Disability Insurance
How much disability insurance do I need?
Most disability policies replace 60–65% of your pre-disability income. The reason it's not 100%: benefits paid from individual policies you pay for are income-tax-free, so 60–65% of gross income roughly equals your after-tax take-home pay. Calculate your monthly essential expenses (mortgage/rent, utilities, food, insurance, minimum debt payments) — that's your minimum coverage amount. Most people need $3,000–$8,000/month in disability benefits.
Key Points
- Most policies replace 60–65% of pre-disability income
- Benefits from individually-paid policies are income-tax-free
- 60–65% of gross income roughly equals your after-tax take-home pay
- Calculate your monthly essential expenses to determine minimum coverage
- Most people need $3,000–$8,000/month in disability benefits
- Group disability through employer typically replaces 60% of base salary only