Blog · Disability Insurance

Employer Disability Insurance vs. Your Own Policy: Coverage Gap Calculator

Group LTD is a valuable foundation. It can also leave a gap because of benefit caps, tax treatment, portability and policy definitions.

Updated September 2026 · Built from official/public 2026 sources where available

DisabilityEmployer BenefitsCalculator

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The short versionUse the employer plan first. Then identify the specific shortfall: monthly benefit cap, uncovered bonus/commission, taxable benefit, definition of disability, or loss of coverage when you leave the employer. Individual coverage is most useful when it solves a named gap.

Employer disability coverage gap

Annual gross income

Employer LTD replacement %

Monthly benefit cap

Estimated tax rate on benefit %

Monthly spending need

Group coverage strengths

Employer coverage can be inexpensive or employer-paid, easy to enroll in and adequate for many salaries. It is often the first disability protection to understand rather than something to dismiss because it is “not individual.”

Where gaps show up

Issue	Employer group LTD	Individual policy
Portability	Often tied to employment	Typically owned by the insured subject to policy terms
Benefit cap	Can materially limit high earners	Sized during underwriting up to carrier limits
Definition	Group contract controls	Can shop definitions/riders
Premium/tax relationship	Employer payment can affect tax treatment	Depends how premiums are paid
Coverage amount	Often percentage with cap	Underwritten to income and existing coverage

Build only the missing layer

If the employer plan already covers your essential spending after tax, the “gap” may be small. If it leaves $3,000 a month uncovered, now you have a concrete target for quote comparisons instead of buying an arbitrary percentage of salary.

FAQ

Should I replace employer LTD with an individual policy?

Usually the first step is coordination, not replacement. Employer coverage may be valuable and inexpensive.

Does individual coverage follow me between jobs?

An individually owned policy is generally not tied to one employer, subject to its contract and premium requirements.

Can I insure 100% of income?

Disability underwriting generally limits replacement to reduce overinsurance and coordinates existing benefits. Carrier rules vary.

Sources & methodology

We favor regulators, government agencies and primary insurance-industry data for factual rules and current limits. Calculators use the numbers you enter and clearly labeled illustrative assumptions rather than pretending a national average is your quote.

NAIC — Disability income insurance consumer guidance

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