When it comes to disability insurance, there’s no such thing as a one-size-fits-all policy.  Everyone’s circumstances are different, so it’s good to take the time to consider what’s right for you.

How do I calculate the amount of disability insurance I need?

You need to figure out your expenses, your income, and whether you have coverage now.   Follow the steps below to get started!

Step One: Calculate your essential monthly expenses.  Consider:

• Monthly housing (mortgage, rent, insurance, taxes)
• Utilities (telephone, electricity, gas, oil, cable TV, internet)
• Food (groceries, dining out, morning coffee)
• Transportation (car payments, gasoline, insurance)
• Education (tuition, books, supplies)Health care (out-of-pocket costs, insurance premiums)
• Debt payments (credit cards, other debt)
• Other (dependent care, life insurance premiums)   

Step Two: Take a look at your current income.  Consider:

• Your annual salary
• Additional annual compensation (bonus or commissions)
• Total gross annual income (the amount you earn before taxes)
• Estimated after-tax monthly income

Step 3: Think about whether you have any existing coverage now. Consider:

• Do you have an existing individual disability policy?  How much is the monthly benefit of this coverage?
• Do you already have a group long-term disability insurance policy through your employer? How much is the monthly after-tax benefit from this coverage?es!

Step Four: Do the math.

Once you’ve calculated the total amounts in steps 1, 2, and 3, you can use these numbers to figure out the appropriate amount for you, knowing that generally, it’s recommended that disability insurance cover 60-70% of your total earnings.

You’ll need to adjust how much you need accordingly—for example, if your expenses are very high, or you don’t have any existing coverage, the amount you need will be higher than someone who already has group disability insurance coverage through their employer.

What’s Next

It’s always a good idea to speak to a financial expert, but if you start by understanding your current needs, you’ve taken the first important step to protect yourself and your loved ones!