{
  "slug": "disability-benefit-gap",
  "title": "Disability Insurance Benefit Gap Calculator",
  "heading": "Disability Benefit Gap Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/disability-benefit-gap",
  "summary": "See how much monthly income you'd lose if you became disabled tomorrow.",
  "description": "Most employer-provided group long-term disability plans replace only 60% of base salary, and that benefit is usually capped at a monthly maximum — often $10,000-$15,000 — regardless of how much you earn above that threshold. On top of that, employer-paid group disability benefits are taxable, while benefits from a policy you pay for yourself with after-tax dollars are not. This calculator computes your real monthly income need, compares it against your actual expected benefit after the cap and any tax hit, and shows the monthly gap you'd need to fill with an individual supplemental disability policy or savings.",
  "formula": "Expected benefit = min(monthly income × group replacement %, monthly benefit cap); after-tax benefit = expected benefit × (1 − tax rate if taxable); gap = income need − after-tax benefit.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=disability-benefit-gap",
  "inputs": [
    {
      "id": "monthlyIncome",
      "label": "Current gross monthly income",
      "kind": "number",
      "hint": null,
      "default": 9000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "incomeNeedPct",
      "label": "% of income you'd need if disabled",
      "kind": "number",
      "hint": null,
      "default": 80,
      "unit": "%",
      "min": 0,
      "max": 100
    },
    {
      "id": "groupReplacementPct",
      "label": "Group LTD replacement percentage",
      "kind": "number",
      "hint": null,
      "default": 60,
      "unit": "%",
      "min": 0,
      "max": 100
    },
    {
      "id": "monthlyBenefitCap",
      "label": "Monthly benefit cap",
      "kind": "number",
      "hint": null,
      "default": 6000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "benefitTaxable",
      "label": "Is the group benefit taxable?",
      "kind": "select",
      "hint": null,
      "default": "yes",
      "options": [
        {
          "value": "yes",
          "label": "Yes — employer-paid premium"
        },
        {
          "value": "no",
          "label": "No — I pay premium after-tax"
        }
      ]
    },
    {
      "id": "taxRate",
      "label": "Marginal tax rate (if taxable)",
      "kind": "number",
      "hint": null,
      "default": 24,
      "unit": "%",
      "min": 0,
      "max": 50
    }
  ],
  "outputs": [
    {
      "id": "gap",
      "label": "Monthly disability income gap",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "need",
      "label": "Monthly income you'd need",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "afterTaxBenefit",
      "label": "After-tax benefit you'd receive",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "annualGap",
      "label": "Annual income gap",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Current gross monthly income: 9000 $",
      "% of income you'd need if disabled: 80 %",
      "Group LTD replacement percentage: 60 %",
      "Monthly benefit cap: 6000 $",
      "Is the group benefit taxable?: Yes — employer-paid premium",
      "Marginal tax rate (if taxable): 24 %"
    ],
    "outputs": [
      "Monthly disability income gap: $3,096",
      "Monthly income you'd need: $7,200",
      "After-tax benefit you'd receive: $4,104",
      "Annual income gap: $37,152"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter current gross monthly income ($).",
      "Enter % of income you'd need if disabled (%).",
      "Enter group ltd replacement percentage (%).",
      "Enter monthly benefit cap ($).",
      "Enter is the group benefit taxable?.",
      "Enter marginal tax rate (if taxable) (%).",
      "Read your monthly disability income gap on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "monthlyIncome": 5500,
        "incomeNeedPct": 50,
        "groupReplacementPct": 35,
        "monthlyBenefitCap": 3500,
        "benefitTaxable": "yes",
        "taxRate": 14
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "monthlyIncome": 9000,
        "incomeNeedPct": 80,
        "groupReplacementPct": 60,
        "monthlyBenefitCap": 6000,
        "benefitTaxable": "yes",
        "taxRate": 24
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "monthlyIncome": 14500,
        "incomeNeedPct": 100,
        "groupReplacementPct": 95,
        "monthlyBenefitCap": 9500,
        "benefitTaxable": "yes",
        "taxRate": 38
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why is my group disability benefit taxable if it comes from a benefit plan?",
      "a": "The IRS treats disability benefits as taxable when the employer pays the premium (or pays with pre-tax payroll deduction), because you never paid tax on the premium dollars going in. If you pay the premium yourself with after-tax income, the resulting benefit is tax-free, which is a major reason some people choose to pay their own premium even when an employer offers a subsidized group plan."
    },
    {
      "q": "Why do monthly benefit caps matter so much for higher earners?",
      "a": "A 60% replacement rate sounds fine until you hit the cap. Someone earning $15,000/month at a 60% group rate would expect a $9,000 benefit, but a $6,000 monthly cap limits them to $6,000 — a 40% shortfall from the stated replacement rate. Caps disproportionately hurt higher earners and are the main reason supplemental individual disability policies exist."
    },
    {
      "q": "Should I count on Social Security Disability Insurance (SSDI) to close the gap?",
      "a": "Be cautious. SSDI has a strict definition of disability (unable to do any substantial gainful work, not just your own occupation), a 5-month waiting period, and roughly two-thirds of initial applications are denied nationally. It shouldn't be the primary plan for closing an income gap, though it can supplement other benefits once approved."
    },
    {
      "q": "How much does an individual supplemental disability policy typically cost?",
      "a": "Individual long-term disability premiums commonly run 1-3% of covered annual income per year, varying with occupation class, age, and benefit period chosen. A desk-job professional pays much less per dollar of coverage than someone in a physically demanding occupation, and choosing 'own occupation' versus 'any occupation' definitions also changes price significantly."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/long-term-care-cost-projection",
    "https://www.revenuelab.fyi/toolbox/life-insurance-ladder-sizing"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Disability Insurance Benefit Gap Calculator (https://www.revenuelab.fyi/toolbox/disability-benefit-gap)"
}