That’s the question I start every disability checkup with. Most people stare at me. Then they say “savings” or “my spouse” or “I’d figure it out.” Those are not plans. Those are hopes.
I’ve done this checkup with hundreds of people. Some are freelancers who haven’t had a steady paycheck in years. Some are corporate employees who think their group policy covers everything. Almost everyone has a gap. And the gap is usually bigger than they think.
So let me give you the ten-minute disability insurance checkup. You don’t need a spreadsheet. You don’t need a financial advisor. You just need a pen and paper, or the Disability Coverage Checker tool.
Step two: calculate your monthly take-home pay after taxes. If you’re self-employed, average your last about six months. Be honest. Write that number down.
Step three: subtract your expenses from your take-home pay. That’s your monthly surplus. If it’s negative, you’re already in trouble even without a disability. If it’s positive, great – but will that surplus cover your expenses if you lose your income?
Step four: look at your savings. How many months of essential expenses do you have in cash? Not your 401(k), not your home equity, not your crypto. Cash in a bank account. Divide your savings by your monthly expenses. That’s your survival runway.
If your runway is less than about three months, you have a critical gap. One injury could wipe you out.
If your runway is three to about six months, you have a moderate gap. You could survive a short-term disability, but a long-term one would hurt.
If your runway is about six months or more, you’re in decent shape – but you still need to think about what happens after those about six months.
Now, what about disability coverage through work? Most corporate employees have some. Pull out your benefits summary. Look for “short-term disability” and “long-term disability.” Write down:
The benefit amount (usually 40-60% of your base salary)
The elimination period (how many days you have to be out before benefits start – typically 0-14 days for STD, 90-about 180 days for LTD)
The benefit period (how long payments last – 13 weeks, 26 weeks, to age 65)
The definition of disability (own occupation vs any occupation)
Whether the premiums are paid by you or your employer (affects taxability)
Then do the math. If your expenses are around $5,000 a month, and your group LTD pays $3,000 a month after about 180 days, and you have two months of savings, you have two big gaps. First, the six-month waiting period – you’d run out of savings before benefits start. Second, the about $2,000 monthly shortfall after benefits start.
You can fill those gaps with an individual disability policy or a supplemental policy. For the waiting period gap, a short-term disability policy or a larger emergency fund works. For the monthly shortfall, an individual policy with a benefit of about $2,000 a month would cover you.
Someone I worked with – let’s call her Karen – was a nurse at a big hospital. She had group LTD that covered 50% of her income up to around $5,000 a month, with a 180-day elimination period. Her expenses were $4,500 a month. She had $15,000 in savings. Her survival runway was 3.3 months – not enough to cover about six months. I suggested she buy a small individual policy with a 90-day elimination period and a about $2,500 monthly benefit. The individual policy would start paying at day 90, covering the gap until her group policy kicked in at day 180. The cost was about $55 a month. She bought it.
Eight months later, she was diagnosed with breast cancer. She was out of work for 14 months. Her individual policy paid about $2,500 a month from months 3 to 6, her group policy paid around $5,000 a month from months 6 to 14, and she used her savings to cover the first about three months. She never missed a mortgage payment. She told me “that about $55 a month was the best money I’ve ever spent.”
The Coverage Gap Calculator can help you see if your workplace disability is enough.
Now, what if you’re self-employed? You likely have no group coverage at all. You need to buy your own individual policy. The checkup is simpler: you have a 100% gap. The question is how much coverage to buy.
Run your expenses again. That’s your target benefit. Most individual policies cap at 60-70% of your pre-disability income, but if your expenses are lower, you can insure less. For most self-employed people, $3,000-5,000 a month is enough.
The elimination period is key. If you have about six months of savings, you can choose a 180-day elimination period and save on premiums. If you have only one month of savings, choose 30 or about 60 days. I typically recommend 90 days for self-employed people with moderate savings – it balances premium cost against waiting time.
The benefit period: to age 65 is ideal, but expensive. A five-year benefit period is a good compromise. Most disabilities don’t last longer than five years, and by then you might be on Social Security disability (though don’t rely on that).
A friend of mine – not a client – is a freelance photographer. He bought a disability policy with a 90-day elimination period, to age 65, own occupation, with a $4,000 monthly benefit. He pays $130 a month. He says “I hate writing that check. But I know if I break both arms, I’m still okay.”
That’s the right mindset.
Let me also address a common myth: “Workers’ comp will cover me if I get hurt on the job.” Workers’ comp only covers injuries that happen at work. If you slip on ice outside your office, or get in a car accident on the way home, or develop carpal tunnel from years of typing – not covered. Workers’ comp also doesn’t cover illnesses. And the benefits are often low. Don’t rely on it.
Another myth: “Social Security disability is enough.” The average SSDI benefit is about about $1,500 a month. And you have to be totally disabled for at least 12 months, plus the approval process takes 18-24 months. That’s not a safety net. That’s a hammock with holes.
So here’s your ten-minute checkup summary.
First, calculate your monthly essential expenses. Write them down.
Second, calculate your survival runway: savings ÷ expenses. If it’s under about three months, your first priority is building an emergency fund.
Third, check your group disability benefits if you have them. Note the waiting period, benefit amount, and duration. Calculate the monthly shortfall (expenses – benefit). Calculate the waiting period gap (savings ÷ expenses to see if you can survive the waiting period).
Fourth, if you have no coverage or insufficient coverage, get a quote for an individual policy. Use an independent agent who specializes in disability. Provide your age, health, occupation, income, and desired benefit.
Fifth, adjust your plan. Maybe you need to increase your emergency fund to cover a longer waiting period. Maybe you need to buy a small policy to supplement your group plan. Maybe you need a full individual policy.
I remember a freelance graphic designer – let’s call her Anna – who did this checkup. Her expenses were about $4,000 a month. She had $8,000 in savings (two months runway). No disability coverage. She was healthy but worked from home, which meant no workers’ comp. Her risk of carpal tunnel or back strain was real. She bought a policy with a 60-day elimination period, $4,000 monthly benefit, to age 65, for about $110 a month. She said “it feels expensive until I think about not being able to work.”
Anna’s right. Disability insurance is not about the premium. It’s about the peace of mind that your family won’t lose their home because you tripped on the stairs.
Take ten minutes this week. Run the Disability Coverage Checker. You might find that you’re already covered – but I’ve rarely seen that. More likely, you’ll find a gap you didn’t know existed. Then you can fix it before you need it, not after.
P.S. Karen – the nurse with breast cancer – she’s back at work now, part-time. Her individual policy had a residual benefit that paid a reduced amount while she ramped up her hours. She told me “I thought disability insurance was for old people. I was 41. I was wrong.”
By Marcus
