How it works
A disability adequacy check asks a different question than a coverage calculator: not how much benefit a policy would pay, but whether the coverage you already own survives contact with reality. Three frictions erode it. Taxes arrive first - employer-paid group benefits are taxable when claimed, so a headline 60% of gross lands nearer 47% in hand, a haircut many beneficiaries discover mid-claim. Erosion follows: most group policies pay a flat dollar amount with no cost-of-living adjustment while household expenses compound relentlessly, so a benefit covering 69% of essentials on day one covers materially less by the tenth year of a long claim. Liquidity comes third: the elimination period demands thirteen weeks of essentials sit in cash before the first cheque arrives, which is an emergency-fund job, not a policy feature. This calculator nets the benefit for taxes, walks expenses and benefit side by side month by month to retirement age, and reports four verdict numbers - adequacy today, adequacy deep into a hypothetical decade-long claim, the accumulated shortfall, and the reserve the elimination period silently requires. Coverage below roughly 70% in year ten is the classic signal to layer an individual policy carrying a COLA rider and an own-occupation definition.
Formula
net benefit = benefit x (1 - tax if employer-paid) | ratio(year n) = net x (1+COLA)^n / (expenses x (1+inflation)^n) | reserve = expenses x elimination weeks / 4.35
Tips
- Haircut employer-paid benefits for taxes before judging adequacy - 60% gross behaves like about 47% net.
- Zero-COLA benefits erode fast: at 3% inflation, year-10 coverage is roughly a quarter weaker in real terms.
- Hold the elimination-period reserve in the emergency fund - the policy assumes you survive the wait.
- Individual policies stack above group dollar caps and travel with you when the job changes.
- Re-run the check after every raise: benefits freeze as a percentage while expenses climb with lifestyle.
Frequently asked questions
- Is 60% disability coverage enough?
- Rarely once taxes apply: employer-paid benefits arrive taxable, so 60% of gross delivers roughly 47% in hand against expenses that never heard of gross-versus-net. Adequate coverage closes the post-tax gap between benefit and essentials - commonly requiring an individual policy layered on top of group cover.
- Do disability benefits keep up with inflation?
- Usually not. Group long-term disability pays a frozen dollar amount with no COLA, so at 3% inflation a benefit covering 69% of essentials on claim day covers barely half a decade later. Individual policies offer COLA riders, typically 3% simple or compound, and they remain among the few riders worth their price.
- How much cash do I need for the elimination period?
- Ninety days of essentials is the standard reserve: on $4,900 of monthly expenses, about $11,300 liquid before benefits begin. Choosing a 180-day elimination period cuts premiums meaningfully but doubles the reserve to roughly $22,600 - worthwhile only when that fund genuinely exists already.
- What is the most common gap in group disability coverage?
- The pairing of a taxable flat benefit with a monthly dollar cap. High earners find the cap binds - $10,000-a-month ceilings strand salaries past roughly $200,000 - while everyone finds taxation. The runner-up gap: group coverage that ends at job change precisely when health questions surface.
- Can I have both group and individual disability insurance?
- Yes, and layering is the standard fix for adequacy failures: the individual policy fills the group cap's ceiling, converts taxable dollars to tax-free ones, and follows you between employers. Insurers coordinate rather than duplicate benefits, designing totals to land near 60% to 70% of income without overlap disputes.