Disability Insurance Income Replacement Calculator
Calculates the monthly disability insurance benefit you need to maintain your lifestyle if illness or injury prevents you from working. Use it when purchasing an individual disability policy or reviewing group coverage from your employer.
About this calculator
Disability insurance replaces a portion of your income when you cannot work. The formula is: monthly_benefit_needed = (monthly_income × (replacement_percentage / 100)) − existing_benefits. The replacement percentage reflects the income share you want protected — most policies cap at 60–70% of gross income, since disability benefits are often tax-free, meaning a 60% benefit approximates your after-tax take-home pay. Subtracting existing benefits (employer group LTD, Social Security Disability Insurance, or a prior individual policy) avoids double-counting coverage you already have. The result tells you exactly how large an additional individual policy you need to purchase. Benefit amount, elimination period (waiting period before benefits start), and benefit period (how long payments last) are the three core design variables in any disability policy; this calculator focuses on sizing the benefit amount correctly.
How to use
Suppose your monthly gross income is $6,000, you want to replace 65% of income, and your employer's group LTD plan already pays $1,200/month. Step 1 — target benefit: $6,000 × (65 / 100) = $3,900/month. Step 2 — subtract existing coverage: $3,900 − $1,200 = $2,700/month. You need an individual policy providing at least $2,700/month in additional benefits. If you later take a job without group LTD, your existing_benefits drop to $0 and the full $3,900/month must come from an individual policy.
Frequently asked questions
What percentage of my income should disability insurance replace?
Most financial planners recommend replacing 60–70% of your gross monthly income. This range is not arbitrary — insurer underwriting guidelines typically cap individual policies at 60–70% of gross income to preserve a financial incentive to return to work. Because disability benefits from individual policies are generally tax-free (when you pay premiums with after-tax dollars), 60% of gross often equals roughly 80–90% of your net take-home pay. Aim for the higher end of the range if you have large fixed expenses like a mortgage or dependent care costs.
How do existing employer disability benefits affect how much individual coverage I need?
Any group long-term disability (LTD) benefit you receive from an employer directly reduces the additional coverage you must purchase individually. Group LTD typically pays 50–60% of your base salary, but it often excludes bonuses, commissions, and raises — meaning your actual replacement rate may be lower than advertised. Group coverage also ends the moment you leave the employer, so relying solely on it creates a gap. Calculating the shortfall with this tool helps you size a portable individual policy that fills the gap both now and if you change jobs.
Why is disability insurance more important than life insurance for many working adults?
Statistically, a working-age adult is far more likely to experience a disabling illness or injury than to die prematurely. The Social Security Administration estimates that more than one in four 20-year-olds will become disabled before reaching retirement age. A disability leaves you alive with ongoing living expenses — mortgage, groceries, utilities — but eliminates your income, creating a double financial burden. Life insurance only pays at death, so it does nothing to replace lost income during a prolonged disability. For most earners under 60, disability insurance delivers protection where the actual risk is greatest.