HesapHanem

Disability Insurance Calculator

Find out how much disability insurance coverage you should carry.

How it is calculated

The tool turns a target share of your income into a monthly benefit and subtracts what you already have.

needed benefit = monthly income × replacement % ÷ 100
gap = max(0, needed benefit − existing benefit)
annual needed = needed benefit × 12

Income and benefits are monthly dollar amounts; the replacement figure is a percentage above 0 and up to 100. The existing benefit is optional: if you leave it blank it is counted as $0. If your existing cover is already larger than the need, the gap is shown as $0.00 instead of a negative number. The tool applies one flat percentage to the income you enter, so it does not work out waiting periods, benefit period, taxes on benefits or the rules of any particular policy. Enter gross or after-tax income consistently with the way your own policy pays.

Worked example

You earn $6,000 a month and want to replace 65% of it if you cannot work. Needed benefit = 6,000 × 0.65 = $3,900.00 a month, which is 3,900 × 12 = $46,800.00 a year. You already have $1,500 a month of cover through work. The coverage gap = 3,900 − 1,500 = $2,400.00 a month. That is the amount of extra monthly benefit to look for, not the premium for it.

Try this example →

Common mistakes

  • Entering annual income. The field is monthly, so $72,000 a year must be entered as 6,000.
  • Confusing the gap with the premium. The $2,400 is the monthly benefit still missing, not what a policy for it would cost you.
  • Entering the existing benefit as a yearly figure. The existing benefit is monthly, so a yearly total makes the gap vanish or look far too small.
  • Choosing 100% replacement as the target. The tool accepts it, but benefit payments are usually capped below your full income, so a result at 100% may not be obtainable.
  • Forgetting that the tool does not model waiting periods or how long the benefit lasts. A policy that starts after 90 days or stops after two years does not match the flat figure shown here.

Sources

About this calculator

Disability insurance replaces a portion of your income if you become unable to work due to illness or injury, typically covering somewhere between 50% and 70% of pre-disability gross income, since insurers cap coverage below 100% to preserve an incentive to return to work. The coverage gap is the difference between the monthly benefit you'd need to hit your target income-replacement percentage and any disability coverage you already have, whether through an employer group plan, an individual policy, or Social Security Disability Insurance (SSDI).

Financial planners and insurance agents use an income-replacement calculation like this to right-size a disability policy, since underinsuring leaves a household exposed to a major income shock — studies cited by industry groups like the Council for Disability Awareness have long noted that a disabling illness or injury is a leading cause of mortgage default and bankruptcy, precisely because people underestimate the odds of a multi-year work interruption relative to more commonly insured risks like death.

Apply the share of income you want replaced to what you earn, take off any cover you already have, and you see the monthly benefit you need and the gap to fill when you shop for more.

Was this helpful?

You can pick up to 3 reactions.

Comments

  • Be the first to comment.

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators