Disability Insurance Calculator

Disability insurance replaces a portion of your income if you become unable to work due to illness or injury. The core calculation determines how much monthly benefit you need, how long it should last, and how much the premium will cost relative to your income.

What this calculator works out: Target Benefit = Gross Monthly Income × Replacement Ratio (0.60–0.70)

That is the figure insurers quote against, and it is why the input asks for gross rather than take-home. Most policies cap out at 60–70% of pre-disability gross income, and the cap is not stinginess. Benefits bought with after-tax dollars arrive tax-free, so 60% of gross usually lands close to your full take-home. Insurers also want a gap between benefit and salary, on the reasoning that a policy paying 100% removes any financial reason to return to work.

Two things you have to work out yourself, because they turn on numbers this page does not ask for:

Your genuine monthly shortfall. Take-home pay minus any income that keeps arriving while you are ill (rent, dividends, a spouse’s earnings) minus the expenses that stop when you stop working, such as commuting and lunches out. The target benefit above is a starting point, not that number.

Your emergency fund. Benefits do not begin on day one. They begin after an elimination period, commonly 30, 60, 90, 180 or 365 days, and you are living on savings for every one of those days. Monthly expenses multiplied by the elimination period in months is what you need banked. A longer wait cuts the premium sharply, which is the main lever people have if the quote comes back too high.

Premium cost benchmarks:

• Short-term disability (STD): 0.3–0.5% of annual salary per year
• Long-term disability (LTD): 1–3% of annual salary per year
• Typical rule: budget 1–3% of your gross annual income for comprehensive coverage

Policy definitions, and the one that matters most:

• Own-occupation: pays if you cannot perform YOUR specific job. Best coverage, most expensive, and the only kind worth having if your income depends on a specific skill. A surgeon with a tremor can still answer phones.
• Any-occupation: pays only if you cannot work ANY job. Cheapest, and much harder to claim on.
• Benefit period: how long benefits are paid. Typically 2 years, 5 years, or to age 65 or 67.
• COLA rider: cost-of-living adjustment, so the benefit rises with inflation during a long claim.

Probability context (US data):

• 1 in 4 workers will experience a disability lasting 90+ days before age 65
• Average long-term disability claim lasts 34 months, nearly 3 years
• Most disabilities come from illness (cancer, heart disease, musculoskeletal problems) rather than accidents

Worked example: Gross monthly income: $7,500. Take-home: $5,600. Fixed monthly expenses: $4,000.

• Target benefit (60%): $7,500 × 0.60 = $4,500/month
• Elimination period: 90 days → emergency fund needed: $4,000 × 3 = $12,000
• Annual premium (2% of $90,000 salary): $1,800/year = $150/month
• Benefit period: to age 65 (own-occupation, with COLA rider)

A $150/month premium protecting $4,500/month in income for potentially 30+ years is among the best risk-management purchases a working professional can make.