Disability Insurance Calculator

Your ability to earn an income is probably your biggest financial asset. A physician may earn $8 million or more over a career; a nurse or pharmacist, several million. Disability insurance protects that income if illness or injury stops you from working — and disabilities are far more common during a working career than most people assume. This calculator estimates how much coverage you need and how much your current coverage really provides.

What this calculator does

Enter your earned income, your essential monthly expenses, any group (employer) long-term disability benefit, whether your employer pays that premium, the tax rate that would apply, other income you'd have if disabled, and the maximum share of income insurers will cover. It shows:

• the individual monthly benefit to consider buying,
• what your group benefit pays after tax,
• the most total coverage insurers will typically allow, and
• a rough yearly premium range.

The formula in plain English

1. Group benefit after tax = group monthly benefit × (1 − tax rate) if your employer pays the premium, or the full benefit if you pay with after-tax dollars.
2. Need = essential monthly expenses − group benefit after tax − other income.
3. Issue limit. Insurers usually cap total coverage at about 60% of your income (including group coverage), so you're never paid more not to work than to work.
4. Benefit to buy = the smaller of your need and (issue limit − group benefit).
5. Rough premium = 2.5% to 4.5% of the yearly benefit. Real quotes depend on age, sex, health, specialty, benefit period and riders.

"Essential expenses" should include everything you'd still pay if you couldn't work: housing, food, insurance, loan payments, childcare and a basic amount of retirement saving.

A worked example

Dr. Morales, a general surgeon, earns $300,000. Her family's essential expenses are $11,000 a month. Her hospital provides a $5,000 monthly group benefit and pays the premium, and she estimates a 25% tax rate on benefits.

• Her group benefit is worth about $3,750 after tax.
• That leaves a gap of about $7,250 a month.
• Insurers would allow up to about $15,000 a month of total coverage, so she can buy the full $7,250.
• A rough premium would be $2,200 to $3,900 a year — real quotes for her specialty and riders may differ.

Without the individual policy, a long disability would cover barely a third of her family's essential costs.

Why it matters at each career stage

If you're: Student

Some schools offer group coverage to students. If you're healthy, look at what your residency will offer, and learn the key terms now so you're ready to buy.

If you're: Resident / fellow

This is often the best time to buy. You're likely healthy, premiums are based on your age, and many insurers offer resident discounts. A future increase option lets you raise coverage after training without new medical exams. Even a $2,500–$5,000 benefit with that rider is a strong start.

If you're: Employed

Check your group policy's definition of disability, benefit cap and taxability. If you rely on group coverage alone, you may be badly underinsured, and you'll lose it if you change jobs. Make sure your individual policy is portable.

If you're: Practice owner

Add business overhead expense coverage so your practice can keep paying rent and staff while you recover. Key person and buy-sell coverage may also apply.

Features worth looking for

• True own-occupation definition, ideally specialty-specific.
• Residual or partial disability rider, which pays if you can work only part-time.
• Future increase option to add coverage as your income grows.
• Cost-of-living adjustment rider, which raises benefits with inflation during a long claim.
• Non-cancelable and guaranteed renewable, so the insurer can't change your terms or price.

Shop through an independent broker who can quote several insurers. Then check your emergency savings with the emergency fund calculator, and read our disability insurance basics.