Why Your Employer LTD May Leave a Dangerous Gap
Employer group long-term disability (LTD) insurance is a valuable benefit, but it rarely tells the whole story. Most group plans replace 60% of your pre-disability income — but that figure is usually gross income, and the benefit may be taxable if your employer pays the premium. The effective replacement rate for many workers is closer to 40–50% of take-home pay.
Group plans also carry monthly benefit caps — commonly $10,000 per month — that can sharply reduce coverage for higher earners. If your gross income is $240,000 per year ($20,000/month), a 60% benefit would be $12,000 — but a $10,000 cap means you'd receive $2,000 less per month than the stated percentage suggests.
Before benefits even begin, you must survive the elimination period — typically 90 days — with no LTD income. This calculator helps you quantify both gaps so you can make an informed decision about whether individual disability income insurance makes sense for your situation.
Estimates only — not a quote
How This Calculator Works
The calculator uses three formulas:
- 1.Employer LTD payout: Your gross monthly income multiplied by the LTD benefit percentage, capped at the plan’s monthly maximum.
- 2.Monthly income gap: The difference between your essential monthly expenses and your employer LTD payout (floored at $0). This is the amount individual DI insurance could fill.
- 3.Elimination period self-pay need: Your essential monthly expenses multiplied by the elimination period in months. This is how much you need in accessible savings or short-term disability coverage before LTD kicks in.
These are gross income estimates and do not account for tax treatment of benefits (which varies depending on whether premiums are paid pre-tax or post-tax), Social Security Disability Insurance (SSDI) offsets in your group plan, or your specific policy terms. Review your actual Summary Plan Description for exact benefit details.
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Jennifer Walsh
Editorial Lead, Health & Medicare
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed June 2026
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