The Short Version

Scenario	Likely Outcome
Single resident with student loans	$5,000–$7,500/mo base + loan rider
Single attending, no dependents, paid-off loans	$10,000–$15,000/mo (~60% of income)
Married attending with kids, mortgage	$15,000–$25,000/mo (closer to 70% replacement)
High-earning specialist (surgery, IR, derm)	$20,000–$30,000/mo combined individual + group
Physician with significant practice ownership stake	Consider business overhead and buy-sell DI separately

The 60% Rule and Where It Comes From

Carriers don't typically issue individual disability insurance for more than about 60% of your pre-disability earned income. This isn't arbitrary — it reflects three actuarial realities:

• Tax treatment. Individual DI benefits paid on after-tax-purchased policies are received tax-free. So 60% of gross income often equals 80%+ of take-home pay, which is closer to actual living expense.
• Moral hazard. Carriers don't want benefits that exceed working income — that would create an incentive to stay disabled.
• Combination caps. If you have group LTD through your employer (typically 60% of base salary, taxable), the combined individual + group benefit is capped around 75–80% of pre-disability income.

For most physicians earning $300K–$500K annually, the 60% rule translates to $15K–$25K/month of total disability income replacement.

How to Actually Calculate Your Number

Start with your monthly fixed expenses — the costs you can't avoid:

• Mortgage or rent
• Property taxes and insurance
• Utilities, internet, phone
• Food (baseline, not dining out)
• Insurance premiums (health, life, auto, home)
• Childcare and education costs
• Minimum debt payments
• Transportation

For most physician households, fixed expenses total $10K–$18K/month. This is your floor — the minimum monthly benefit needed to maintain the basic household if your income stops. Then add discretionary spending — savings, retirement contributions, college funds, lifestyle expenses. The total of fixed plus discretionary is your "income replacement target." Most physicians want this number close to their pre-disability take-home pay, since disability is most damaging when it forces lifestyle reduction at the same time as health stress. Subtract any expected group LTD benefit (which is typically 60% of base salary, taxable). The remainder is the individual DI benefit you need.

Group LTD Stacking Math

If your employer offers group long-term disability (LTD), don't skip individual DI — but do account for the group benefit in your calculation. Group LTD has several limitations that individual DI doesn't:

• Taxable. If your employer pays the premium, benefits are taxable as ordinary income. A $10K/month group benefit nets ~$6,500/month after tax.
• Capped on base salary. Bonus, RVU production, and partnership distributions usually aren't covered.
• Definition of disability is weaker. Most group plans switch to "any occupation" after 24 months — meaning if you can do any job, benefits stop. Individual policies with true own-occupation language don't have this limitation.
• Not portable. Coverage ends if you change employers.

Most physicians benefit from layering: maximize individual DI for true-own-occupation, tax-free benefit, and portability, then accept the group LTD as supplemental coverage that brings combined replacement closer to 80%.

Inflation: The COLA Rider

A disability that lasts 10+ years (which is common — once a long-term disability claim begins, average duration exceeds 8 years) erodes meaningfully in real terms if benefits are fixed in nominal dollars. The cost-of-living adjustment (COLA) rider increases benefits during a claim by an inflation-linked percentage (typically 3–6% per year). For a 32-year-old buying a 30-year policy, the COLA rider can roughly double the real value of benefits at year-30 of a claim. Cost is usually 10–15% additional premium. For physicians, this is almost always worth including.

Frequently Asked Questions

See related: Physicians hub · Group disability insurance · True own-occupation · Carriers compared