Reviewed September 2026.
Disability coverage sizing answers one question: if illness or injury stops your paycheck, how much monthly benefit (and cash bridge) keeps housing, food, insurance premiums, and minimum debt payments going. This is an amount guide, not the waiting-period deep dive in Short-term disability or the STD-vs-LTD map in Disability insurance basics.
Start with take-home, not pre-tax salary
Most group long-term disability (LTD) quotes replace ~50–60% of pre-tax earnings. Benefits paid under an employer-paid premium are often taxable. Do not convert that brochure % into a guessed “% of take-home.” Instead compute after-tax benefit ÷ your take-home once you know the tax treatment. Write three numbers before you shop:
| Input | What to write | Why |
|---|---|---|
| Monthly take-home | Net pay after tax / benefits | Bills are paid from net |
| Must-pay floor | Rent/mortgage + utilities + groceries + health premiums + minimum debt | Survival budget while disabled |
| Gap after offsets | Floor minus only income the LTD certificate will not already subtract (for example spouse earnings that continue). Apply the plan’s offsets for SDI, SSDI, or other disability pay before you size a gap | Avoid counting the same disability dollar twice |
State programs (for example California SDI) can fill part of a short window: State disability insurance basics.
Worked sketch: $6,000 take-home, 60% group LTD
Alex takes home $6,000/month. Must-pay floor is $4,800. Employer LTD pays 60% of $7,500 pre-tax salary = $4,500, and that benefit is taxable in Alex’s case. After roughly 22% effective tax on the benefit, Alex nets about $3,510.
| Piece | Amount |
|---|---|
| Must-pay floor | $4,800 |
| After-tax LTD estimate | ~$3,510 (~58.5% of $6,000 take-home, or ~46.8% of $7,500 gross; the 22% tax haircut is illustrative) |
| Monthly shortfall (before other offsets) | ~$1,290 |
| 90-day elimination cash need | 3 × $4,800 = $14,400 before LTD starts |
Before buying a gap rider, Alex reads the certificate’s offset list. If state SDI or SSDI would reduce the group benefit dollar-for-dollar, adding that same SDI into “other income” while also assuming a full $4,500 LTD would double-count. Alex then checks whether an individual quote will issue the desired monthly amount given income tests and existing coverage limits. Remaining options: cut the floor, or size an emergency fund for elimination plus shortfall months. Definition language still matters: Own-occupation vs any-occupation.
Four adjustments that change the target
- Bonuses and overtime. Group LTD often covers base salary only. If 20% of income is variable, your replacement % on total pay is lower than the brochure % on base.
- High fixed costs. A $2,800 mortgage plus $900 childcare can push the floor above a 60% benefit even when peers “look fine” on paper.
- Dual earners. Size each earner’s coverage against the household floor if the other income would continue; do not assume both stop at once unless that is your scenario.
- Employer vs individual stack. Compare taxable group benefits to after-tax individual policies in Employer disability vs individual policy.
Quick sizing checklist
- Write take-home and must-pay floor for the next 12 months.
- Read the group certificate for % of earnings, max monthly benefit (often $5,000–$15,000 caps), and what counts as earnings.
- Subtract expected tax on employer-paid benefits.
- Add cash for the elimination period (30 / 90 / 180 days common on LTD).
- Decide whether a gap rider or individual policy is cheaper than carrying a larger cash reserve forever.
Educational only. Not insurance, tax, or claims advice. Policy definitions, taxable treatment, and state programs vary; confirm with plan documents and a licensed professional.