More than one in four workers entering the workforce today will experience a disability lasting more than 90 days before reaching retirement age, according to Social Security Administration data. Yet private disability insurance remains one of the most overlooked personal lines coverages. This calculator shows what individual long-term disability coverage should cost to replace 60 to 70 percent of your income.
Enter your current gross monthly income and the percentage you want to replace (most policies cap at 60 to 70 percent). Choose your elimination period -- the waiting period before benefits begin (30, 60, 90, or 180 days) -- and your benefit period (2 years, 5 years, or to age 65). Select your occupation class. The calculator returns an estimated monthly premium for individual long-term disability coverage.
Occupation class is the most carrier-specific variable. Most insurers use a 1 to 6 class system -- office professionals (Class 5 or 6) receive the best rates; physical laborers (Class 1 or 2) pay significantly more. The elimination period has a large effect -- a 90-day period costs significantly less than a 30-day period for the same monthly benefit. Longer benefit periods cost more; to-age-65 is the most comprehensive and most expensive option.
Social Security Disability denies roughly 65 percent of initial applications, pays an average of $1,500 per month, and typically takes one to two years from application to first payment. Private LTD activates in 90 days, uses an own-occupation definition, and replaces 60 to 70 percent of income. They are not substitutes.
Employer group disability typically replaces 60 percent of base salary only, ends when you leave the job, and benefits are taxable. Individual policies are portable, cover your full compensation, and pay benefits tax-free when premiums are paid with after-tax dollars.