Disability insurance is sized differently than life insurance — it commonly targets 60% of income rather than a full replacement, since the benefit is designed to sustain, not exactly match, take-home pay.
How it works
Annual income is converted to a monthly figure and multiplied by a replacement percentage to find a target monthly benefit, then compared against existing coverage already in force to find the remaining gap.
Why 60%, not 100%
Employer-paid disability benefits are often taxable, while employee-paid ones frequently aren’t — and either way, some income-driven costs (commuting, retirement contributions) disappear during a claim, which is why full income replacement isn’t the typical target.
How to use this calculator
- Enter annual income and a target replacement percentage.
- Enter any existing disability coverage already in force.
Frequently asked questions
Does this include Social Security disability benefits?
No — it covers private disability coverage the target and gap apply to; Social Security’s own disability benefit would reduce the actual gap further if awarded, which isn’t guaranteed or quick to obtain.
Should self-employed people use a different replacement percentage?
Often higher, since there’s no employer-provided coverage to layer on top of — a personal policy may need to cover the full target on its own.
