How Much Does Disability Insurance Cost?
Disability insurance is one way to replace your income if you're too sick or incapacitated and can't work. There are two types of disability insurance--long-term disability and short-term disability. Payments for short-term disability normally last a year or less. Long-term disability payments may last your entire life for as long as you're disabled. Group policies tend to cost less than individual disability policies.
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Elimination Period
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The elimination period is the length of disability before you begin receiving checks. The longer the elimination period, the lower the policy premium is. With short-term policies, the elimination period may be as little as seven days, which would be the most expensive time period. Long-term policies' shortest elimination period is 30 days, but the most popular policies tend to have periods of 90 days. The longer the elimination period, the less the policy costs.
Benefit Period
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The benefit period is the length of time the policy pays benefits. For long-term policies with a five-year benefit period, the policy pays the insured for five years. Short-term policies often offer a six-month elimination period to coordinate with Social Security benefits or long-term disability policies. The longer the benefit period is, the higher the price of the policy.
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Occupation
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People with dangerous occupations or who use their brawn to earn a living rather than sit in an office also pay more because there's also more chance of disability. A broken leg might stop a lineman from working, but it would only be an inconvenience to an office worker. Those who have higher-income-producing jobs also get a break on premiums because statistics prove they are more motivated to return to work.
Amount
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The amount of money per year you receive, normally based on a monthly amount, affects the premium. If you purchase $400 per month in coverage, you'll pay less than if you purchased $1,000 per month in coverage.
Health History
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Your health history, history of smoking, weight and even financial history play a part in the premium you pay. If you're a smoker, expect to pay more. The same is true if you're overweight or grossly underweight.
Types
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Besides the differentiation between long-term and short-term disability, there are also noncancellable and guaranteed renewable policies. Companies can never increase your premium on noncancellable policies, but they can increase the premium of the entire class of policyholders for guaranteed renewable policies, and you may be in that class. If your policy is noncancellable, it costs more. In addition, policies that state they pay if you can't perform the material duties of your own occupation as opposed to any occupation cost more.
Gender and Age
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Women pay more than men on individual disability policies but the same on group policies. Older people pay more for premium than younger ones, regardless of the type of coverage.
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References
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