How much disability insurance do I need?

You need enough coverage to maintain your standard of living if you lose your job due to an unexpected disability. Your plan should also cover your outstanding debts.

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Nupur GambhirNupur GambhirSenior Editor & Licensed Life Insurance ExpertNupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

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Anthony HeAnthony HeDisability Insurance Operations Manager Anthony He is a disability insurance expert and the Operations Manager at Policygenius. He has 10 years of previous insurance experience and is a licensed agent in the state of New York.

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Disability insurance protects you from the financial burden of losing your income if you become disabled and can’t work. Think of it as an income replacement — if you’re not getting a paycheck from work due to a disability, you’ll get a monthly benefit from your insurance company. The amount of coverage you get depends on a variety of factors, such as how much you earn and your financial obligations.

Your disability benefit should be about 60% of your gross pay, which usually equals your take-home paycheck.  For that level of coverage, you can expect to pay between 1% and 3% of your annual salary in premiums, though the actual amount will vary based on how much coverage you buy.

Key takeaways

  • Disability insurance replaces your income if you become disabled and cannot work

  • Your disability benefit should pay out 60% of your gross pay, which will roughly equal your monthly paycheck

  • The actual amount of disability coverage you get will be based on your income

Determining how much disability insurance you need

The exact amount of disability coverage that you need depends on your income and monthly expenses. Most people are only eligible for up to 60% of their income, and should get as much coverage as they qualify for.

Your income

You can’t predict when you’ll be injured or become ill, and you can’t predict how long such a disability will put you out of commission. During that time, you’ll still need to put food on the table and live as normal a life as you did before the disability struck, so you want your benefits to match or exceed your paycheck — this usually amounts to 60% of your gross income. Even if you think you can live on less, you may want to get coverage that exceeds what you currently spend to account for unforeseen costs, like medical bills not covered by your health insurance. 

Disability insurance benefits can be as high as $5,000 to $10,000 per month. You’ll have to pay a considerably higher premium to get that big of a benefit, but if you need that much coverage you can probably already afford it.

Disability insurance is also necessary for people on the other end of the income spectrum. You can buy coverage with a lower premium that’ll pay out a smaller disability benefit. Although you won’t need to replace as much income, you’ll still need to ensure that you can afford the same necessities you paid for before becoming disabled.

Your expenses 

It’s important to account for what your day-to-day expenses and financial obligations look like, such as paying for food or bills. If you become disabled and cannot work, you will need assistance paying for a mortgage or rent, paying off student loans or car loans, or covering medical expenses. Failing to pay these could result in losing your property, hurting your credit score, or accumulating unmanageable amounts of interest.

The benefit of your disability insurance policy should be high enough to cover all of your expenditures — such bills and loans — so you can keep up to date with them while you recover. Calculate how much you pay for your monthly expenses and go from there. 

Your savings

Another thing to account for is the precarious economy. You should have enough savings to tide you over during periods of unemployment and to support your eventual retirement. Not only does disability coverage ensure you don’t deplete those savings, but you can also put your disability benefit toward a savings account.

However, that doesn’t mean a tax-advantaged retirement account, like a Roth IRA. You can only contribute to such accounts with “earned income,” which means wages and tips – income that can be taxed. Disability insurance benefits are unearned income and they’re not taxed unless your premiums were paid for with pre-tax dollars. If you try to use a disability benefit to fund a tax-qualified account, you could be assessed a penalty by the IRS.

So if you do stash away disability insurance benefits, put them in a deposit account such as a CD or a savings account. You can also use the benefits to buy stocks, but you should only do this once your other financial obligations are covered. It could provide a little bridge between jobs if you lose yours while you are disabled.

Do you need long-term or short-term disability insurance?

When deciding how much coverage you need, you’ll have to choose between short-term and long-term disability insurance. The difference between the two is the length of the benefit period: short-term disability insurance lasts for just a matter of months, while long-term disability insurance lasts for many years or even decades.

Many people already receive short-term disability insurance through their employer at a low cost — or no cost at all. But if you buy it independently you’ll pay the same amount as long-term disability insurance, so it may be wise to hedge your bets and get more robust protection with a long-term disability plan. 

Additionally, long-term disability insurance provides the amount of protection that most people actually need. The average disability lasts at least two years, which wouldn’t be covered by a short-term disability insurance plan.

How much disability insurance costs 

Most people pay between 1% to 3% of their salary for disability insurance. 

The younger and healthier you are when you buy disability insurance, the cheaper it will be. But high-earners will usually pay more because they need a higher benefit amount. Additionally, women tend to pay higher rates than men. For example, a healthy 35-year-old female doctor would pay about $2,422 a year for a monthly benefit of $5,000. Her male counterpart would pay about $1,605 for the same amount. 

The actual cost of a disability insurance plan will vary depending on your background and occupation. Everyone’s needs differ, so this range is only a starting point to understand how disability insurance is priced.

The factors that determine how much disability insurance costs include:

  • Occupation: People with high-earning jobs or those with student loans from university degrees will need a higher amount of coverage and will pay more for a bigger benefit.

  • Income: The more you earn, the more coverage you will need, which leads to higher premiums. 

  • Benefit amount: The benefit amount should be enough to replace 60% of your income, which should be close to your take-home pay. A bigger benefit amount means costlier premiums.

  • Elimination period: Insurance companies charge more for shorter elimination periods, which is the amount of time you have to be disabled for you to start receiving the benefit. But longer elimination periods could place a financial burden on someone who needs the cash sooner. We recommend a 90-day waiting period.

  • Benefit period: The shorter the benefit period, or the amount of time the policy pays out, the cheaper the premiums will be. 

  • Health: Those in good health will pay more affordable rates than those with pre-existing conditions or smokers. 

  • Own-occupation coverage: While own-occupation coverage is more expensive, it increases your chances of receiving the disability insurance benefit. Own-occupation policies pay out a benefit if you are unable to do your own job, but still able to work in other jobs. Without own-occupation coverage, you will have to prove that you can’t work any occupation in order to receive his benefits. Some occupations don’t qualify for own-occupation insurance. 

  • Residual disability coverage: This increases premiums, but pays for a partial disability.

  • Non-cancelable coverage: A non-cancelable policy increases the cost of your policy, but ensures that you will be covered as long as you keep paying the premiums. The insurer can’t cancel or modify your policy, premiums, or benefits. 

The amount of disability insurance you need is determined by your income and financial obligations, but should ideally be about 60% of your gross income. Work with a Policygenius agent for free to get the right policy for your needs

Frequently asked questions

How is disability insurance calculated?

You can calculate the amount of disability insurance you need by taking 60% of your gross income.

What does disability insurance pay for?

Because disability insurance is a substitute for your income, it can cover virtually any expense you would pay for. You can even contribute the money from disability insurance towards your savings accounts.

How much disability insurance should I get?

The amount of disability coverage you get should mirror your paycheck so that you can maintain your lifestyle and cover emergencies.


Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

Expert reviewer

Anthony He is a disability insurance expert and the Operations Manager at Policygenius. He has 10 years of previous insurance experience and is a licensed agent in the state of New York.

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