The Average Cost for Disability Insurance
Disability insurance can be purchased as an individual policy or provided with a group health insurance plan that is provided by an employer. The costs for disability insurance can vary depending on many factors, including the elimination period, benefit period, the age of an individual, his occupational class, and the benefit amount. Individuals normally purchase or are provided short-term or long-term disability insurance policies.
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Individual Cost
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Individuals who purchase a disability income policy can expect to pay about 1 percent to 3 percent of their annual salary. This means that an individual with an annual salary of $50,000 can expect to pay between $500 and $1,500 a year. The benefits that are provided by a disability insurance policy are typically about 60 percent of an individual's salary per year. However, insurers normally offer discounts that can be used to lower the cost of the policy.
Discounts
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Insurance companies have many types of discounts available that can be applied to an individual's disability income insurance policy. One type of discount that is available is to select a longer waiting period before policy benefits are paid. Insurers may also offer a discount when more than one policy has been purchased or is in force. Discounts can also be applied to the policy when a shorter benefit period has been selected.
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Monthly Expenses
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One of the biggest factors that are used to determine how much an individual will pay for disability insurance is her monthly expenses. Monthly expenses typically include what an individual spends on living expenses per month. This typically includes rent, mortgage payments, groceries, phone bill, gas and other types of expenses. The total amount of monthly expenses needs to be included in the amount of coverage that is selected, which will also affect the cost of the policy.
Annual Inflation
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Inflation increases every year and this can be factored into the cost of a disability insurance policy. The most common measure of inflation is to use the Consumer Price Index or CPI. The rate of inflation varies considerably but generally averages just over 3 percent per year. Individuals who select a short-term disability policy are not really affected by this. However, if an individual is disabled for a long period, the rate of inflation should be factored into the price of a disability insurance policy.
Additional Options
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Disability insurance comes with additional options or riders that can be used that affect the cost that is paid for a policy. One type of rider that typically increases the cost of the policy is called a cost-of-living rider. This rider can increase the premium for a policy between 20 percent and 40 percent but will pay increased benefits when an individual becomes disabled. Another rider that can be selected is called a return-of-premium and can increase the cost of a policy by 50 percent.
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