Disability Income Insurance Coverage Calculator: Monthly Benefit Need

What employer LTD typically covers and excludes

Group long-term disability through an employer typically replaces 50 to 60 percent of base salary. The benefit is paid pre-tax (the employer pays the premium with tax-deductible dollars), so the proceeds at claim time are taxable income to you. After federal and state tax, the effective replacement on take-home is closer to 40 to 50 percent for typical earners.

Major exclusions in employer plans: bonus income, commission, RSU vesting, and most equity compensation are not insured (the policy uses your base salary only). For employees whose total compensation is largely bonus or equity, employer LTD covers only a fraction of true income.

Monthly benefit caps: most employer plans cap at $5,000 to $10,000 per month. A $400,000 base salary earner with a 60 percent replacement target needs $20,000 a month; the employer cap at $10,000 leaves a 50 percent gap that only individual insurance can fill.

Elimination periods: typical employer plans pay benefits after a 90-day or 180-day waiting period. During that period you rely on emergency savings, short-term disability (if your employer offers it), or paid time off. The longer the elimination period, the cheaper the premium.

Benefit periods: employer plans typically pay benefits to age 65 or for a maximum of 5 years, depending on the policy. Individual policies can extend to age 67 or 70.

SSDI and what it actually pays

Social Security Disability Insurance is the federal program for workers who become disabled and have sufficient work history (typically 40 quarters of covered employment, with at least 20 in the 10 years before disability). SSDI benefits are based on your earnings history. Average monthly benefits in 2025 are roughly $1,500 for single individuals; high earners can receive up to about $3,800 per month. The benefit amount tracks Social Security retirement benefits closely (using a similar formula).

SSDI is not easy to obtain. The Social Security Administration denies the majority of initial applications. Most successful claimants go through 2 to 3 levels of appeal that can take 12 to 24 months total. The definition of disability is strict ('inability to engage in substantial gainful activity for at least 12 months') and is closer to any-occupation than own-occupation.

Most individual LTD policies offset their benefit by your SSDI payment, meaning the policy pays the gap between your insured benefit and your SSDI. This calculator includes an SSDI offset input; enter your expected SSDI amount if you expect to qualify (most high-income professionals will).

Own-occupation versus any-occupation

The single most important policy feature is the definition of disability. Own-occupation coverage pays if you cannot perform the substantial duties of your specific occupation, even if you could work in another field. Any-occupation coverage pays only if you cannot perform any reasonable occupation for which you are educated and trained.

For physicians, lawyers, and other high-skill specialists, own-occupation is essential. A surgeon who develops hand tremors cannot do surgery but might be able to teach or consult; an any-occupation policy would not pay because the surgeon can do something else for income. An own-occupation policy pays the full benefit.

Most employer LTD policies are own-occupation for the first 24 months and any-occupation thereafter. Individual private policies can be own-occupation through the full benefit period (typically to age 65 or 67). The extra cost for true own-occupation coverage is meaningful but worth it for high-income specialists whose earnings depend on specific skills.

What this calculator does not include

Short-term disability (typically 1 to 6 months of coverage after a brief waiting period; covers maternity and short illness). Long-term care insurance (different product for nursing home and home care needs in old age). Cost of living adjustments (COLA riders) on benefit amounts (essential for long disability periods to protect against inflation). Future-purchase options (riders that let you increase coverage without medical underwriting as income rises). Premium-waiver during disability (most quality policies include this; non-premium waiver policies are not worth buying). Residual disability benefits (partial pay for partial disability where you can work some but earn less). Workers compensation interaction (different system for work-related disabilities only). For a comprehensive analysis, work with an independent insurance broker who can quote multiple carriers; this calculator estimates the coverage gap and lets you size the individual policy you need to fill it.