Last reviewed October 27, 2026 by Vivek Sharma, licensed Pennsylvania insurance producer (License #719000).
The right amount of disability coverage replaces enough income to keep your plan on track, within the limits insurers set. Here’s how to estimate it.
Start with what insurers will allow
Insurers won’t insure 100% of your income. They typically limit total disability coverage from all sources, including group plans, to a percentage of your earned income, and the percentage generally declines as income rises. These “issue and participation” limits vary by insurer, so the maximum you can buy depends on your income, your occupation and your existing coverage.
Three ways to estimate your need
1. Income replacement
Aim to replace a target share of your after-tax income. Because benefits from a policy you pay for with after-tax dollars are generally tax-free, a benefit of 60% of gross income can replace a much larger share of take-home pay.
2. Cash flow
Add up what must continue if you can’t work: housing, loans, insurance premiums, family expenses and retirement savings. Subtract other income that would continue. The difference is the monthly benefit you need.
3. Fill the group gap
If you have group coverage, work out what it really pays after the benefit cap and taxes, then cover the shortfall with an individual policy.
A hypothetical illustration
For illustration only. Figures are hypothetical and do not represent any specific plan, policy or client.
A physician earns $300,000 a year, or $25,000 a month. Her hospital’s group plan pays 60% of salary up to $10,000 a month, so it pays the $10,000 maximum, which is 40% of her gross pay. Because her employer pays the premium, that benefit is taxable, so after tax it replaces less than half of her take-home pay. If her essential monthly costs are well above what the group plan would pay after tax, an individual policy paid with after-tax dollars could fill much of the gap, subject to the insurer’s limits on total coverage.
Don’t forget
- Future income: a future increase option lets coverage grow as your income does.
- Inflation: a cost-of-living rider increases benefits during a long claim.
- Retirement savings: some insurers offer riders that keep retirement contributions going while you’re disabled.
- Your business: owners may need business overhead expense coverage too.
Related: Group vs. individual coverage · How benefits are taxed · Waiting and benefit periods