that keeps arriving if you cannot work and the expenses that keep arriving regardless. Group long-term disability replaces a headline share of salary — commonly 60% — but employer-paid benefits are taxed when claimed, so sixty percent of gross lands closer to forty-five after withholding. Social Security Disability may add support, yet it pays modestly, imposes a five-month waiting period and denies most first applications, so any estimate deserves pessimism. The calculator nets benefit plus continuing household income plus realistic government support against essential monthly expenses; whatever cannot be covered is the gap. From the gap flow three figures that turn anxiety into a plan: the coverage ratio showing how much of life the policy actually funds, the lifetime shortfall accumulated to age sixty-five, and the lump sum that, invested conservatively today, would fill the entire gap — the honest price tag of being uninsured. That final number is why disability coverage outranks almost every other insurance purchase for working-age households: the probability of a long disability during a career materially exceeds the probability of dying young, yet the same family that owns life insurance often owns no disability cover at all.Formula
monthly gap = expenses - (income x replacement % / 12 + other income + other benefits)
Tips
- Haircut the headline rate for taxes — employer-paid benefits are taxable, so 60% gross is ~45% in hand.
- Discount SSDI hard in your planning: five-month wait, strict definitions, most first claims denied.
- 'Own-occupation' wording is the clause that protects specialists; confirm it before buying individual cover.
- Keep any gap fund in safe assets — disability and market crashes tend to arrive together.
- Re-check the gap after every raise; benefits are frozen percentages while expenses grow with your life.
Frequently asked questions
How much disability insurance do I need?
Enough to close the monthly gap between post-tax benefits and essential expenses, sustained to age 65. Most households discover group cover alone leaves a real gap once taxes are applied — the calculator quantifies it, then prices the lump sum that would close it outright.
Are disability benefits taxable?
It depends who paid the premium. Benefits from an employer-paid group policy are fully taxable; benefits from a policy you bought with after-tax dollars are tax-free; mixed-premium plans split proportionally. That distinction is why a '60%' group benefit behaves like ~43-45% net.
What is the difference between short-term and long-term disability?
Short-term runs weeks to months, often through an employer at partial pay; long-term picks up after the elimination period — typically 90 days — and can pay to age 65. Serious planning focuses on long-term, because that is where group cover and savings both fall short.
Does Social Security disability pay enough to live on?
Rarely alone. Average SSDI awards are modest, processing takes months to years, and the majority of initial applications are denied. Treat it as a partial offset with an uncertain start date, not a floor you can build a budget on.
What does own-occupation mean in disability insurance?
The policy pays if you cannot perform your specific occupation — a surgeon unable to operate collects even if she could teach anatomy. Any-occupation wording only pays if you cannot work any job suited to your education and experience, a far stricter test.