Disability insurance is the most underinsured risk I see in client plans. Everyone thinks about life insurance. Almost nobody thinks about what happens if they can't work but they're still alive.
The math is simple: if your client's income stopped, could they sustain their lifestyle? For most people, the answer is no. That's the conversation.
How I think about it
I look at disability coverage as income replacement. The goal is to replace enough of their income that they can cover essential expenses if they're unable to work. The standard target is around 60-80% of gross income, and Kerdora defaults to 80%.
The nuances matter though. Group coverage through an employer is better than nothing, but it's usually capped, often taxable, and disappears if they leave the job. Individual policies are portable and typically pay tax-free benefits. Most clients need to understand that distinction.
The calculator
Kerdora's disability calculator is simple:
Annual income — pulls from their wage income in the system
Coverage percentage — what percentage of income to replace (default: 80%)
Target monthly benefit = income x percentage / 12. That's the number you compare against what they currently have.
What you're tracking
For each disability policy:
Policy type — Group or Individual
Benefit type — monthly dollar amount or percentage of salary
Benefit amount — how much the policy pays
Benefit period — how long it pays: 2 years, 5 years, 10 years, to age 65, to age 67, or lifetime
Elimination period — the waiting period before benefits begin: 0, 30, 60, 90, 180, or 365 days
Own occupation — whether the policy covers inability to do their specific job (own occ) or any job (any occ). Own occupation is better and usually only available on individual policies.
Taxability — whether the benefits are taxable. Employer-paid group premiums usually mean taxable benefits. Individually-paid premiums usually mean tax-free benefits.
Inflation protection — whether the benefit grows over time (simple or compound)
Why the details matter
A client might say "I have disability insurance through work" and think they're covered. But when you look at the details, the group policy covers 60% of base salary (not bonus), has a 90-day elimination period, pays for only 2 years, and the benefits are taxable.
After tax, that 60% is more like 40%. And it runs out in 2 years. That's a gap worth noting.
The elimination period matters too. A 90-day wait means they need 3 months of expenses in cash before benefits kick in. That's a direct connection to the liquidity goal.