Disability Insurance Calculator

Disability insurance is the most overlooked yet critically important coverage for working-age adults. While most people insure homes ($300,000 assets) and cars ($30,000 assets), they neglect insuring their income-generating ability ($2-4 million lifetime earnings for average workers). Statistics reveal the risk: 25% of today's 20-year-olds will experience a disability lasting 90+ days before reaching retirement age. Without income protection, disability forces families to drain savings, accumulate debt, or declare bankruptcy.

Disability insurance replaces 50-70% of gross income if you become unable to work due to injury or illness. Policies vary significantly in definition of "disability"—own occupation (can't perform your specific job, most valuable for high-skill professionals) versus any occupation (can't perform any job you're reasonably qualified for, less protective). Elimination periods (30, 60, 90, or 180 days before benefits begin) function like deductibles—longer periods reduce premiums but require larger emergency funds to bridge the gap.

Group disability through employers offers base coverage but typically has limitations: benefits capped at $5,000-10,000 monthly regardless of actual income, coverage ends if you change jobs, and benefits are taxable if employer paid premiums. Supplemental individual policies fill gaps, cost more, but provide own-occupation definitions and tax-free benefits (when you pay premiums). For high-earners, professionals, and self-employed individuals, individual policies are essential since group coverage caps leave significant income exposure.

Cost-benefit analysis shows disability insurance is typically worthwhile for working-age adults with limited savings and dependents. A 35-year-old earning $75,000 pays approximately $100-150 monthly for quality individual coverage—2-2.4% of gross income. If disabled for just 2 years, benefits total $90,000-126,000, far exceeding lifetime premiums paid. However, healthy disabled individuals face decades of lost income. The alternative to insurance—self-insuring through massive savings—requires net worth exceeding 10-15x annual expenses, unrealistic for most workers under 50.

Short-Term Disability (STD)

Long-Term Disability (LTD)

Common Options:

The elimination period (or waiting period) is like a time-based deductible. It's the number of days you must be disabled before benefits begin.

Own Occupation

Modified Own Occupation

Any Occupation

After-Tax Premiums ✓

Pre-Tax Premiums ✗

Cost of Living Adjustment (COLA)

Residual/Partial Disability

Future Increase Option

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  Relying only on employer coverage: Employer plans typically cover only 60% up to $10,000/month and aren't portable if you change jobs.
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  Waiting until you're older: Premiums increase 10-15% every 5 years, and health conditions can make you uninsurable.
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  Choosing "any occupation" to save money: Saves 15-20% on premiums but makes it extremely difficult to qualify for benefits.
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  Skipping the residual rider: Many disabilities allow some work capacity. Without this rider, you get nothing unless totally disabled.

Absolutely Need DI:

Probably Need DI:

Rule of thumb: If you couldn't maintain your lifestyle for 2+ years without your income, you need disability insurance.